This document provides an outline and overview of a course on healthcare administration and delivery systems. It discusses the following key points: - The course will introduce quantitative decision-making methods in healthcare management and apply techniques like forecasting, optimization, and simulation to address challenges in the healthcare system. - Traditional management has relied on intuition but incorporating quantitative methods can help address problems in a systematic way. - The roles and responsibilities of healthcare managers have become more visible and important given issues around costs, access, and quality in the system. - A background in both healthcare and business administration is valuable for medical and health services managers.

1. Business Administration 755
Healthcare Administration
and Delivery Systems
Session 1
Alexander Kolker 1

2. OUTLINE
1. Course Organization and Syllabus Overview
 comparing with other business schools
2. Introduction to Healthcare Administration &
Delivery Systems
 Overview of Healthcare Management
 The role of quantitative decision-making in
management
 Historical Background
 The Nature of Healthcare Services
 Healthcare Managers’ Responsibilities
Alexander Kolker 2

3. Alexander Kolker 3
1. Course Organization-
Syllabus Overview

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 Rationale for the Course:
1. Modern medicine has achieved great progress in treating
individual patients
2. However, relatively little material resources and technical
talent have been devoted to the proper functioning of the
overall health care delivery as an integrated and
economically sustainable system
3. There is a current trend for the systematic and widespread
use of methods and principles of quantitative management
of operations

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Cont.
4.The healthcare industry has lagged behind many
other industries in this respect
5. One way to promote greater use of quantitative
methods in decision-making is to include
quantitative methods in the curricula for graduate
programs in health administration
6. This course places emphasis on the application of
quantitative techniques to problem solving and
decision-making related to the management of
health care providers, including, but not limited to:
hospitals, physician practices, and clinics– compare
to:
Yale, UW-Madison, Northwestern, Concordia

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7. To address the challenge of transforming the
system of care delivery in practice, some leading
healthcare organizations have adopted this area as
a strategic priority
8. For example, the Mayo Clinic, has defined the
Science of Healthcare Delivery as one of its four
strategic directions.
9. The Mayo Clinic has also created the Center for the
Science of Healthcare Delivery, a new initiative that
will focus on creating improved approaches to how
healthcare is delivered

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Materials and Textbooks:
1. A. Kolker. Healthcare Management Engineering: What does this fancy
term really mean? The use of Operations Management Methodology for
Quantitative Decision-Making in Healthcare Settings.
Springer_Briefs Series in Healthcare Management & Economics, 2012
(will be referred as Kolker)
2. Y. Ozcan, Quantitative Methods in Healthcare Management, 2nd
Edition, 2009. Jossey-Bass. (will be referred as Ozcan)
3. Reid P., D. Compton, J. Grossman, (Eds). Building a Better Delivery
System: A New Engineering / Health Care Partnership. National
Academy of Engineering and Institute of Medicine. Washington, DC,
2005. (will be referred as NAE Report)

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Specific Course Objectives:
1. To develop analytical skills in decision-making and problem
solving by using quantitative analytical tools
2. To develop proficiency in selecting and applying various
quantitative techniques which may be useful in
administration of various health care service providers
3. To review and critique the strengths and weaknesses of the
above techniques in relation to their applications in the
health industry
4. To identify health services problems or problem types
amenable to various quantitative techniques

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“Where do we go from here ? How would [it all]
help us?
- Only if the three necessary things could be
given…..
- # 1: Quality of information….
- # 2: Leisure to digest it…..
- and
- # 3: the right to carry out actions based on what
we learn from the interactions of the first two.”
Ray Bradbury “Fahrenheit 451”, pages 84-85.
The 50-th Anniversary Edition

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COURSE OUTLINE SUMMARY
Session Date Topic
1 09/10/12 Course organization; Introduction to Quantitative Decision-
Making Methods in Healthcare Management
2 09/17/12 Introduction to Forecasting for Healthcare Operations
3 09/24/12 Decision-Making in Health Care Facilities
4 10/1/12 Staffing and Scheduling Using Linear Optimization Models
5 10/8/12 Resource Allocation Using Linear Optimization Models
6 10/15/12 Physician/Patient Clinic Appointment Scheduling:
Advanced Access and Reducing Delays in Primary Care
Clinics
7 10/22/12 Team Based Approach to Care. ‘Fair’ Costs and Payoff
Distributions Among Cooperating Providers.
Introduction into the Concept of the Shapley Value
8 10/29/12 Mid-Term Examination

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COURSE OUTLINE SUMMARY (cont.)
Session Date Topic
9 11/5/12 Introduction into Queuing Analytic Theory: Random
Demand and Fixed Supply
10 11/12/12 Introduction into Discrete Event Simulation (DES)
Methodology for Clinic, Bed and Operating Room Capacity
Analysis
11 11/19/12 DES Methodology: Staffing Planning
12 11/26/12 DES Methodology: Patient Flow
13 12/3/12 Fundamental Healthcare Operations Management
Principles: Summary and Review
14 12/10/12 Course Review. Preparation for Final Examination
15 12/17/12 Final Examination

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2. Introduction to Healthcare
Administration & Delivery
Systems

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•The administration of a business is synonymous
with the performance or management of business
operations, including important decision-making
• Administration includes the efficient organization of
people and other resources to direct activities
toward common goals and objectives (Wikipedia)
Basic Definition
ad·min·is·tra·tion
Noun
The management of any office, business, or
organization; direction. (Dictionary.com)

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The key word is:
Management

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•The world's first business school, the Ecole Supérieure de
Commerce de Paris, France, was established in 1819
• The first business school in the United States, the Wharton
School of the University of Pennsylvania, was founded in 1881
• The top French business school HEC (Hautes Études
Commerciales ) was also created in 1881, while Harvard
Business School was founded in 1908
A little bit of History

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Healthcare Administration/ Management- is it a hidden
profession ?
• Are healthcare managers play a low profile role in
comparison to the direct-care professions ?
Not anymore…..
• The visibility of healthcare management / administration
has risen significantly in recent years, due largely to the
widespread problems in balancing costs, access, patient
coverage and quality in hospitals and clinics.
• These problems have become especially acute in light of
the upheld Accountable Care Act (ACA)

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Original Post:
“How do you think non-medical Hospital Administrators can
help in making successful hospital operations? “
http://www.linkedin.com/groupItem?view=&gid=1928712&type=member&item=3049
393&commentID=-
1&goback=%2Egmr_1928712%2Egde_1928712_member_92544889#lastComment
Started in April 2009.
Continues now…. 180 posts/comments up to date….
Latest post:
LinkedIn Discussion: Group ‘International Hospital Administrators’
“This discussion is really getting HOT!
In terms of successful hospital operations we must maintain a golden
balance between the medical team and the non-medical team. If the
CEO is treated at par with Medical Director , such hospitals will reach
greater heights…. “

18. Now this profession is considered a Smart Career
Choice for Intelligent People
•Employers are always looking for smart people to add to
their team
• They are looking for leadership skills, team skills, and
people with an ability to take justified calculated risks
And, according to the recent Yahoo! Education Survey,
Career #1 is ……….
Smart Careers for Intelligent People - Yahoo!
Education.mht
Alexander Kolker 18

19. Medical and Health Services Manager/Administrator
• Medical and health services managers combine knowledge
of two complex industries - health care and business.
• According to the U.S. Department of Labor, HS managers
keep up-to-date on new health laws and regulations, as well
as manage the finances and capacity of a healthcare facility
Education:
According to the US Department of Labor, it is typical for
medical and health services managers to have a master's
degree in an area like health services, long-term care
administration, public administration, public health, or
business administration
Alexander Kolker 19

20. Healthcare Management is...
• the management of processes and health
systems that provide care to patients
• the use of decision tools to manage and
improve processes
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21. Healthcare Management Requires
Decisions in:
• Forecasting
• Capacity planning
• Staffing & Scheduling
• Patient Flow
• Managing medical supplies
• Quality Control
• Motivating employees
And much more . . .
Alexander Kolker 21

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Traditional (Intuitive) Management is Based on:
• Past experience.
• Intuition or educated guess.
• Static pictures or simple linear projections.
What is Management?
Management is controlling and leveraging
available resources (material, financial and
human) aimed at achieving the performance
objectives.
One more Definition

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What could happen if we rely on gut feeling
or educated guess ?
Quiz
1. Before Mt. Everest was discovered, what was the
highest peak in the world?
2. How much dirt is in the hole that measures 2 x 3 x 4
feet?
3. If you were running a race and you passed the person in
2-nd place, what place are you in now?
4. A farmer has 5 haystacks in one field and 4 haystacks in
another. How many haystacks would he have if he
combined them all in one field?
5. John’s mother has 3 children. 1-st named April, 2-nd
named May. What’s the 3-rd child name?

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Answers:
1. Mt. Everest. It just was not discovered yet….
2. There is no dirt in the hole at all….
3. 2-nd place. You passed the person in 2-nd place,
not 1-st
4. One. If he combines all his haystacks they all form
one big haystack
5. John….(not June)

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This quiz illustrates the important points:
•Humans have a very strong tendency to see what they want
to see and what they expect to see…
•This has huge implications in the real world when studying
customers, markets, and data that influence key business
decisions
•We frequently miss opportunities because we tend to see
what has worked in the past, and project it into the new
situation
•Our brain doesn't like information gaps. So, we tend to jump
at the 1-st answer/solution that looks good rather than to
examine all available data

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This is especially true because we receive more information
than we have time to assimilate. We reject ‘extra’
information. This is an irony of the information age…..
Finally, our brains love to look for patterns and make
connections….This serves us well in many ways.
But the brain doesn't always get it right (see question 5….)
So, let’s pause from time to time to watch for data we tend
to unconsciously screen out , as well as different sources of
data and methods that could counterbalance what we
expect to see…

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For example,
If ED is consistently busy, let’s increase its
capacity….Do you agree ?
If ICU has 10 beds but only 5 beds are typically used ,
let’s cut ‘un-needed’ 5 beds capacity.
Do you agree?
If we have scheduled and emergency surgical
patients, let’s arrange operating rooms for emergency
and scheduled surgeries separately.
Do you agree?
If the average demand is equal to the average supply
(beds, appointments, etc), then the balance is maintained and
no waiting time is expected.
Do you agree?

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What is Scientific Management ?
A systematic way of developing managerial decisions
for efficient allocating of material, human and financial
resources needed for delivery of high quality care
using quantitative analytic methods is the scope of
Scientific Healthcare Administration & Delivery
Systems

30. The Nature of the Healthcare Industry
• Combines medical technology and human touch,
administers care around the clock from newborns
to critically ill
• More than 580,000 establishments make the
health services industry
• Nearly 77% of all health services establishments
are offices of physicians, dentists, or other health
care practitioners
• Hospitals constitute 1.3 % of all health services,
but they employ 35% of all health workers
Alexander Kolker 30

31. Alexander Kolker 31

32. What Does Healthcare Industry Do?
Transforms the Poor Health to Better Health
The difference between the cost of inputs
and the value of outputs.
Inputs:
Land
Labor
Capital
Transformation/
Conversion
process
Outputs:
Services
Control
Feedback
FeedbackFeedback
Value added
The essence of healthcare operations is to add patient value
Sick
patient
Treated
patient
Alexander Kolker 32

33. Healthcare Process is:
Inputs Processing Outputs
Doctors, nurses Examination Healthier
patientsHospital Surgery
Medical Supplies Monitoring
Equipment Medication
Laboratories Therapy
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34. • Patient is a participant in the process
• Production and Consumption occur simultaneously
• Perishable Capacity
• Site selection is dictated by patient location
• Labor intensiveness
• Intangible nature of healthcare outputs
• High level of judgment called upon and heterogeneous
nature of healthcare
Distinctive Characteristics of Healthcare Services
Alexander Kolker 34

35. Decision-Making is the Key!
There are two groups of decisions:
System Design-- capacity, location,
departmental arrangements, product and
service planning/ forecasting, acquisition and
placement of equipment- Strategic Decisions
System Operations-- personnel staffing,
inventory, scheduling, product management,
quality measurement - Tactical Decisions
Alexander Kolker 35

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Decision-Making For
Systems Design Include:
• capacity
• location
• arrangement of departments
• product and service planning
• acquisition and placement of equipment

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Decision-Making For
System operations Include
• Personnel / staffing
• Inventory
• Scheduling
• Patient Flow
• Project management
• Quality assurance

38. Who is the Healthcare Manager?
•CEO?
•COO?
•CFO?
•CIO?
•CNO?
•CXO?
•Mid-Level Manager?
•Operational Level Manager?
Alexander Kolker 38

39. Decisions fall into a hierarchy
Strategic
Tactical
Operational
Broad Scope:
Product Selection
New Construction
Location Decisions
Technology Choices
Moderate Scope:
Staffing levels
Supply Chain
Equipment Selection
Financial Resource Allocation
Narrow Scope:
Scheduling
Controlling Quality
Inventory Replenishment
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40. Historical Background and Development of Decision
Techniques
• Scientific Management Techniques (1910s) – Frederic W. Taylor:
work/labor - observe, measure, analyze, improve.
• Standardization – Frank & Lillian Gilbreth (1915-1916)
• Psychological Effects of Work Conditions – Henry Gannt
• Quantitative Inventory Management (1915) – F.W. Harris
• Quality Control & Sampling (1930s) – W. Shewhart
• Operations Research/Management Science (1950s)
• Linear Programming (G. Dantzig, V. Kantorovich), Queuing Models
• Management Information Systems (1970s)Alexander Kolker 40

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Scientific Management
When do you think these works and quotations were published ?
1. “Scientific Management in the Hospital”
2. “Hospital Efficiency from the Standpoint of the Efficiency Expert”
3. “…surgeons could learn more about motion and time study, waste
elimination and scientific management from other industries…”
4. “There are several concessions you must take before you can expect
any valuable work of the science of management in the hospital.
The 1-st is having accurate measurements for the present method and
practices. The 2-nd is to apply the measurement and determine the
resulting standard.”
5. “When your management becomes a science it will result in greater
efficiency in you as individuals and in the hospitals to which you
devote your lives.”

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KEYS
1. Gilbreth, F., Transactions of the American Hospital
Association, v. 16, 16-th Annual Conference, p.492, 1914
2. Gilbreth, F., Modern Hospital, v.3, pp.321-324, 1914
3. Gilbreth, F., Boston Med Surg Journal, May 27, 1915

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http://www.archive.org/details/OriginalFilm_2
The surgery portion starts at approximately 10:12, but I
think you will watch it all!

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Key Points of Session 1

46. Main Concept
• Modern medicine has achieved great progress in treating
individual patients.
• However, relatively little resources have been devoted to the
proper functioning of the overall healthcare delivery as an
integrated system, in which access to efficient care is
delivered to many thousands of patients in an economically
sustainable way.
(The 2005 Joint Report of National Academy of Engineering and Institute of
Medicine “Building a Better Delivery System: A New Engineering/Healthcare
Partnership).
• A real impact on efficiency and sustainability of the healthcare
system can be achieved only by using quantitative healthcare
delivery management

47. Main Concept
• There are two sides of Healthcare Management:
• Clinical patient management-outcomes
• Business management: given uncertainty and variability of
patient mix and volumes, develop and execute an efficient
management of the organization/hospital resources and
operations. This is the focus of our course
• The 2006 Institute of Medicine recommendations:
• Hospitals/Clinics should adopt system-wide operations
management principles in order to actually impact both
clinical quality and efficiency of care/operations
• Training in operations management for hospitals should be
promoted and provided by qualified professionals and
organizations
• The Joint Commission and CMS should develop standards
to reduce/eliminate ED crowding, boarding, and diversion

48. What is Healthcare Operations
Management / Administration?
A systematic way of developing managerial
decisions for efficient allocating of material,
human and financial resources needed for
delivery of high quality care using
quantitative methods is the scope of
healthcare operations management and
delivery of care

49. Scientific Management is Based on:
• A goal that is clearly stated and measurable, so the decision-
maker (manager) always knows if the goal is closer or farther
away.
• Identification of available resources that can be leveraged
(allocated) in different ways.
• Development of models or computer algorithms to quantitatively
test different decisions for the use of resources and
consequences of these decisions (especially unintended
consequences) before finalizing the decisions.
The Underlying Premise of HCM is:
• Decisions should be made that best lead to reaching the goal.
• Valid quantitative models of operations lead to better justified
decisions than an educated guess, past experience, and linear
extrapolations (traditional decision-making).

50. Key Points (cont.)
Operations Management / Decision-Making is indispensible in addressing
the following typical hospital issues:
- Capacity: How many beds are required for a department or unit? How
many procedure rooms, operating rooms or pieces of equipment are
needed for different services?
- Staffing: How many nurses, physicians and other providers are needed
for a particular shift in a unit (department) in order to best achieve
operational and service performance objectives?
- Scheduling: What are the optimized staff schedules that help not only
delivering a safe and efficient care for patients but also take into account
staff preferences and convenience?
- Patient flow: What patient wait time at the service stations is
acceptable (if any at all) in order to achieve the system throughput
goals?

51. Key Points (cont.)
- Resource allocation: Is it more efficient to use specialized resources or
pooled (interchangeable) resources (operating/procedure rooms,
beds, equipment, and staff)?
- Forecasting: How to forecast the future patient volumes (demand) or
transaction volumes for the short- and long-term budget and other
planning purposes?
And the ultimate goal (and the holy grail of Operations Management /
Decision-Making):
Given the variable patient volume and patient mix,
design and manage hospital operations efficiently,
i.e. increase profitability (reduce operating expenses, increase
revenue) while keeping high quality, safety and outcomes standards
for patients.

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Next session reading:
Forecasting
Ozcan, chapter 2
Kolker, chapter 4

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