Hospitals need a cultural change 

Michael Herzog: Currently the biggest challenge, in addition to many others, is without doubt the introduction of the new hospital financing system in accordance with Swiss DRG as of 1 January 2012. Swiss DRG is the new tariff system for acute somatic inpatient hospital services which, according to the most recent revision of the Swiss Health Insurance Act (HIA), uniformly governs inpatient hospital treatment throughout Switzerland according to case-based lump sums. In terms of the Swiss DRG case-based lump sum system, every hospital stay will be allocated to a case group using specific criteria, such as primary diagnosis, secondary diagnoses, treatments and other factors. This means that any shortfall of a hospital institution will now no longer be automatically borne by the public purse.

André Zemp: This also entails accompanying legal and organizational restructuring measures. Many hospitals are currently adapting their legal form to the new conditions. The foundation and the non-profit making corporation (gemeinnützige Aktiengesellschaft) are the most common organizational forms for managing a hospital, in addition to public corporations. On an organizational level, case-based lump sum accounting is also leading to a new way of thinking about internal processes. Cross-departmental cooperation and thus networking of the specialisms and expertise within the individual hospital departments is one of the positive side effects of revitalizing financing and cost management in a hospital. Even today in many hospitals this is still too administration-oriented.

Michael Herzog: As the fixed costs for using a hospital’s facilities are a new part of the Swiss DRG lump-sums payments, many hospitals in Switzerland have assumed direct responsibility for their real estate. This leads to the hospital having to directly plan, implement and finance future renovations and new buildings. Consequently, a hospital organization has to compile its operational figures more transparently and accurately to be able to negotiate with banks and other lenders.

André Zemp: The Swiss hospital landscape is very heterogeneous and primarily displays strong regional differences. The new case-based lump-sum payments place hospitals from peripheral regions in increasing difficulty, because they have too few cases per service group to be able to treat these effectively and efficiently. There is a conflict here between broad regional hospital service coverage and economically sensible use of the expensive infrastructure, as well as maintenance of a 24-hour operation. In the past, however, progressive and economically motivated advances made by politicians in certain cantons had little chance of being implemented, and many politicians have stumbled over the question of hospitals and the service range of health services.

André Zemp: The Swiss Federal Health Insurance Act (HIA) forms the authoritative basis for the healthcare system. The Parliament took the decision to revise the HIA, with the amended version coming into force in 2009 and introducing fundamental changes with regard to hospital financing. The reform is one of the biggest steps in healthcare policy in recent years. It is regarded as the end of the “hospital administration” era. The amended HIA increases competitive forces in the marketplace with regard to price and quality, aims to split tasks up clearly between canton and hospital and gives patients freedom of choice beyond cantonal boundaries concerning the hospital they use. The revised HIA enables, that private and public hospitals are treated in the same way. Commissioned private hospitals will be financed in the same way as public hospitals.

Michael Herzog: The aim of increased competition is to slow down the explosive rise in healthcare costs. A clear commitment to the new system and its potential for savings is, however, required from politicians and hospital management in order to actually achieve a cost-cutting effect for all parties involved. Unfortunately, in my experience, the individual interests both of politicians and hospitals are still limiting the potential benefits arising from the political framework.

Michael Herzog: We’re clearly noticing a repositioning in the market. Hospitals which are willing to take on this challenge want to create greater transparency. They are developing new corporate strategies, analyzing their existing range of services and reviewing cooperation agreements. The extensive changes are forcing the cantons to review their hospital strategy. Alliances and cooperation agreements in the field of service provision ultimately bring cost benefits thanks to increased case numbers. Suddenly the once hotly disputed topics, such as exchange of services with external partners, for example, are now being re-evaluated. Outsourcing or insourcing of services and general supply chain management optimization are also being discussed.

André Zemp: Clear, relevant figures are required, though, in order to gain an overview of the strengths and weaknesses, risks and opportunities. This is where finance and accounting is needed. You’re in a better position to manage and take decisions if your finance is under control. You also have the necessary, well-founded information for discussing cooperations and optimizing the range of services.

Michael Herzog: We are seeing private hospitals in Switzerland, but also private hospital groups from abroad, showing great interest in the Swiss market. In the medium term, with a clear strategy and efficient organization, it will be possible for these institutions to take over inefficiently run public hospitals which don’t have a focused strategy.

André Zemp: At management level we see public hospital models being adapted increasingly to the operational models used by commercially run enterprises, by appointing a CEO, for example, who is senior to all the specialists and departmental managers. Private institutions are obviously one step ahead in terms of governance structure. On the other hand, private clinics are nowadays increasingly caring for patients with general insurance, because the purely privately insured patient market in Switzerland is too small to survive in the long term. The proportion of foreign patients who attend a private Swiss clinic is, however, often overestimated. With the exception of the Lake Geneva region, this proportion barely exceeds 2 to 3 percent.

Michael Herzog: In general, the management bodies of hospitals will have to learn to increasingly manage their organization by using key figures. We are noticing that numerous hospitals clearly need to catch up where finance and accounting is concerned. Then again, others are working flat out to quickly rectify these deficiencies. They know this is important for the success of strategic decisions. This is associated with a change in culture which cannot be implemented overnight.

André Zemp: Staff management is a decisive factor in this development. Running a hospital depends on its staff from all levels of expertise and specialism. It’s also a question of supporting staff on the new path and equipping them with the necessary specialist knowledge at operational level. Doctors and nurses will also have to learn to influence costs and set economic targets, which requires motivation and passing on operational knowledge which is geared towards the respective level, such as “What is the best way to schedule my staff if bed occupancy fluctuates?”