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Conditions to assess the future performance of Dutch hospitals

Maasacker, Marjorie van (2010) Conditions to assess the future performance of Dutch hospitals.

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Abstract:On behalf of ING (Internationale Nederlanden Groep) Domestic Bank Nederland we performed this study. The Dutch health care sector and especially the Dutch hospital sector are central subjects in this report. The central question in this report is. ‘Which conditions should a hospital meet to determine whether they have enough potential for a structurally profitable business in ever changing circumstances?’ The aim of this report is to advise ING how they can judge whether a Dutch hospital has the potential to perform well on the longer term. We can conclude that a hospital with a good, clearly defined and well-reasoned policy, has the potential to perform better in the future than a hospital which has not an obvious policy. The literature states: ‘clear formulated goals have a positive effect on the performance of an organization’ (Locke and Latham [1990a, 2002, 2007]). Clear formulated goals specifically influence the choices, efforts and perseverance of the employees (Latham, Borgogni and Petitta [2008]). Defining clear goals should be covered in the policy process. The ever changing circumstances make it difficult for a hospital to follow their own course. Besides this, a company in the public sector has a large number of influential stakeholders who influence the policy process. This makes the process of defining the policy much more complex than for a firm in the private sector (De Wit and Meyer [2004]). For ING it is important to get insight in the policy of a hospital, in this way they can judge whether a hospital has clear formulated goals. Describing a clear-defined policy is not enough. ING has to have good knowledge about the choices made by a hospital regarding their policy. A good policy process starts with an internal and external analysis. Based on its results a hospital can define their mission statement and vision. After a literature study and interviews, we can conclude that the mission statement should include the following subjects.  Customers - who are the clients of the hospital.  Positioning - the environment where the hospital is situated (demography and competitors).  Products and services - the functions a hospital offers to their clients.  Employees - the attitude of the hospital towards the employee. The vision shows the long-term goal that the hospital wants to achieve. When the long-term goal is clear, defining the strategy can start. The strategy starts with the sub-objectives. Other crucial elements are the activities and tasks to be performed, which employee is responsible for each activity and task, which resources should be used, how to measure the progress (milestones), the desired results and corresponding indicators. These elements are essential seen the strategy must be translated to the entire organization. With a clear defined strategy, a hospital will be able to implement the strategy into the organization without too many problems. Finally, it must be clear who the stakeholders are and the degree of influence they have with respect to the hospital. Overall, it seems that a clear description is enough. Nevertheless, this is not true. A good strategy without well-defined motivations is worthless. The motives a hospital gives for the choices made are more important to get a good understanding of the situation. Conditions to assess the future performance of Dutch hospitals Master thesis University Twente 6 Marjorie van Maasacker – s0209406 Besides the motives, a hospital must show how they implement the strategy into the entire organization. Only than ING can judges whether a hospitals policy is good enough. The Dutch hospital sector In the Netherlands 85 general hospitals are registered (in 2010 at the Vereniging van Ziekenhuizen (NVZ)). Hospitals are important clients for ING concerning credit facilities and payments. However, the health care sector is changing. The essence of this is the modifying relationship between the health care providers, insurers, patients and the Dutch government. An example is the declining controlling role of the Dutch authorities which means increasing responsibility for the health care institutions. Although the regulating role of the Dutch government will decline, they will always be part of the Dutch health care sector. Therefore it is important for a hospital to deal with this changing environment. A hospital has to act more and more like an entrepreneur. Entrepreneurship is associated with risks and uncertainty. The size of the risks is fluctuating. Doing business with a hospital brings uncertainties concerning a credit application from a hospital to a bank. Currently, ING uses three tools to assess a hospitals’ creditworthiness. The rating model is a statistical instrument developed by ING. It monitors the likelihood that a hospital is not able to meet their short term obligations with respect to the bank. With the outcomes of this model ING can determine the price of credit facilities, the higher the risk the higher the price of the products/services of ING. The policy paper answers the question whether credit can be provided and under which conditions. With the help of qualitative and quantitative criteria a hospital will be evaluated. The benchmark provides insight into only financial characteristics of a hospital compared to other hospitals. The annual report of all hospitals serves as input for the benchmark. In addition to these three tools, ING wants to explore whether there are identifiable indicators for estimating the longer term performance of a hospital. The research The research is divided into two parts. For a theoretical background we started with a literature study. Central subjects are: performance management, strategic management and the public sector. To get more insight in the policy process and content of hospitals we have conducted 10 interviews with experts from ING and health care experts. Recommendation It is essential for ING to up-date their policy paper with the results of this investigation. We recommend ING to add some critical questions to the policy paper, regarding the policy process. Especially the subjects: internal/external analysis, mission statement, vision, goals and strategy are important. A hospital should make clear which choices concerning the policy they have made and why they made these choices. A hospital must be able to show how the policy affects the hospital and in which way it is implemented in the organization. Besides a focus on the policy process, ING should focus on the stakeholders of the hospital. A hospital should make clear to ING:  Who are the stakeholders of the hospital.  Whether stakeholders have influence on the business of the hospital.  To what extent these stakeholders have influence.  On what areas these stakeholders have influence. When a hospital can show all this, ING can expect that the hospital is able to deal with the changing environment and to conduct their business on a structural profitable way. Unfortunately, it is not possible to process these questions in a questionnaire, ING should ask the questions during a conversation with the hospital.
Item Type:Essay (Master)
Clients:
ING
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Business Administration MSc (60644)
Link to this item:http://purl.utwente.nl/essays/60386
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