By Chloe Reichel
This post is the first in a series of question and answer pieces with Rina Spence about hospital administration and the COVID-19 pandemic.
The COVID-19 pandemic has brought numerous challenges to hospitals and hospital administrators: equipment shortages for both patients and health care workers; steep declines in revenue; and attendant staffing concerns.
Rina K. Spence served as the president and CEO of Emerson Hospital in Concord, MA from 1984 through 1994. Currently, Spence is an advisor to the Precision Medicine, Artificial Intelligence, and the Law Project at the Petrie-Flom Center for Health Law Policy, Biotechnology, and Bioethics at Harvard Law School.
Spence spoke with the Petrie-Flom Center to offer her perspective on the challenges hospitals are facing amid the COVID-19 pandemic. The conversation touched on: the basics of hospital administration; the business-like model by which many hospitals are run; unpopular decisions hospitals are making during the pandemic, like furloughing some staff and slashing retirement benefits; and steps forward in addressing the COVID-19 crisis at the hospital-level.
We’ve lightly edited and condensed the interview, which we will run in the coming weeks as a series of question and answer pieces. This first installment provides an overview of for-profit and not-for-profit hospital administration, laying the groundwork for understanding the crises that hospitals are facing. The next installment will delve deeper into the tough choices hospitals are making now.
The Business of Hospital Administration
CR: Maybe we could start by talking a bit about your background.
RS: I ran a hospital through the 1980s into the 1990s. That’s quite a long time ago; on the other hand, it was a transition time into different types of cost containment. So, I look at some of the issues happening today and relate it back to efforts like cost containment and different insurance models going back.
Generally speaking, I’ve been involved with the whole hospital management, healthcare management arena for close to 25 – 30 years. I’ve also spent time sitting on hospital boards, internationally.
CR: Could you talk about the structure of leadership and decision-making for a hospital?
RS: Well, a not-for-profit hospital has a board of directors, with an executive committee that is more active, and the CEO of the hospital reports to the board. So you have chain of command there.
They usually both [non-profit and for-profit hospitals] have committees, like the finance committee, the development committee, medical affairs committee.
And trustees will sit on all of those committees, so that they become actively involved in some of the oversight of the hospital. Their role is not in day-to-day management but their role is clearly oversight. The hospital is given authority by the state, usually the Secretary of State, to be a not-for-profit, a 501(c)(3). They don’t pay taxes, and they have certain mandates under that, and that is, in essence, overseeing the institution for the care of the patients… they are mandated to oversee it in what we would call a professional, responsible manner.
They have a set of responsibilities and duties, and those responsibilities include: oversight for patient care, for making sure that physicians are credentialed, that the hospital meets licensure requirements, that funds are used appropriately and not misused. There’s a whole list of responsibilities that they have.
In a for-profit setting, they still have oversight responsibilities given to them by government licensing requirements. Each state will have licensing requirements for a hospital. Those have to do with staffing levels, cleanliness, patient outcomes. All the things a not-for-profit has to be responsible for. But the people doing the oversight, in this case, are investors. And they have much more conflicted loyalties.
CR: Could we talk a bit, then about your experience running a hospital and on boards — the culture and the business of that?
RS: Let me start with running the hospital part. I ran a not-for-profit. And that means that it is to serve the community, the board of the hospital came from the community and represented the community. That being said, the sources of revenue were insurance, or some self-pay, some government [insured], like Medicare. And the hospital depended on donations, especially for capital projects. The hospital had to be run in a business-like way, because in order to operate, we needed cash to pay people. And, if we were not making money, we wouldn’t have the funds for the salaries and continued operations. So we had a responsibility, in a sense, to the community, to operate as efficiently as possible.
So let me move that into a for-profit setting. I did spend 14 years on the board of a for-profit hospital, internationally. And there, my role was representing shareholders… The investors in that situation saw it as a business. Yes, they saw it as a business that had some good social good. But in essence, they needed a return on their investment.
CR: Where is this pandemic being borne out at the level of hospital administration?
RS: I think we have to think about, what is our social responsibility to maintaining [these] institutions? I mean, in some ways, these institutions started operating like businesses and started doing okay and paying pretty well. We don’t think of them as places that need subsidies.
But in essence, when you get a crisis like this, they have to be there. They can’t shut down, we need them there. And I think we do have to think about, hospitals, maybe we run them like businesses, but they’re also care institutions that the community has to have. Because at a time like this, we probably don’t put business first. We put your responsibility to care for the patient first. Even though the business is supposed to put the care of the patient first.
What I’m saying is you’re going to make decisions that may not be right for the business to be profitable, you’re going to make decisions for the business to be there to care for that patient no matter what.
Coming next: Hospital administration in a crisis.