What really is re-engineering?

Theory and reality often diverge

In the first section of the report, Re-engineering Hospitals: Evidence from the Field, researchers at The Wharton School, University of Pennsylvania identified seven components of re-engineering that occurred at varying levels and intensities at the 14 hospitals.

"These commonalties provide a useful basis to describe re-engineering in practice as opposed to theory," explains John Kimberly, PhD, professor of management. "Yet, this is not to be taken as a template for re-engineering. Overall, each re-engineering program was rather distinct."

Below are the seven components and the frequency noted in the study:

· Patient aggregation, which occurred mostly at larger teaching hospitals.

· Clinical pathways, which occurred in four hospitals. "Although most hospitals in our sample recognized the importance of selecting best physician and nursing practices to provide superior care and minimal expenses, most had not intensively invested in its development," he says.

· Changes in managerial structure, which were considered an important focus for all hospitals. "A central idea at each facility was that flattening the organization structure would increase informational flows and productivity," he says. "However, when and how much to implement the change generated significant debate." The study found management restructuring occurred prior, during, and at the conclusion of re-engineering - and each timetable has advantages and disadvantages. (See table, p. 56.)

· Service decentralization, which occurred at all but one hospital.

· Downsizing layoffs, which occurred at all but one hospital. Although some argue downsizing is not re-engineering, the study showed otherwise. "The rapid decrease in inpatient activity and low occupancy rates accentuated the need for downsizing," Kimberly says. Specific re-engineering plans such as service decentralization, skill-mix changes, or management consolidations also precipitated layoffs, he adds.

· Skill mix alterations. The largest cost savings component in many hospitals in the study came from skill mix changes, which included displacing LPNs in favor of lower paid nursing aides or replacing primary care with a mixture of nurses, aides, or LPNs, he says.

· Non-core cost savings changes. Such changes included energy savings, negotiating new materials contracts, decreasing employee benefits, increasing charge capturing and inpatient rates, reduction of food costs at meetings, and decreasing transfer charges for medical benefits, he says.