Institutional and market changes seem to force hospitals across the Western world to revitalize their corporate strategies towards more cost efficiency on the one hand, and more flexibility towards customer demands on the other hand. Hospitals, however, apparently differ in the extent to which they are able to implement such strategies effectively. This paper explores whether these different levels of effectiveness depend on how hospitals’ top managers’ use of the available management information systems (MIS). Based on data obtained from the 218 CEOs of public hospitals in Spain, we analyze how CEOs’ professional and educational backgrounds affect their use of MIS, and how the use of the MIS subsequently supports or inhibits the implementation of these strategic goals. The results indicate that CEOs with a predominant clinical background focus more on non-financial information for decision-making and prefer an interactive style of using MIS, which together support flexibility strategies. CEOs with a predominant administrative background seem more effective in establishing cost-reduction strategies, through their larger inclination to emphasize financial information in combination with a diagnostic use of the MIS. Implications for the strategic management of hospitals are outlined.
The medical industry across the Western world is currently involved in processes of serious strategic and managerial reorientation [1] and [2]. These processes originate in a number of different structural and demographic developments, such as the progressive ageing of the Western population, the impact of new pathologies and technologies, autonomous increases in health care demands by citizens, and the need to repair supposed inefficiencies in the design and running of national health care systems [3], [4], [5] and [6]. In several countries, such as Spain, formal legislation requires regional health care authorities to encourage hospitals to become flexible organizations that are more receptive to the demands from the public, and to offer these higher quality services at lower cost [7], [8] and [9]. Although these strategic goals and policies are not mutually exclusive by definition, the strategic management literature suggests that the organizational requirements for the effective implementation of quality strategies and cost-reduction strategies may differ strongly [10], [11] and [12]. This explains why hospitals pressed towards both cost reduction and flexibility enhancement may often perform better on one strategic dimension than the other [1], [4], [10] and [13]. In this paper we analyze the impact on strategic performance of hospitals of a combination of two such types of organizational requirements, which are the characteristics of the hospital's CEO and of the hospital's management information system (MIS). Based on the upper echelon theory of organizations, which recognizes the impact of managers’ backgrounds on their subsequent choices and behavior [14] and [15], we develop a model that explains hospital's pursuit of strategic objectives by the way in which CEOs with different educational and professional backgrounds use the hospital's MIS differently [14] and [15]. In particular, we expect systematic differences between hospital CEOs with an administrative and with a clinical background in their use of the MIS, which subsequently affects the hospital's strategic focus. For the aim of this paper, we define a MIS broadly as the information system that provides management with information about financial and operational aspects of hospital management. Typical information elements contained in a hospital MIS relate to financial data on operational budgets, cost information per patient, per activity or treatment, and non-financial data on such divers issues as number of treatments, bed occupancy, staff absenteeism and discharge rate [16] and [17]. Although it is obvious that any MIS plays an important role in day-to-day hospital management [18], [19] and [20], we investigate the strategic role of MIS use here, which is increasingly acknowledged in the contemporary strategic management literature [1], [4], [5], [10], [11], [12] and [13]. This literature in particular suggests that quality enhancement and cost reduction may require quite a different use of MIS by hospital management [20] and [21]. In sum therefore, we will contrast the clinical versus administrative background of CEOs, explore whether CEO background reflects in their use of the hospital's MIS, and how this use of MIS explains the subsequent pursuit of strategic policies by the hospital.
The objective of this study was to provide evidence on the use of the MIS by hospital CEOs with different backgrounds, and to analyze the effect of CEOs’ use of MIS on subsequent strategy implementation. As hospitals are reported to spend as much as 15% of their budget on gathering and using management information [44] and [45], understanding the use of MIS seems important, especially in situations where MIS may become vital in the implementation of strategic policies. Our analyses overall indicate that CEO background affects the use of MIS, which in turn appears to affect the strategic policies adopted by the hospital. CEOs with a dominant administrative background tend to use MIS more diagnostically than interactively, and seem to emphasize performance evaluation and the use of financial information more than non-financial (medical) information for decision-making. In contrast, CEOs with a dominant clinical background tend to use MIS more interactively than diagnostically, and also tend to use clinical information more than financial information. This suggests that clinical CEOs rather than administrative CEOs show behavior that is better aligned with normative statements about the roles of CEOs of today's hospitals. Schultz et al. [15], for example, argues that hospitals are demanding a new role of clinical CEOs who should become more proactive and aiming at continuous improvement of a health care delivery. As the strategic management literature shows, this requires that CEOs use the MIS in a more interactive way to discuss available information on critical aspects of the hospital's strategy across hierarchical levels and functions. This will help hospitals to identify strategic uncertainties and to react appropriately and timely [30].
Our results also show that the findings in the broader upper echelon literature [14] and [22] apply in a hospital setting. We find that the use of financial versus clinical information is related to the type of decision take by CEOs. Although CEOs seem to make some use of both types of information for both types of decisions, we find a stronger connection between CEOs use of clinical information for resource allocation decision than for performance evaluation decision. The results also show that CEOs use financial information more for performance evaluation decision than for resource allocation decisions.
Regarding the effect of the use of MIS on hospital strategy implementation, the results show that both styles of using MIS have positive effects on strategy implementation, but that systematic differences exist between strategic directions. An interactive style seems beneficial to the implementation of both strategies focused on cost and strategies focused on quality and flexibility. A diagnostic style is related to the implementation of a strategy focused on cost. These results confirm earlier research that demonstrated that the participation of physicians in management appears beneficial in controlling costs, maintaining quality, and bringing about organizational change [20], [21] and [28]. We also observe that the use of financial information has a positive effect on the implementation of a strategy focused on cost, but not on flexibility and quality. Reversely, the use of clinical (non-financial) information is positively related to the implementation of a strategy focused on flexibility but not on cost. In general, these results support that, in line with Schultz et al. [15], CEOs with a dominant medical background (regarding both experience and education) are more in tune with the needs of patients and therefore are more likely to make decisions that benefit the quality of care delivered to patients. The implication is that training in the administrative side of management may pay off as it allows (clinical) CEOs to use typical management information in broader ways, than just determined by their education and functional experience alone. This is not only important for the CEO, but also for middle management staff. Indeed, being confronted with the administrative side of management earlier in the career will make clinical (top) managers more effective in building and using the management repertoire they potentially have.
This latter implication may also be considered to be highly important given the technical complexity of contemporary MIS, which often almost requires expert knowledge on its functional possibilities [44] and [45]. Clearly, our results indicate that the technical sophistication of MIS may be less important than ‘alignment’ with strategy that it allows. In turn, this means that CEOs should be made aware of the type of management information that has to be provided by MIS in order to enable strategic management for the hospital [16] and [29] and that serious investments in the accessibility of information may pay off. This is in line with the findings by Young et al. [14] that managers in more successful hospitals know how to use management tools and techniques more effectively. As this is not a competence that clinical backgrounds generally provide, we agree with Wyatt [45] who pointed out the need to empower and train clinical managers to improve the quality, relevance, and understandability of data [44] and [45]. Indeed, investing in the provision of management reports that are understandable to clinicians and administrators, such as through balanced scorecards that combine financial and operational indicators may complement such developments. Reversely, we conclude that the administrative background of CEOs may be beneficial for overall cost-reduction policies, but may render CEOs less equipped to engage in interactions about quality enhancement. This latter requires an ability to use of MIS interactively, and to bridge the gap between aggregate financial information and detailed operational (non-financial) information.
In sum, the practical implications of this paper can be summarized as follows. First, as CEO background affects the pursuit of strategic policies by the hospital through the use of MIS, CEOs appointed to implement such policies should be experienced or trained in the use of non-financial management information in an interactive and participative style. Second, CEOs appointed to implement cost-reduction policies control, should be experienced or empowered towards the typical ‘administrative’ ways of dealing with the MIS. Third, as these different backgrounds have such different implications, CEOs with a balanced background may be most effective to confront pressures towards both cost reduction and quality enhancement. This implies not only that CEOs obtain a larger repertoire in the ways they manage the organization, but also that the information provided by the hospital's MIS supports this repertoire in full. Here, investment in additional reports that combine and integrate various kinds of clinical and administrative information may be beneficial. This in turn requires and allows, fourth, that clinical and financial information is used more at the various hierarchical levels within the organization, and in combined fashions as to integrate the clinical and administrative needs. In terms of general leadership, this may require that CEOs spur clinicians at other levels to understand and formulate their own information demands, and to clarify what these demands mean for the design of the hospital's MIS. Thus, hospital's top managers may have to actively stimulate dialogue among clinicians and administrators to ‘demystify’ the MIS and make it more broadly owned. This requires that CEOs apply a style of supervision that stimulates agreement with the relevant professional staff about desirable financial and non-financial controls for monitoring, which will not ‘erode’ professional (clinical) discretion unnecessarily, and that balances the need to provide management with performance feedback while establishing control boundaries within which professional discretion can be exercised [25], [26] and [27]. This also requires that CEOs realize the importance of the relationship between information management and the accomplishment of the hospital's strategic objectives [44] and [45]. All this, finally, may require that the hospital's board of directors, who are responsible for appointing hospital CEOs, will pay increased attention to the proper balance between CEO characteristics and the strategic needs of the hospital.
