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Is hospital performance related to expenditure on management?

A Street1, R Carr-Hill, J Posnett

  • 1York Health Economics Consortium, University of York, UK.

Journal of Health Services Research & Policy
|May 27, 1999
PubMed
Summary

Management spending in National Health Service (NHS) hospitals does not have a clear link to performance. Optimal performance may occur when management expenditure is approximately 5-6% of total income.

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Area of Science:

  • Health Services Management
  • Health Economics
  • Organizational Performance

Background:

  • Reducing management costs is a common goal in the National Health Service (NHS).
  • Assessing appropriate management spending requires understanding its impact on organizational performance.
  • Previous research has not definitively linked management costs to NHS hospital performance.

Purpose of the Study:

  • To investigate the relationship between management expenditure and hospital performance in the NHS.
  • To determine if higher management costs correlate with better financial targets, waiting times, and service costs.
  • To evaluate the optimal level of management spending for improved hospital outcomes.

Main Methods:

  • Econometric analysis of routinely available NHS acute hospital data.

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  • Examined the correlation between the proportion of income spent on management and three performance metrics.
  • Performance metrics included financial targets, waiting time standards (Patient's Charter), and service provision costs.

    • Main Results:

    • No consistent general relationship was found between management costs and overall hospital performance.
    • A quadratic relationship was observed between management spending and operating surplus.
    • Optimal performance returns were indicated when management expenditure was around 5-6% of hospital income.

    Conclusions:

    • Current evidence is insufficient to conclude that NHS acute hospital management costs are excessive.
    • Indiscriminate reductions in management spending could negatively impact hospital performance.
    • NHS managers should focus on identifying and measuring productive management activities to distinguish effective from ineffective management.