Aalto University

School of Science and Technology

Department of Industrial Engineering and Management
Degree Programme of Service Management and Engineering





An Chen









Productivity Improvement in Specialty Hospitals in China











Thesis submitted for review, in partial fulfilment of the requirements for the degree of Master of
Science in Technology



Espoo, May 10, 2011



Supervisor: Prof. Paul Lillrank
Instructor: D.Sc. Antti Peltokorpi

Acknowledgements

The completion of the thesis would not be possible if there were no helps and supports of many
people who are gratefully acknowledged here.
First and foremost, I own my deepest gratitude to my supervisor, Professor Paul Lillrank, who
offered me valuable inspiration, encouragement, guidance, suggestions and criticisms with his
profound knowledge and rich research experience. His patience and kindness are greatly
impressive and appreciated. His vigorous academic observation enlightens me not only in this
thesis but also in my future research and study.
From my research work in HEMA group to the completion of this thesis, I am very grateful for the
insightful guidance and comments of my instructor, D.Sc. Antti Peltokorpi. This thesis obtained lots
of enlightenments from his previous researches and works. He helped me to overcome many
problems and challenges during the process of thesis writing.
Then, I shall extent my thanks to all my seniors in HEMA research group, especially to D.Sc. Paulus
Torkki who offered me valuable advices for research practice. We had a great time during vising
hospitals in China with Prof. Lillrank and D.Sc. Peltokorpi.
Sincere acknowledgement should be shown to several organizations for their great collaboration
and support. I would like give special thanks to Shanghai Zhabei central hospital, JinHua central
Hospital, JinHua No.1 People Hospital, JinHua Eye Hospital, JinHua Women Hospital, Zhejiang
Guangfu Hospital, ktilopisto Women Hospital and their contacts for granting me access to data.
My special thanks are owed to Dr. Anne-Maija Tapper for her suggestions and comments on my
thesis.
Whats more, thanks are also due to my parents and relatives for all their understanding and
support. My Dad and Mon have made their great efforts to help me contact with hospitals in China.
Last but not least, I want to thank my dear friends. Thanks all the students from SME for bringing
joy and pleasure to my life aboard; Thanks my flatmates Zengcai Qu and Yu Wei for giving me a
feeling at home in Finland; Thanks all my friends who made this thesis possible; Thanks my dearest
friend Yu Wei especially.

Espoo, May 2011
An Chen




Abstract

The world-wide challenges, such as aging of population, the growth of chronic diseases, and the
increased aspiration of better-quality life, are imposing enormous pressure on healthcare systems
all over the world. Facing these inescapable challenges, the world is engaging in providing
healthcare services with higher quality but less cost. In order to reduce complexity, decrease
service costs, increase productivity and improve service quality, focus strategy has been advocated
to apply in the health care industry as service lines are organized around a special identifiable
problem and a certain segment of patients who are aggregated and treated as a collection of
individuals with similar diagnoses and treatment. However, there is no conformable finding that
specialty hospitals in reality will provide permanent improvements and better performance when
compared with general hospitals or other medical institutes. Especially in China, specialty hospitals
stand in a weak position in healthcare industry.
This research is aiming to develop the insights of improving productivity in Chinese specialty
hospital by exposing the problems existing in the operations management of Chinese Specialty
hospitals and figure out possible solutions for these issues. Benchmarking, comparing the
performance of Chinese specialty hospitals with that of Chinese general hospitals and Finnish
specialty hospitals, is the main research approach in this research to find the deficiencies in
Chinese specialty hospitals and to expose the potential improvements in operations. This research
is focused on surgical units.
The result of the study indicates that productivity of Chinese specialty hospitals is low, deficiencies
exist and there is huge potential space remained for Chinese specialty hospitals to improve. It is
observed that different kinds of promising operative practices for surgical units can be learned by
the Chinese specialty hospitals from Chinese general hospitals and Finnish Specialty hospitals.
1

Table of contents

List of figures ............................................................................................................................................... 4
List of tables ................................................................................................................................................ 5
1 Introduction ............................................................................................................................................ 6
1.1 Background ........................................................................................................................................ 6
1.2 Research objective and scope............................................................................................................. 7
1.3 Research base .................................................................................................................................... 8
1.4 Thesis structure .................................................................................................................................. 9
2 Literature review ....................................................................................................................................10
2.1 Productivity .......................................................................................................................................10
2.1.1 Production system ......................................................................................................................10
2.1.2 Definition of productivity ............................................................................................................11
2.1.3 Productivity measurement and evaluation .................................................................................15
2.1.4 Productivity improvement ..........................................................................................................21
2.2 Operations management...................................................................................................................23
2.2.1 Basic concept of operations management ..................................................................................23
2.2.2 Services operations management ...............................................................................................29
2.2.3 Healthcare operations management...........................................................................................30
2.3 Focus strategy ...................................................................................................................................31
2.3.1 Focus factory ..............................................................................................................................31
2.3.2 Focus strategy in services ...........................................................................................................33
2.3.3 Focus strategy in healthcare .......................................................................................................34
2.4 Specialty hospital ..............................................................................................................................35
2.4.1 Definition of specialty hospital (SH) ............................................................................................35
2.4.2 Characteristics of specialty hospitals...........................................................................................35
2.4.3 Pros and Cons of specialty hospital .............................................................................................37
2.4.4 Ideal model of specialty hospital.................................................................................................38
2.5 Summary of the literature review ......................................................................................................40
3 A Framework for productivity and operations measurement in surgical unit of specialty hospital ..........42
3.1 Productivity definition for this research .............................................................................................42
3.2 Productivity measurement for this research ......................................................................................42
2
3.2.1 Output and input ........................................................................................................................42
3.2.2 Quality measurement for this research .......................................................................................43
3.2.3 Efficiency measurement for this research ...................................................................................43
3.2.4 Model and formula of productivity measurement for this research ............................................44
3.3 Linkages between operations management, productivity determinants and productivity improvement
of SH .......................................................................................................................................................45
3.4 Measurement of operations management ........................................................................................46
3.5 A framework for measurement and comparisons of operations management and productivity in SHs
...............................................................................................................................................................46
4 Research methodology ...........................................................................................................................49
4.1 Research approach ............................................................................................................................49
4.1.1 Inductive reasoning ....................................................................................................................49
4.1.2 Qualitative and quantitative approaches ....................................................................................49
4.1.3 Comparative study and benchmarking ........................................................................................49
4.2 Research methods.............................................................................................................................50
4.2.1 Questionnaire.............................................................................................................................51
4.2.2 Interviews ..................................................................................................................................51
4.2.3 Site visits ....................................................................................................................................51
4.3 Research process ..............................................................................................................................51
5 Results ...................................................................................................................................................53
5.1 General conditions and situation of specialty hospitals in China ........................................................53
5.1.1 Survival environment..................................................................................................................53
5.1.2 Competitiveness .........................................................................................................................53
5.1.3 Gaps to ideal model ....................................................................................................................55
5.2 Difference between Chinese specialty hospitals and Chinese general hospitals .................................57
5.2.1 Ophthalmology ...........................................................................................................................57
5.2.2 Gynecology.................................................................................................................................59
5.2.3 Tumor & Cancer .........................................................................................................................62
5.3 Difference between Chinese specialty hospitals and Finnish specialty hospitals ................................64
5.4 Summary of benchmarkingdeficiencies and possible solutions .......................................................66
6 Conclusion and discussion .......................................................................................................................68
6.1 Key findings .......................................................................................................................................68
6.2 Recommendations ............................................................................................................................68
6.3 Managerial implication ......................................................................................................................72
6.4 Validity and reliability of this research ...............................................................................................73
3
7 Limitation and further research ...............................................................................................................75
References ..................................................................................................................................................76
Bromhead, H.J., et al.(2002). The use of anaesthetic rooms for induction of anaesthesia: a postal
survey of current practice and attitudes in Great Britain and Northern Ireland. Anaesthesia. Volume
57, Issue 9, 850854. ..........................................................................................................................76
Appendixes .................................................................................................................................................84
1. Statistics of hospitals in JinHua City (source: JinHua Municipal Bureau of health, Zhejiang Province,
http://www.jhwsj.gov.cn/html/jgjs/tjsj/5864.html, updated to Sep.2010) ..............................................84
2. ASA physical status classification system .............................................................................................86
3. Questions used in the questionnaires and interviews ..........................................................................87























4

List of figures

Figure 1 Chart for research question No.3 and No.4 ..................................................................................... 8
Figure 2 Model of system theory (Report, 2005) .........................................................................................11
Figure 3 Production model in healthcare services sector (Sharpe et al., 2007) .............................................11
Figure 4 Service quality image (Lahtinen & Isoviita, 1994). ..........................................................................13
Figure 5 Model of productivity improvement ..............................................................................................22
Figure 6 Stages and activities in operating process (Peltokorpi, 2010) .........................................................30
Figure 7 Structure of specialty hospital (Herzlinger, 1999) ...........................................................................36
Figure 8 An ideal model of specialty hospitals (Peltokorpi et al., 2010) ........................................................39
Figure 9 Model of productivity for this research .........................................................................................44
Figure 10 Productivity improvement model ................................................................................................46
Figure 11 Numbers of Chinese specialty hospitals (1998-2008) (Statistics N. , 2009)....................................54
Figure 12 Numbers of visits and inpatients per general hospital and specialty hospital (2008) (Statistics N. ,
2009) ..........................................................................................................................................................54
Figure 13 Average utilization rates and stay days in hospitals of Chinese specialty hospitals and general
hospitals (Statistics N. , 2009) .....................................................................................................................55
Figure 14 Possible layout of surgical unit .....................................................................................................70
Figure 15: Parallelized process of surgical unit (Friedman & Sokal, 2006) ....................................................71















5
List of tables

Table 1 Properties of productivity indicators and examples from hospital departments (Walker & Laura,
2006) ..........................................................................................................................................................19
Table 2 Common indicators used for measuring surgery quality ..................................................................20
Table 3 Types of processing (Stevenson, 2009) ...........................................................................................26
Table 4 Five types of facility layouts and supportive processes (Stevenson, 2009) .......................................26
Table 5 Measures in performance metrics ..................................................................................................28
Table 6 Primary differences between services operations and manufacturing operations (Dilworth, 1992) .29
Table 7 Characteristics of focused factory (Skinner, 1974); (Harmon & Peterson, 1990); (Vokurka & Davis,
2000) ..........................................................................................................................................................32
Table 8 Some special problems in applying focus into services (Dierdonck & Brandt, 1988) ........................34
Table 9 Debates over the effects of SH ........................................................................................................37
Table 10 Summary of the existing theory and the identified research gaps .................................................40
Table 11 Items and their descriptions in the framework for measuring and comparing operations
management and productivity in SHs ..........................................................................................................46
Table 12 Comparison between Chinese specialty hospitals and an ideal specialty hospital ..........................56
Table 13 Benchmarking between Jinhua eye hospital and two Jinhua general hospitals in the aspect of
ophthalmology ...........................................................................................................................................57
Table 14 Benchmarking between Jinhua women hospital and two Jinhua general hospitals in the aspect of
gynecology .................................................................................................................................................60
Table 15 Benchmarking between JinHua tumor & cancer hospital and two Jinhua general hospitals in the
aspect of tumor & cancer............................................................................................................................62
Table 16 Benchmarking between Jinhua women hospital and one Finnish focused care unit for women in
the aspect of gynecology (Torkki et.al, 2007) ..............................................................................................64
Table 17 Summary of comparisons and benchmarking ................................................................................67












6
1 Introduction

1.1 Background

The world-wide challenges, such as aging of population, the growth of chronic diseases, and the
increased aspiration of better-quality life, are imposing enormous pressure on healthcare systems
all over the world. These challenges affect all types of systems: publicly financed welfare states
such as Finland and U.K., private and mixed systems such as the US, and developing economies
such as China (Linna et al., 2006). While these challenges get different manifestations in different
socio-economic context, at the core is the issue of providing healthcare services with higher
quality but less cost, i.e. improving operational efficiency. Legislative initiatives are debated in
Finland; in the US, there is a large agenda of promoting value-based health care (Hughes et al.,
2010); China announced a new set of healthcare reforms in 2009 in order to achieve universal,
safe, affordable and effective basic health care by 2020 (Herd, 2010). (Linna, Hakkinen, &
Magnussen, 2006). (Hughes, Kirkman-Liff, & Lockhart, 2010).
The mission of enhancing service quality and quantity while spending less money per case or per
person has forced healthcare organizations to find new ways of arranging and operating. A variety
of innovative strategies and management principles are proposed and adopted in order to
improve productivity of healthcare industry (Peltokorpi, 2010). One such is the focus strategy,
guided by the principle that a small set of linked tasks improves operating performance. In
manufacturing, it has been theoretically and empirically proven. Consequently, focused
production is viewed as one most promising solution for improving quality and efficiency of service
organizations, such as hospitals (Huckman & Zinner, 2008). Focus principles drive the emergence
of a new type of healthcare service organizationspecialty hospital (Herzlinger, 1999) or focused
care unit (Peltokorpi el at., 2010). (Peltokorpi, Improving Efficiency in Surgical services:A
production planning and control approach, 2010)
However, there is a debate over the issue whether specialty hospitals in reality will provide
permanent improvements and better performance. While some scholars believe that healthcare
industries can anticipate the same high level of success that in manufacturing, some others show
evidence of inefficiencies or no improvement in the performance of specialty hospitals (Pieters et
al., 2010). This debate can be understood in two ways: 1) the existing organizations called
specialty hospitals may not in reality be focused; 2) focus strategy alone may not be sufficient for
better performance, but some other changes in operations management are also needed
(Peltokorpi et al., 2010). (Pieters;Oirscho;& Akkermans, 2010)

The purpose of this research is to examine the issue of how to develop specialty hospitals
successfully. The Chinese healthcare market provides a case in point, as the number of specialty
hospitals is increasing (National Bureau of Statistics of China, 2008). With the huge population
density, increasing demand and expanding supply, the Chinese market would be a fertile ground
for specialty hospitals and enable them to exploit and develop the focus concept in healthcare.
However, this assumption conflicts with the fact that overall productivity of Chinese specialty
7
hospitals is lower, compared with that of other healthcare institutes, such as general hospitals.
(China Investment Consultancy, 2010). Based on this situation, the researcher of this thesis was
motivated to find the problems existing in Chinese specialty hospitals and tried to make
contributes to the insights of how to improve productivities of specialty hospitals.

1.2 Research objective and scope

The subject defined for this research is productivity improvement in specialty hospitals in China.
There are three key words posited in the topic: productivity improvement, operations
management, and Chinese specialty hospitals. The object is Chinese specialty hospitals. The goal
of this research is to develop insights that could help to improve operations management and
increase productivity of Chinese specialty hospitals. Generally speaking, this research is aiming to
find out the deficiencies existing in the operations management and operations system of Chinese
specialty hospitals, figure out possible solutions for these deficiencies and explore the feasibility
and availability of these operation management solutions applied to Chinese specialty hospitals.
The focus of this research is placed on the operations management and productivity of the surgical
unit, which is commonly viewed as an operations-intensive, cost-intensive and multi-professional
part of healthcare service production (Peltokorpi, 2010). Managing operation rooms effectively
and efficiently is essential to maximize outcomes and minimize costs (Peltokorpi, 2010). Without
any question, covering all aspects of hospitals performance in the research is highly expensive and
time-consuming. Therefore, this research concentrates on operations management and
productivities in surgical units of hospitals.
The whole research is divided into five research questions tightly around the research theme. The
main purpose of these research questions is to dig out the typical problems existing in operations
management in the Chinese specialty hospitals and find out possible solutions for them.
1. What is the general condition and situation of Chinese specialty hospitals?
2. How do the Chinese specialty hospitals differ from the ideal specialty hospital?
3. What are the differences between Chinese specialty hospitals and Chinese general
hospitals in the aspects of operations management and performance?
4. What are the differences between Chinese specialty hospitals and Finnish specialty
hospitals in the aspects of operations management and performance?
5. What kind of experience Chinese specialty hospitals can learn from Chinese general
hospitals and Finnish specialty hospitals in the aspect of operations management?
The third and fourth questions are the essential research questions, which could be positioned to
a chart for clarity. (Figure 1)
8

Figure 1 Chart for research question No.3 and No.4

1.3 Research base

This study gets support from HEMA (Healthcare Engineering, Management, and Architecture)
Institute at Schools of Science and Technology of Aalto University. Established in 2003, HEMAs
focus is on the organization and management of healthcare industries. HEMA institute is an
affiliate of BIT Research Centre (Business, Innovation, and Technology) of Aalto University. This
research is financed by BIT Research Centre.

This report is based on data collected from different sources. The secondary data about the
situation and profile of Finnish hospitals were obtained from the database of HEMA. The first hand
data were gathered from the hospitals located in Jinhua City, which is a middle size city in China
and has four specialty hospitals with different service focuses in the urban area.

Jinhua is a prefecture-level city in central Zhejiang province in China, with area of 10,918 km
2
and
population of 4,614,100 (Statistics J. , 2008). The research base is located in the urban area with
two districts and a population of 923,800 (Statistics J. , 2008). The main reason for selecting the
hospitals in this middle size city as our research sources is that the condition and situation of
hospitals in Jinhua urban area could be applicable for Chinese hospitals as a whole in an average
level. The research with the hospitals from the same area may eliminate many factors interfering
results, such as catchment, healthcare polices and so on. In addition, the favorable relations and
connections between the researcher and hospitals provide conveniences for data collection and
real visits. Fortunately, the willing of cooperation from Jinhua area hospitals is very strong. Forced
by the increased healthcare demand, most of hospitals in Jinhua are undergoing large-scale
reconstruction to expand their businesses. When most of new hardware part, such as new
buildings and equipment, will be ready to use to scale the businesses in the quite near future,
hospitals have urgency to introduce more effective and efficient management principles and
methods into operations systems. Our visits are warmly welcomed by them and they expect us to
propose advanced operations management principles and models for improving their productivity.
9
1.4 Thesis structure

The thesis consists of the following structure with 7 Chapters. Chapter 1, providing an overall
picture of this research, gives readers a description of the background of the study, defines the
objectives and scopes of the study, and identifies research problems. Chapter 2 comprises a
comprehensive review of existing knowledge relating to the research topic. Chapter 3 proposes
the framework used in benchmarking in this research. Chapter 4 introduces and justifies the
methodology selected to produce research results. Chapter 5 presents the results and lists
possible solutions for productivity improvements in Chinese specialty hospitals. Chapter 6 draws
the conclusion of the study, summaries the main managerial implications and analyzes the validity
and reliability of the research. Chapter 7 presents the research limitations and recommends the
potential further researches.

















10
2 Literature review

The aim of this literature review part is to find out what is known and what is not known in the
academic literature relating to the research topic. In accord with the theme and purpose of this
research, the literature review covers three big fundamental research areas: productivity,
operations management and the focus principle (or focus strategy). This review focuses on
concepts, principles and theories that are mature in manufacturing and are gradually applied in
service industries and adopted by healthcare services.
The books and articles that are identified as references for this review were found by searching
relevant key words or their combinations through available Nelli and Teemu databases (provided
by Aalto library) and selected by evaluating the titles, abstracts or texts of the search results. More
useful articles or books were found by reading the reference part of reviewed materials.

2.1 Productivity

The history of productivity studies using scientific methods could be traced back to the late of 19
th

century and the early of 20
th
century (Report, 2005). Frederick Taylor, the father of scientific
management, made the first premise that there was one best way to do a job and that the way
should be discovered and put into operation (Dessler, 2000).

In this part, theories about productivity, including its concept, measurement, and improvement,
are illustrated and explained from the perspectives of services and then narrowed down to
healthcare services.

2.1.1 Production system

The concept of productivity is based on process theory and system theory and it is involved with
the transformation form inputs to outputs within one organization (Figure 2). Basically, inputs are
defined as the resources that could be combined and modified by technology and managerial
action to become sellable products. Resources could be fixed, such as buildings and facilities, or
variable, such as labor force. Transformation involves actions that happen to inputs and causes the
changes in them. Output, which can be goods or services, is the result of the function of
transformation. Output can be evaluated against quality and performance standards and give
feedback to the system. Efficiency and effectiveness are two measurements for production.
Efficiency shows the ability to produce more outputs with less resource (time and/or money).
Effectiveness measures whether the actual output meets the desired objectives, such as the
usability of goods and the health of human body. (Report, 2005)

11

Figure 2 Model of system theory (Report, 2005)

The Eurostat Handbook, Price and Volume Measures of National Accounts (2001), defines the
healthcare service production system and makes the distinction between inputs, activities,
outputs and outcomes for individual services (Figure 3). The input includes resources used in the
process of production, such as capital, labor, materials and energy. Processing represents the
activities related to production, such as medical treatment provided by doctors. The output is
much likely to be view as intermediate output and can be counted with the number of results,
such as patients treated, physician visits, in-hospital days or procedures performed. The outcome,
different from output, is perceived as the ultimate output or the effects of output, involved with
patients experience and determining whether the set goals were met. Outcome can be expressed
by effectiveness. (Sharpe et al., 2007) (Sharpe;Bradley;& Messinger, 2007)

Figure 3 Production model in healthcare services sector (Sharpe et al., 2007)

2.1.2 Definition of productivity

There is no uniform definition of productivity in academia. On a general level, productivity is an
attribute of a productive organization or a characteristic of the production function, which is an
indication of how efficiently inputs are transformed into outputs. Traditionally, in manufacturing
and services, productivity is simply defined as the ratio of what is produced from the system to
12
what is given to the system, that is, the ratio of output to input (Gupta A. , 1995). Pritchard (1995)
in his book Productivity Measurement and Improvement has concluded that there are three
categories of productivity definitions. The first one highlights an efficiency measure expressed by
the ratio of the number of outputs to the costs producing them (outputs/inputs). The second type
of definition of productivity combines efficiency aspect (outputs/inputs) and quality aspect
(outputs quality/goals or quality standards) together. The third one, which is the broadest one,
considers productivity as anything that makes the organization function better, including efficiency,
effectiveness, absenteeism, turnover, morale, innovation, etc. The first approach is ignoring
quality attributes of output, and the third one confuses productivity with drivers or conditions of
productivity. The second one could be the best way to define productivity.

Services productivity
The commonly acknowledged model to define services is IHIP (intangibility, heterogeneity,
inseparability and perishability) with the four observable characteristics of services (Moeller, 2010).
But there are many criticisms on IHIP. Sampson and Froehle (2006) presented present a Unified
Services Theory (UST), separating services from goods by customer inputs and stating that: With
service processes, the customer provides significant inputs into the production process. With
manufacturing processes, groups of customers may contribute ideas to the design of the product,
but individual customers only participation is to select and consume the output. All managerial
themes unique to services are founded in this distinction. (Sampson & Froehle, 2006)

While the concept of productivity in manufacturing has been analyzed for more than two hundred
years and still hasnt got complete conformance, the concept of productivity in the service sector
has not been discussed until the end of the twentieth century and the contentions over it are
more drastic (Rutkauskas, 2005). The question whether quality should be concerned when
productivity is analyzed is the main focus of debates. Some researchers, such as Brignall et al.
(1996) and Heskett et al. (1994), stated that quality and productivity are two unrelated concepts.
But some other researchers, such as Sahay (2005), argued that quality is an indispensible part of
service productivity.

From the customers view, the volume of the service output is invisible and not significant,
because the customer usually buys only one unit of output or one package of service (Rutkauskas,
2005). The customer is inclined to attach more importance to service quality instead of quantity or
efficiency that is usually more considered by service providers, and the output in the form of
quality is what the customer in fact pays for (Adam, 1995). The absence of an adjustment for the
quality in measuring productivity of healthcare services is strictly criticized by lots of scholars and
practitioners (Ruchlin & Leveson, 1974). Farrell (1957) began to argue that it is unscientific to
measure the efficiency of organization management entirely separately from the quality factors
(Farrell, 1957). Omitting quality factor from the efficiency analysis might lead us nonsensically to
consider one organization, which in fact produces low volume services but provides a higher
13
quality of services or better outcomes, to be inefficient (Zuckerman et al., 1994).
(Zuckerman;Hadley;& Iezzoni, 1994).
Basically, there are two ways of understanding services quality: output quality and outcome.
Outcome, that involves not only output quality but also customer expectation, is broader than
output quality. (Figure 4)

Output quality or service experience from the perspectives of customers, consists of the quality of
the service environment, services resources and service process, which can be measured by
comparing the achievement of these elements to their stated goals or standards and can be
controlled by providers (Lahtinen & Isoviita, 1994). In many cases, service quality is directly
replaced by effectiveness or outcome and translated into customer perceived quality or customer
satisfaction, which depends on customers expectation of services and stresses the individuals
assessment of the value of the total service offering (Gummesson, 1992), (AQA, 2006), (Walker &
Laura, 2006). This is much more subjective and relatively hard to be fully managed by providers.



Figure 4 Service quality image (Lahtinen & Isoviita, 1994).


14
Besides quality part, productivity contains the other partefficiency. Service providers are more
likely concerned about the efficiency aspect of service and encouraged to consume less resource
or time to produce higher volume of services (Rutkauskas, 2005). Hospitals and other healthcare
institutes are expected to increase their output by increasing its efficiency, without adding more
resources (Farrell, 1957).

Generally, the term efficiency refers to the best use of recourse in production and overall
efficiency falls into three classes. The first one is technical efficiency that produces the maximum
amount of output from a given amount of input, or alternatively produces a given output with
minimum quantities of inputs (Hollingsworth et al., 1999). It could be the ratio between output
produced and production resources in terms of personnel working hours and machine hours
(Peltokorpi, 2010). The second one economic efficiency takes the costs of recourse units and a
resource mix into account (Peltokorpi, 2010). The final one allocative efficiency describes different
impacts of different resource allocation decisions or strategies on technical efficiency and other
performance measures such as service access and waiting time (Peltokorpi, 2010).
(Hollingsworth;Dawson;& Maniadakis, Efficiency Measurement of healthcare:a review of non-parametric methods and applications, 1999)
Rutkauskas (2005) defines services productivity by the following ratio:

Service productivity= Quantity of output and quality of output / Quantity of input and quality of
input

In this definition, Rutkauskas (2005) considered both quantity and quality aspects of service
productivity. Quantity of output means service volume. Quantity of input represents the amount
and mixes of resources that are needed in the process of services. Efficiency can be expressed by
the ratio of output quantity to input quantity. Here, the output in the form of quality is defined as
customer perceived quality that is the difference between expected service quality and
experienced service quality. The quality of input is affected by the management of personnel, the
application of technology, the construction of service culture and other tangible or intangible
elements. The quality index is expressed by the ratio of output quality to input quality.
Productivity can be classified into various types according to different perspectives. With respect
to the types of resources used, productivity can be divided into labor productivity, capital
productivity, energy productivity and so on. Since services are more personnel or labor intensive
when compared to manufacturing (Rutkauskas, 2005) and enhancing labor productivity can
dramatically improve the overall productivity of service organization, many researches are willing
to put emphasis on labor resource in service and make efforts to find effective way of improving
labor productivity that is usually measured as the ratio of output to labor-hour and (or) labor-cost
(Peltokorpi, 2010).
Healthcare service productivity
It is hard to find a conformable definition of productivity in healthcare service. Researches from
different research contexts have their own understandings about healthcare services productivity.
15
Gupta (1995) has the idea that productivity of healthcare is determined by intangible output
quality and the skill level of staffs. Walker & Dunn (2006) didnt tell productivity and performance
apart when they used the Balanced Scorecard to analyze a hospitals management and delivery of
healthcare. During the research on improving efficiency in surgical services, Peltokorpi (2010)
analyzed hospital productivity by measuring technical efficiency that is the ratio of output quantity
to input quantity.
Definition of productivity for this research
In this research, productivity is defined as an attribute of a production organization. It consists of
efficiency and quality, referring to the number of outputs (the results of production) that meet the
standard quality from a production process, per unit of input (the resources used for production).
The production scope covered by this study is from input to output. Outcome of services, involving
customer perception, wont be included in this research, because that is not fully controlled by
services providers. Measurement of productivity and related indicators are explained in the next
section.

It becomes problematic when components of productivity are specified and
elaborated. Specifications and elaborations are necessary for the measurement of productive
organizations. Specifications include: What are the inputs and outputs? How should the inputs and
outputs be measured? What is the unit (of analysis) to which productivity is applied: a task, a
process, a department, an organization, an industrial sector or a national economy? All the
questions will be studied in the next section.

2.1.3 Productivity measurement and evaluation

When productivity has long been used as a key parameter of business performance, productivity
measurements play an important role in business process redesign, optimal production
assessment and cost reduction. Documentation and measurement of productivity are significant in
the process of improving productivity in practice (Report, 2005).

Since Bertalanffy, in 1950s, gave the first state that productivity could be measured using the
systems approach, academia has witnessed massive attempts made to develop productivity
measurement. Basically, productivity measures express relationships between the outcomes or
outputs of goods or services and the resources required to achieve outcomes or produce outputs
(Mclaughlin & Coffey, 1990); (Ruchlin & Leveson, 1974); (Walker & Laura, 2006).

Certainly, since the gaps between various definitions havent been filled yet, productivity
measurement used in real case depends on how the researcher understands and defines
productivity (Pritchard, 1995). In this research, the reviews and application of productivity
measurement are based on Rutkauskas model that takes both quantity and quality into account.
16
Appropriate identification and measurement of input and output are also very significant for real
productivity analysis (Mclaughlin & Coffey, 1990). Meanwhile, productivity measurement wont be
successful without proper and effective measurement methods and techniques (Mclaughlin &
Coffey, 1990). There are many techniques being widely applied with their own advantages. At the
very beginning, for the sake of simplicity, economist used isoquant curve to analyze the efficiency
of production (Farrell, 1957); (Chiang, 1984). The common techniques and methods used currently
include: Data Envelopment Analysis and (DEA), Stochastic Frontier Regression (SFR), Balanced
Scorecard (BSC) and Benchmarking (BM).

Gupta (1996) concluded that, in tradition, productivity measurements could be categorized into
partial productivity measurements that analyze the ratio of output to one kind of input or
combinations of some kinds of inputs, and total productivity measurements that analyze all output
and all input. In order to avoid being overcomplicated and accused of incompletion, productivity
measurement should have its own point of emphasis.
In brief, the decisions that researches should make before the implementation of productivity
measurement include: the definition of productivity, partiality or entirety of research, ranges of
input and output, as well as the methods and techniques. In this research, both efficiency and
quality are considered for measuring productivity. Partiality, ranges of input and output, as well as
the methods and techniques of productivity measurements in this research will be discussed later.

Productivity measurement in services

Productivity measurement and management are very challenging and complex in public services.
Techniques borrowed from manufacturing are being utilized to measure productivity and
performance of service sectors (Walker & Laura, 2006). But most of the existing approaches and
the corresponding measurement methods retain much of their bias towards manufacturing and
fail to capture some fundamental aspects of services. Because of services special characteristics
intangible, heterogeneous, perishable, and simultaneous, the development of productivity
measurement specific for services face up enormous challenges and many of the current
measurement methods used in manufacturing should be changed and improved (Mclaughlin &
Coffey, 1990); (Gadrey & Gallouj, 2002). In addition, there is no perfectly systematic answer
covering all industries. The given concepts and models may produce highly effective management
tools in certain circumstances and period but cannot replace the all managerial judgments in an
environment that is consistently changing. Choosing and composing the appropriate measures for
real situation is an art (Stainer, 1995).

1) Efficiency

Basically, efficiency is defined by the ratio of output quantity to input quantity. While scholars who
are engaging in manufacturing area define inputs as various resources, such as materials,
personnel, capital, utilities, and information, put into a production system or expended in its
17
operation process to achieve output or a result (Gaither & Frazier, 1999), researchers in services
area add customer input into the analysis of service production system because of the significance
of customer involvement in the process of service production (Sampson & Froehle, 2006); (Lillrank,
2009). Service output usually is an intangible result caused and influenced by service process. Only
the output that fulfills basic quality requirements is counted as output, and the defectives are not
counted as outputs (Lillrank, 2009). Service output could be one clinical surgery, one knowledge-
intensive lecture or one experience of haircut. Of course, identification of output depends on
service types and researchers experience.

Quantification of inputs and outputs may vary. It could be affected by many factors, such as the
level of measurement, the type of services industry, researchers preference and so on. When
countries evaluate growth of service productivity at national level, inputs and outputs of service
industries may be measured in value terms (Mohr, 1992). Focusing on small service units and
ignoring capital respect, some service organizations may use the number of customers served as
output quantity and use the total labor time consumed to service these customers as input
quantity (Gupta A., 1995). Transportation industry could define output as the volume of
movement of goods or passengers and inputs as the indexes of total hours for the railroad and
petroleum pipeline industries, while communication industry can calculate output indexes with
weighted aggregate of deflated revenues of telephone services and define the input as total labor
hours (Dean & Kunze, 1992). When measuring productivity of food service, some researches put
the total meals served per day in the position of output and productivity labor hours per day
in input, but some researches use the number of customers served per hour as the index of
productivity (AQA, 2006). (Gupta A. , 1995).

When the information about input and output has been identified respectively, the issue becomes
how we can organize them. Service process may involve one, several or many types of inputs and
result in one, several or many types of outputs. Mclaughlin and Coffey (1990) comprehensively
analyzed the complexity of inputs and outputs in services. They identified two strategies to deal
with inputs and outputs. The first strategy aims to measure or compare the inputs and outputs for
each component separately. In the strategy, service mix should be disaggregated into different
components. Inputs and outputs are analyzed component by component. The second one is based
on the model that analyzes multiple inputs and outputs simultaneously when the outputs are joint
products of a single process.

2) Quality

Usually, quality index can be expressed by the ratio of output quality to standardized quality or by
the ratio of output quality to input quality.

There are three main sources as inputs causing the variability of service quality. Customer inputs
varying in quality are one part of main sources of qualitative variability (Lillrank, 2009). The
18
variable resources, like the skills of service providers, affect the result of services (Gupta, 1995).
The physical resources and their mix, such as machines, equipment, tools and materials, are
influencing the effectiveness of services (Ghobadian, 1993). Input quality measurements could be
carried out to cover these aspects. (Ghobadian;Speller;& Jones, 1993).

Even though intangibility of services makes it hard to measure service quality, many researches
have been conducted to develop output quality measurements in services. A relatively common
way to measure service quality is measure the extent to which the service delivered meets the
customers expectation (Ghobadian et al., 1993). Data about output quality can be obtained from
the customers who can express their service experience, expectations and perceptions, or by
someone playing the role of the customer, or by directly observing and estimating the process and
the results according to some standards (Mclaughlin & Coffey, 1990). However, this measure
enormously depends on customers background and is really subjective.

Mukerjee and Witte (1992) agree that the measurement of service output quality could be in a
way consistent with predefined regulation at regional level, federal level or national level. Dunnel
and Smith (2007) stated that one prerequisite forward to measure service quality is to properly
define the unit of output in a way that includes quality, such as one unit that comprises successful
diagnoses and treatments for an illness and make up a long sequence of activities. Lillrank (2009)
believes that only output that fulfills basic quality requirements is counted as output and output
can be classified, measured or evaluated in relation to quality criteria (Lillrank, 2009). (Mukerjee
& Witte, 1992).
3) Means and techniques for productivity evaluation and comparison

There has been more than one method or techniques available for evaluating and comparing
service productivities. Statistical Comparisons (SC) can be employed to analyze the central
tendencies of input and output, develop the input and output relationship through regression and
forecast the output of each unit, but it could not identify the most productive units directly
(Mclaughlin & Coffey, 1990). The techniques of Data Envelopment Analysis (DEA) and Stochastic
Frontier Regression (SFR) are well developed to identify best practice as well as to gauge the
deviation of a given decision-making units or providers from frontier value (Bauer, 1990). The
Balanced Scorecard (BSC) is found to be effective for exposing existing problems and identifying
opportunity for productivity improvement (Chen et al., 2006). More specifically, significant
productivity improvement can be gained by incorporating Benchmarking (BM) (Swift, 1995), which
is the practice of comparing, on some measurable scale, the performance of a series of business
operations of different organizations (Elnicki, 1972). (Chen;Yamauchi;& Kato, 2006)

Productivity measurement in healthcare service

Applying the productivity measurements of other industries to healthcare is not straightforward,
because neither the input consumed nor outputs produced are same across different industries or
19
even just within healthcare (Zuckerman et al., 1994). Assessing productivity in healthcare is more
difficult than assessing it in other sectors, because treating patients is a far more complex process
than producing goods and other services. It involves numerous inputs and variant outputs and it is
hard to quantify all the elements involved (Dorsey et al., 1996). (Dorsey;Ferrari;& Gengos, 1996).

Recent years have witnessed many interesting attempts made to develop productivity
measurement in healthcare. The productivity of hospitals has been measured, compared and
estimated by various mathematical or statistical methods that deliver many useful messages and
insights. But universal consensus on productivity measurement in healthcare service has not been
achieved. Even for the operation room, there is no clear conformation of opinion about measures
of operation room (OR) productivity (Peltokorpi, 2010).

Indicators of productivity need to visualize the success or failure of hospital efforts and evaluate
the effects of operations management (Chirikos & Sear, 2000). The choice of variables for input
and output reflects a tradeoff between what is optimal and what is available with the data or data
recourses at hand (Chirikos & Sear, 2000). Walker & Laura (2006) concluded some properties of
productivity indicators for hospital services and gave many examples from different hospital
departments (Table 1).

Table 1 Properties of productivity indicators and examples from hospital departments (Walker & Laura, 2006)
Properties of indicators Examples from hospital departments
Developed through team efforts Cost of suppliers (ophthalmology)
Based on existing information Percentage of complete instrument set before and
after surgery (plastic surgery)
Measured in understandable terms Value of lost medications (pharmacy)
Selected to measure cooperation between
departments
Number of cold meals served (food service)
Related to individual and group performance
evaluation systems
Patient transport and waiting time (emergency
room)
Meaningful to upper management Rate of complaints from patients and family
(medical records)
Reflect the needs of patients, doctors and staff Response time to call lights (nursing services)
Adjustable for changes in strategic direction or
environment
Number of errors in patients bills (admissions and
discharge)
Do not require additional staff or equipment Number of community seminars conducted
(community health)


1) Efficiency

In healthcare, an output can be a patient visit, a prescription of medication, or a surgical
procedure (Lillrank, 2009) and the input can be human body, staff skills, equipment, facilities, etc.
(Walker & Laura, 2006). Many scholars emphasize the impact of patient input on the output or
outcome of healthcare service (Lillrank, 2009).
20

For identification and quantification of input and output, many attempts have been made.
Saathoff and Kurtz (1962) made the earliest attempt to composite output measure based on days
of inpatient services. In the research conducted by Ruchlin (1974), output was defind as the sum
of the quantities of services produced per department weighted by cost per item and was related
to the number of employees. Chirikos and Sear (2000) constructed six output variables (service
mix, days of care, etc.) and a number of input variables (expenses, wages, etc.) for each
observation in the data set according to their research on hospital efficiency comparison. Walker
and Laura (2006) identified and operationalized inputs and outputs for different departments of
hospital, recognized availability of operation room (OR) time, anesthetic/recovery incidents, OR
session cancellations/delays and throughput of patients as the indicators of operation units
outputs, and used staff time, OR supplies, maintenance cost, and equipment cost to be indicators
of operation units inputs.

2) Quality

Healthcare quality is difficult to define and to measure. The question of what constitutes
healthcare services quality is lastingly discussed from post-world War II till present times but has
not got any affirmative answer (Mukerjee & Witte, 1992). Hospitals crossing countries, hospitals in
one region, or departments in one hospital may have different requirements for service quality
(Walker & Laura, 2006). Table 2 presents common indicators used for measuring hospital service
quality (surgery department) in today.

Table 2 Common indicators used for measuring surgery quality
input quality output quality standardized quality
Indicators patient condition or
severity (Mitchell et al,
1998); scores of staff
skills (Gupta, 1995)
(Mitchell;Ferketich;&
Jennings, 1998);

surgical wound
infection (SWI) rates
(Culver, 1991); hospital
survival rates (Dunnel &
Smith, 2007); mortality
rate, patient transport,
waiting time, delays in
patient treatment,
blockage of inpatient
beds (Walker & Laura,
2006); patient re-
admission rate (Luthi et
al., 2003)
(Luthi;Sampietro;&
Lund , 2003)
indicators from
regulations issued by
governments (Corrigan
et al., 2003)
(Corrigan;Eden;&
Smith, 2003).


3) Available techniques for healthcare service productivity evaluation
21

Differences of the results of productivity measurements and estimations are caused by different
data availability, data quality and estimation techniques (Hollingsworth, 2003). Different
techniques for healthcare service productivity evaluation were found from scientific papers or
articles with reviews of application of techniques for evaluating healthcare (hospitals)
productivities.

Sink (1985) presented several techniques of evaluating healthcare productivity, including Multi-
Factor Productivity Measurement Model (MFPMM), Normative Productivity Measurement
Methodology (NPMM), and Multi-Criteria Performance/Productivity Measurement Technique
(MCP/PMT). Hollingsworth (2003) made a comprehensive review over 188 published papers on
parametric and non-parametric healthcare productivity measurement and concluded the situation
of technique application between 1994 and 1997. Due to the development of methodological and
practical software development from 1994 to 1997, Data Envelopment Analysis (DEA) was
prevailing as a non-parametric measurement of healthcare efficiency and as a method of
identifying further determinants of efficiency. Malmquist technique that is helpful for measuring
the changes in productivity from one period was used in 9% of studies and researches. Stochastic
Frontiers (SFA) and other parametric techniques were used in 12% of studies and researches to
determine the inefficiency level of group practice. (Hollingsworth, 2003)

Concerned about the increasing competition among hospitals within a country or cross countries,
many researchers started to use Balanced Scorecard (BC) to evaluate performance and
productivities of different hospitals (Walker & Laura, 2006); (Chen et al., 2006) With integrating
Benchmarking (BM) into hospital productivity measurements and evaluation, healthcare
academics are entering into a new era and opening up new opportunities of mutual learning
between hospitals (Linna et al., 2006).

Productivity measurement in this research

According to the literature above and data available in hands, this research focuses on labor
productivity of surgical units. Productivity can be divided into efficiency and quality. The efficiency
is measured by the ratio of number of surgeries operated (outputs quantity) to the labor hours
used to produce these surgeries (inputs quantity). The quality refers to patient severity or case mix
(inputs quality) and the percentage of surgeries meeting the standard (outputs quality). The
concrete formula for productivity measurement and related indices are discussed in Chapter 3.

2.1.4 Productivity improvement

It is necessary for businesses to implement appropriate strategies and operations to make
improvements in productivity. Firstly, no business is willing to be ticked out from the market and
they want to remain strong competitiveness. Weak competitiveness could be the result of failure
22
to meet targeted productivity. Then productivity improvement is ultimately affecting the living
standard of people. (Accel-Team, 2009)

Determinants of productivity

Identifying the factors that affect productivity is the first job in the process of productivity
improvement (Report, 2005). Banz (1981) argued that technology and capital
needed to produce, procure, and maintain the products are key determinants of productivity in
manufacturing and services. Kendrick (1988) stated that the chief factor behind increases in
productivities is innovation in the technology and organization of production, and other factors,
such as changes in the capacity utilization, are also important. When Jonsson and Rehnberg (1994)
made comparison in the achievement of service productivity, they systematically analyzed
performances on speed, capacity utilization and unit outputs of different organizations. Stainer
(1995) concluded that flexibility, speed of operation, innovation, capacity utilization, and social
effectiveness are the main determinants for achieving a competitive advantage both in value and
productivity terms. Accel-Team (2009) research group, based on its extensive experience and
knowledge of improving productivity of human and others resources, has highlighted that
utilization, efficiency and human psychological factors are influencing service productivities.

HEMA group of BIT research center in Aalto University has been engaging in a series of researches
on healthcare productivity improvement, especially on surgical units efficiency or productivity
improvement, for many years (e.g., Peltokorpi et al., 2006; Peltokorpi et al., 2008; Peltokorpi, et al.,
2009). The based model used to benchmark the performance of different hospitals and analyze
possible solutions of productivity improvement for labor intensive service sector is illustrated by
figure 5. It shows that the productivity can be driven by high capacity utilization, short throughput
time and proper configuration of resources. But whether productivity and access to service sector
are conflicting or mutually promoting has not been confirmed yet.

Figure 5 Model of productivity improvement

Operations management affects productivity

There is a tight linkage between productivity and operations management. As it has been
acknowledged widely, the changes for productivities improvement can be caused by the changes
23
in hard part, including machine, equipment, installations, etc., as well as in the soft part, including
working methods, management systems, product design, etc. (Rodriguez, 1995). Operations
realize the production that transforms the inputs to outputs, and operations management affects
the effectiveness and efficiency of the transformation (Stevenson, 2009).

The factor analysis can deliver descriptive insights into the strategic and operative practice of
service sectors and into the connections between possible strategic or operative solutions and
productivity (Peltokorpi, 2010). Peltokorpi (2010) uncovered two possible operations promoting
productivity of operation room: increasing personnel incentives and enhancing personnel
flexibility. These two strategies can help to decrease idle time, increase OR utilization, optimize
the resources distribution, and finally improve OR productivity.

The explanations about operations and operations management in service and healthcare services
will be extended in the second part of literature reviewoperations management.

2.2 Operations management

Productivity is part of operations management (OM) that emphasizes the production system and
involves transformation from input to output (Stevenson, 2009). Operations management
provides great value as a competitive weapon for companies development (Dilworth, 1992).
Operations management studies production with the aim of improving efficiency and quality. In
this part, existing knowledge and theories about operations management are illustrated and
explained from the perspectives of services and healthcare services.

2.2.1 Basic concept of operations management

Definition

Until now, the development of OM theory and practices has gone through 240 years, starting from
Adam Smiths theory about division of labor to the attempts of applying related theories to
services. During the development, Japanese manufacturers made influential contribution in
refining operations management practices that increase the productivity of products (Stevenson,
2009).

Operations is treated as a singular noun since it refers to a single function (Dilworth, 1992). As one
of three basic functions (finance, marketing, and operations) of business organization, operations
function is responsible for producing products and/or delivering services (Stevenson, 2009). It is
considered to be an integrated system that transforms the necessary inputs to the outputs that is
desirable to the customers and then delivers them to customers (Dilworth, 1992).

24
There is no big gap between the different definitions of operations management. Operations
management is defined as the design, operation, and improvement of the systems that create and
deliver the firms primary products and services. (Chase et al., 1998). Operations management is
the management of systems or processes that create goods and/or provide services. (Stevenson,
2009). The scope of operations management may be broad and across the whole organization.
Operations management involves product and service design, process selection, selection and
management of technology, design of work systems, location planning, and quality improvement
of the organizations products or services. Interrelated activities include forecasting, capacity
planning, scheduling, managing inventories, assuring quality, motivating employees, deciding
location, and more. (Stevenson, 2009). (Chase;Aquilano;& Jacobs, 1998).

The key task for operations managers is to make decisions of what, when, where, how and
who (Stevenson, 2009):
What: what resources will be needed, and how many/much?
When: when will each resource be needed? When should the work be scheduled? When should
materials and other supplies be ordered? When is corrective action needed?
Where: where will the work be done?
How: how will the product or service be designed? How will the work be done? How will resources
be allocated?
Who: who will do the work?

Operations management is strongly influenced by strategies and must be in alignment with them
(Chase et al., 1998). Strategies, providing focus for decision making and giving guidance of
operations, are the plans for achieving organizational goals and can be compared to the roadmaps
for reaching the destination (Stevenson, 2009). Operations function plays a significant role in
implementing strategies of business (Dilworth, 1992).

Aspects and issues of OM

Operations system is made up by facilities, people, jobs, methods and procedures (Dilworth, 1992).
Process, people, resources, technology, information and networks are viewed as key operational
drivers for business success (Johnston & Clark, 2008). Once the operations system is built, the
main job turns to planning and controlling that takes place within the system and ensures the
high-quality and high-efficiency work performed (Dilworth, 1992). (Johnston & Clark, Service
Operations Management 3rd edition, 2008).
In order to avoid overproduction or underproduction that betrays the real demand and will
frustrate organizations and damage the long-term success, demand forecasting is responsible for
estimating the level of demand from the customers and predicting the desirable volume of
outputs that the operations system should be capable of providing (Dilworth, 1992). History
experience and updated information in the market are the two pillars supporting demand
forecasting (Dilworth, 1992).
25

The capacity of a process reflects the degree of output matching demand (Stevenson, 2009).
Capacity crisis is overwhelmingly hindering the future success of business organizations,
especially the service sectors (Stevenson, 2009). Capacity refers to an upper limit or ceiling on the
load that an operating unit can handle. (Stevenson, 2009). The load could be the volume of
products the physical unit produces or the service organization delivers (Stevenson, 2009).
Capacity management is a balancing act that prevents the production resources from
underutilization and overutilization, both of them are disadvantageous (Johnston & Clark, 2008).

Productivity is a measure of the use of resources. Resource management, responsible for effective
use of operational resources, is the heart of service operations management (Johnston & Clark,
2008).Improving productivity means optimizing the utilization of resources through operations
management. The main role of operations management is to manage productive resources, and
design and control the systems responsible for productive use of raw materials, human resources,
equipment, facilities in the development of product or services (Chase et al., 1998). As a key
element of project management, resources management helps to execute and monitor a project
successfully by effectively and efficiently deploying an organizations resources that include
financial resources, inventory, human force, information systems, network and so on (Lewis, 2006).

Essentially, process management is the central role of operations management (Stevenson, 2009).
Simply speaking, process transforms input to output. From the perspectives of customization and
standardization, there are four process options that have their own strategic significance: a job
shop usually handles small jobs with high diversity and low volume; batch processing operates
moderate volume of goods or services with semi-standardization; repetitive processing is used to
produce high volume of standardized outputs; continuous processing requires highly specialized
facilities and produces very high volume of extremely standardized products (Table 3). Process
selection and facility layout are closely tied (Stevenson, 2009). Smooth processing cannot be
obtained without economical configuration of departments, work centers and equipment
(Stevenson, 2009). Facility layouts are classified into five types that satisfying the needs of
different particular situations (Table 4).












26
Table 3 Types of processing (Stevenson, 2009)
Type of processing Description Advantage Disadvantage
Job shop to process customized
goods or services
able to handle a wide
variety of work
slow, high cost per
unit, complex planning
and scheduling
Batch to process semi-
standardized goods or
services
flexibility moderate cost per
unit, moderate
scheduling complexity
Repetitive/Assembly to process
standardized goods or
services
low unit cost, high
volume, efficient
low flexibility, high
cost of downtime
Continuous to process highly
standardized goods or
services
very efficient, very
high volume
very rigid, lack of
variety, costly to
change, very high cost
of downtime


Table 4 Five types of facility layouts and supportive processes (Stevenson, 2009)
Type Description
Product layout In order to achieve a smooth and rapid workflow and produce large volume of
similar goods or services, the work is divided into a series of standardized tasks,
permitting specialization of equipment and division of labor.
It is used for repetitive and continuous processes.
Cellular layout In order to perform minimal work for a set of similar items or part families with
little waste, workstations are grouped into a cell.
It is the miniature versions of product layout.
Process layout In order to process items and provide services that involve a variety of
processing requirements, the various jobs are assigned into separate
departments in which similar kinds of activities are performed.
It is suitable for job shop and batch processes.
Fixed-position
layout
In order to avoid having to relocate materials or equipment around the work
site, coordinate various activities and narrow the span of control, the items
remains stationary and workers, materials, and equipment are moved about as
needed.
Combination
layout
It allows product layout, process layout, and fixed-position layout to coexist in
one organization.

Resource is limited and it is impossible to satisfy all customers demands at the same time.
Scheduling and sequencing is responsible for allocating limited capacity of organization to specific
customers and releasing the conflict between infinitive resources and excessive demands (Johnson
& Clark, 2008). A good schedule with the operating plan enables to interlink and coordinate
various aspects of the operations, provides a clear production (customer) flow, and ensures the
utilization of resources (Johnson & Clark, 2008). Six sequencing rules that manage the
prioritization of allocation are listed by Johnston & Clark (2008): First in, first out (FIFO); Last in,
First out(LIFO); Most valuable customer first; Most critical first; Least work content first; Most
work conotent first. Different rules may be applied in different contexts (Johnson & Clark, 2008).
27

Another important issue of operation management is quality management that is aiming to
maintain or improve the ability of a production to produce product or service consistently meeting
or exceeding customer requirements or expectations. Total Quality Management and Six Sigma
are playing primary roles of management to control, maintain and improve quality and to achieve
customer satisfaction. Quality controlling usually involves quality standards set as the benchmark
of performance. (Stevenson, 2009).

Other aspects of operations management include constraints management, supply chain
management, change management, etc. All the aspects are interplaying connectively in the whole
organization.

Decision making

Many managers make decisions based on intuition with little evidence to support their actions.
They have insufficient ability to identify the relationships between operations actions and business
performance. Therefore, it is important to invest in methods that help manages to explore and
exploit the relationship between operations and success and to make rational decisions on
operations management. (Johnson & Clark, 2008)

Proper decision on operations can be made without necessary tools and appropriate approaches.
The commonly used approaches include: 1) models that refers to an abstraction of reality and
simplified representation of something hassled with problems, and helps to clarify the situation; 2)
quantitative approaches that help to solve problems by obtaining mathematically optimal
solutions, such as linear programming and statistical model; 3) Performance Metrics that is used to
measure and compare organizations activities and performance in several aspects such as profits,
costs, quality, productivity, assets, schedules, and so on, and then find the preferable operations.
Other methods include analysis of trade-off, degree of customization, system approach,
establishing priorities, and ethics. (Stevenson, 2009)

Measuring and comparing performance offer operations managers with evidence of how
productively the operations are and how the productivity can be improved by changing operations.
Chase et al.(1998) suggested that possible measures in performance metrics include productivity,
efficiency, time (including run time, setup time, operation time, throughput time, value-add time,
cycle time, etc.), throughput rate, and capacity utilization rate. These measures and their concepts
defined by Chase et al. (1998) are presented in table 5.






28
Table 5 Measures in performance metrics
Measures Definition
Productivity the ratio of output to input in amount
Efficiency the ratio of the actual output of a process relative to some standard
Run time the time required to produce a batch of parts or a single unit of product
Setup time the time required to prepare a machine to make a particular item
Operation time the sum of the setup time and run time for a batch of parts that are run on
machine
Throughput time average time for a unit of product to move through the system, including the time
that the unit spends actually being worked on and the time spent waiting in a
queue
Value-add time the time that useful work is actually being done on the unit
Cycle time average time between completion of units
Throughput rate the number of output that the process is expected to produce over a period of
time. the reciprocal of cycle time
utilization rate the ratio of the time that a resource is actually being used relative to the time that
it is available for use

Application of these measures has not been unified and it depends on the experience of scholars
and practitioners. For example, sometimes capacity is replaced by design capacity that refers to
the maximum output rate or service capacity an operation, process, or facility is designed for
(Stevenson, 2009). One indicator used to measure the efficiency of production utilization rate is
defined as the ratio of actual output to design capacity (Stevenson, 2009).

The falling or uprising of measured quantities on production is depending on the changes of
operations and operations management. Operation managers can use metrics to find the room for
improvement and propose corresponding operations changes. For example, high utilization rate
can be achieved by effective use of resources, reasonable product layout, proper process
management, optimal scheduling and other operations management. Minimizing the idle time can
result in maximum utilization of labor and equipment (Stevenson, 2009). Throughput time can be
reduced without adding additional resources, and performing activities in parallel, changing the
sequence of activities or reducing interruptions are recommended as economical and appropriate
ideas to reduce throughput time (Stevenson, 2009).

Trade-off should be considered in decision of operations management. Single operation cannot
simultaneously flourish all competitive dimensions, sometimes probably booming one aspect
needs whittling another (Chase et al., 1998). For example, narrowing down the scope of
production process may increase specialization but decrease flexibility. Thus, managers have to
think about which aspects are critical for businesss success and decide the focus of development.
Plant-within-a-Plant (PWP) model suggested by Skinner (1974) encourages separated units to
formulate own operations strategies and minimize the conflicts between incompatible activities in
the development of the whole organization.

29
2.2.2 Services operations management

Since the early days in the 1970s, when Harvard Business School began to launch researches and
courses in services operations and apply basic manufacturing concepts in service environment,
service operations management have started to capture the interest of academia of operations
management and develop into a legitimate field of its own (Heineke & Davis, 2007). However, the
SOM researches done in recent years only occupy the niche of OM researches. Difficulties,
debates and inconformity in SOM academia can be observed (Machuca, 2007). In SOM academia,
there is more research done on strategic issues than on tactical operational issues that are more
diffuse and less structured but more practical (Machuca, 2007).

Services operations, differing from manufacturing operations, have unique characteristics.
Dilworth (1992) concluded the primary differences between services operations and
manufacturing operations (Table 6).

Table 6 Primary differences between services operations and manufacturing operations (Dilworth, 1992)
Services operations Manufacturing operations
Productivity Measurement Difficult, because of the
intangible outputs
Easy, because of the tangible
products
Establishment of Quality
Standardization
Difficult, because the intangible
outputs cannot be held, weighed,
or measured
Easy, because the tangible
outputs can be held, weighed, or
measured
Customer Contact high frequency seldom
Inventory management Hard, because of perishability Easy, because of standard
products and repetitive
production

The most eminent characteristics of services operations is that services are subjected to higher
degree of customer contact or involvement in co-creation (Vargoa & Magliob, 2008). Compared
with manufacturing operations, service operations involve greater variability of customer inputs
and require greater ability to control variability. Services activities and output sometimes appears
to be lack of uniformity. To guarantee services quality under the indivisibility of processes of
production and consumption and the uncertainty of customers demands is a big challenge for
services organization (Stevenson, 2009).

The gradual realization of the importance of the customer and a more customer-oriented view of
operations has shifted SOM away from just focusing on internal efficiency of organization. But this
growing awareness of orienting SOM to more customer-focused or market-centered direction is
facing suspicions. Some people argue that refocusing on the traditional core operational issues,
such as quality, efficiency and productivity, might provide a greater rigor to the developing subject
of service management (Johnson, 2005 A); (Johnson, 2005 B).

30
Some aspects of operations management are particularly emphasized in services. Many
managerial techniques are available to assist queue management, such as modeling and
simulation. Waiting lines are taken seriously by service operations management (Stevenson,
2009). Traditionally being viewed as non-value-added occurrences and obstacles of production
efficiency, waiting of customer can cause lower productivity, competitive disadvantage and the
possible loss of reputation of service providers (Stevenson, 2009). However, some empirical
evidences show that an increase in the average length of time that patients wait to have surgery
within 2 weeks may cause an increase in OR utilization without irritating patients and losing them
(Dexter et al., 1999).

2.2.3 Healthcare operations management

As one of the sectors that are most commonly studied in SOM research, healthcare services
provides great opportunities for the development of SOM research. When healthcare services
increasingly utilizes expensive facilities and equipment and consumes large labor forces, it is very
urgent for the executives to understand what kind of operations management decisions are
critical and effective to provide high quality healthcare services at a reasonable cost (Li & Benton,
2002).

Many scholars, like Heineke (1995) and Dierdonck(1995), suggested that operations management
principles and models developed manufacturing could be applied into healthcare industries for
achieving better performance in the changing healthcare environment. Li et al. (2002) drew a
conceptual model presenting the strong relevance of hospitals operations management and their
performance.

Surgical unit is commonly viewed as an operations-intensive, cost intensive and multi-professional
part of healthcare service production (Peltokorpi, 2010). Surgical unit operations management
affects costs, patient flow and resource utilization throughout a whole hospital (Gupta, 2007).
Surgical services can be divided into three main stages: pre-operatives, operatives, and post-
operatives (Saleh et al., 2009). There are many activities involved in these stages. Details are
presented in figure 6. (Saleh;Novicoff,;Rion;MacCracken;& Siegrist, 2009).


Figure 6 Stages and activities in operating process (Peltokorpi, 2010)

31
At the first stagepre-operative process, patient arrives at a healthcare institute, receives some
necessary examinations and educations before operating decisions are made, and gets
professional cares if doctor decides to operate. The second stageoperating unit process is the
essential part of an operation and also the focus of many researches, where the patient is
anesthetized locally or generally, the surgery is proceeding, and patient is monitored for post-
anesthesia recovery. Post-operative process includes post-operative care that usually occurs in
post anesthesia care unit (PACU) or an intensive care unit (ICU) and patient discharges.

While strategic level decisions determine the types of surgeries that will be performed at the
facility, the practices like scheduling, sequencing, resource allocation and deviation adjustment of
surgical units are considered as major operations decisions at tactical/operational level (Gupta,
2007).

2.3 Focus strategy

When business organizations are seeking new and better ways of operating in order to achieve
greater productivity and maintain or enhance competitiveness in global economy with everlasting
changes, lean philosophy or methodology has been dramatically penetrating into operations
systems and operations management.

In brief, lean operations or lean production, initiated and developed by the Japanese automobile
manufacturer-Toyota, is a flexible system that eliminates waste, reduces resources, curtails
expenses, streamlines all operations, shortens cycle times, enhances quality, and finally improves
productivity (Stevenson, 2009).

Lean is usually realized by focused factory (Stevenson, 2009). In this part, existing theories about
focus factory and focus strategy are illustrated and explained.

2.3.1 Focus factory

The indicator helping to select the winners apart from the losers is whether the winners can
produce and deliver the products or services with better quality, cheaper price, faster speed, and
more agile operation (Nicholas, 1998). This competitiveness can be achieved by focused factory
(Harmon & Peterson, 1990) that was first planted by Wickham Skinner in one of his seminar
papers Manufacturing: Missing Link in Corporate strategy in 1969 and formally described in his
article the Focused Factory in 1974.

Skinner (1974) firstly described the focused factory as one organization whose entire apparatus
is organized to accomplish a particular manufacturing task demanded by the companys overall
strategy and surrounding market (Skinner, 1974). Pesch (1996) offered a formal definition of a
focused factory by conducting a Delphi survey:
32
The focused factory is a factory with a limited, strategically linked, and internally consistent
set of demands that derive from the plants products, processes, customers, and suppliers.
Limiting the demands placed on the plant in turn limits the number of manufacturing tasks in
the plant, and establishes a clear set of priorities for both workers and managers. (Pesch,
1996)
It is obvious that focus of focused factory is upon a limited, concise and manageable set of tasks
(products, technologies, volumes, and markets) linking to a particular group of customers, a small
number of simple and repeatable operation and production lines, or a narrow product mix, rather
than upon many inconsistent, conflicting, or implicit tasks.
Compared to the conventional factory (non-focused factory), focused factory has the following
characteristics (Table 7):
Table 7 Characteristics of focused factory (Skinner, 1974); (Harmon & Peterson, 1990); (Vokurka & Davis, 2000)
Aspects Characteristics
Customer/Markets with less variation in delivery requirements
Administration Executives and managers control the factory on
factory floor, or nearby; Administration is closer to
its employees and also closer to the vendors and
customers.
Process Processes, equipment, and materials handling are
specifically organized according to one or a limited
set of similar products; Fewer setups; Higher
repetition; Higher degree of learning curves; Fewer
discontinuities in production processes; More
automation
Products Fewer SKU (stock keeping units); Fewer variations;
More standardization.
Resources Narrower range; Higher volume;
Staff Office staff is minimal and intimately familiar with
factory operations, production, and inventory
status; Worker training and incentives have a clear
focus; Everyone sharing a limited set of common
goals in the organization feels directly involved in all
aspects of production.

When factory grows and the system becomes corpulent and clumsy because of massive materials
and explosive production, or when the resistance for non-focused organization in its changing
towards to focused factory is overwhelming, Plant within Plant is a more practical and effective
approach to realize focused factory. In deference to the real market situation and company
circumstances, a company may successfully serve more than one set of market requirements
which are congruent with manufacturing characteristics and allocated internally into separated
units. Each of these units concentrates on particular manufacturing tasks and has its own facilities,
workforce approaches, organizational structure, and independent recourses to support self-
sustain operations (Skinner, 1974); (Harmon & Peterson, 1990).

33
There is a general premise that factory focused on a narrow product mix for a particular market
niche can achieve superior performance (Vokurka & Davis, 2000). Various researches and practices
have been done to approve the validation of focus approach. Brush and Karnani (1996) provided
empirical evidence that narrowing focus of manufacturing leads to higher productivity. Vokurka &
Davis (2000) organized a series of comparison studies and found that focused plants have better
performance in key operational measures relating to cost, quality, dependability, and speed.

Some explanations in theoretical level link the focus strategy and business success. Skinner (1974)
stated simplicity, repetition, experience, and homogeneity of tasks breed competence, that is,
volume increasing for a special task not scope broadening will enrich production experience of a
factory to do this task so that the quality and efficiency of performance can be improved as the
time goes on, which is also can be interpreted as learning effect. Matt Ridley (2010) proposed the
operational concept of reusing setups, explaining that reusing same production bases and without
building new foundations can achieve energy saving and cost-efficiency. Bredenhoff et al. (2004)
emphasized that process-alignment, which strives for seamless transitions between sub-processes
and prevents interruptions, is an essential element of efficient and effective focused factories.

However, some doubts over the effect of focused factory are not negligible. Focus,
compromising flexibility to uncertainty and variety, may be difficult to develop in complex and
dynamic business environment (Gerwin, 1993). A conscious strategic transition from conventional
factory to focused factory may cause chaos in the organization (Ketokivi & Jokinen, 2003).

2.3.2 Focus strategy in services

There is a general agreement that the focused-factory concept is not only limited to
manufacturing but also can be and has been successfully applied in service environments
(Dierdonck & Brandt, 1988). One evolution in service economy is characterized by service
companies focusing their operations on a particular customer group and their needs or a specific
(niche) market (Schmener, 1986).

Particularities should not be ignored when focus strategy is employed in service sectors. Dierdonck
& Brandt (1988) described challenges of applying focus strategy into services. It is obvious that
most of the challenges are caused by customer participation in services. (Table 8)










34
Table 8 Some special problems in applying focus into services (Dierdonck & Brandt, 1988)
Problems Description
intangible services Service is intangible. It is hard to segment service
market. Traditional axonomies or classification
schemes trying to make a distinction between
various types of business are inappropriate to
define the focus of services.
customer input It is hard to keep customer input consistent with
service focus.
customer needs Custmers needs are varing all the time.
focus It is hard to establish and keep the consistency
between external focus (customer interactive part)
and internal focus (internal operations part).
coordination It is hard to bundle all elements (equipment,
materials, operaitons, staffs) to be coherent with
main task.


2.3.3 Focus strategy in healthcare

It is unavoidable that patients may have different health problems with different gestalts and
urgency profiles and patients have different abilities to articulate their problems and make efforts
for their recovery (Peltokorpi et al., 2010). It is really expensive to respond to and deal with a
variety of customers demands. Healthcare industry has been increasingly adopting the concept of
focus, in order to absorb the variety of patient needs, reduce production complexity, release the
pressure of variety, decrease service costs, maintain or improve quality and increase productivity.

Many researches on focus strategy in healthcare have been done. Herzlinger (1997) firstly
introduced focused factory concept into healthcare industry. Bredenhoff et al. (2004) emphasized
the benefits of focus strategy applied into healthcare: Skinner uses the focused factory concept
to create (routine) processes that are predictable and easy to plan. For hospitals this implies that a
part of the hospital is focused on and designed for the treatment of a specific group of patients.
This will improve the efficiency, safety, patient-centeredness and timeliness of the treatment
process. Lent (2005) formulated a definition of focused factories in hospitals: A focused factory
is (an autonomous part of) an organization that is characterized by a focus upon a limited range of
activities and/ or a focus on a well-defined, limited group of patients band an alignment of all the
involved processes to these focus areas. This process alignment implicates that continuous
improvements are an aim of the organization. (Lent, 2005). (Bredenhoff;Schuring;& Caljouw,
2004).




35
2.4 Specialty hospital

Focused care units or specialty hospitals emerge when focus principle starts to be applied in
Healthcare. This part presents some existing knowledge about specialty hospital, including its basic
concepts, characteristics, ideal model and academic debates over its impacts.

2.4.1 Definition of specialty hospital (SH)

Definitions of SH are various. As one option for the healthcare productivity revolution, specialty
hospital is referred to a lean enterprise, focused on single health care objectives, smartened up
with technology and smoothed out with integrated operating systems (Herzlinger, 1999). From
the perspectives of operations management, specialty hospital can be viewed as an organization
where activities are organized to center round a special identifiable problem or a certain segment
of patients who are aggregated and treated as a collection of individuals with the similar diagnoses
and treatments using a functional resources structure of spatial proximity (Shortell, 2000). Now
specialty hospitals are typically defined as those that treat patients who have specific medical
conditions and are in need of specific medical or surgical procedures (Schneider & Ohsfeldt, 2005).

There are several dimensions for hospitals to focus on. Specialty hospital may be classified into
hospital focusing on different population groups (childrens hospital), may be focusing on one
certain disease (eye hospital), or may be formed around one specific function or procedures
(rehabilitation center or cataract surgery unit).

2.4.2 Characteristics of specialty hospitals

The fundamental idea behind special hospitals is limitation of the service scopes or simplification
of the process of clinical or surgical operations. Dramatically different from other types of medical
institutes like general hospitals (GH), specialty hospitals have their own characteristics in the
following least but not last aspects.

Marketing
Currently, whereas the dominant markets are occupied by the general hospitals, specialty
hospitals focus on niche markets where a group of patients with one kind of healthy problems are
aggregated or a segment of population with similar conditions in one aspect is targeted (Shortell,
2000). Usually, it is quite easy for mainstream miners to ignore the potential profits in niche
market, so specialty hospitals can bypass the heating competition in main markets and gain
opportunities in the minor market.
Structure
In one focused care unit built with lean thinking, buildings and equipment are brought together to
provide complete care for patients with similar problems (Weber, 1994). One example of the ideal
36
specialty hospital is a foot center presented by Herzlinger (1999). The foot center would be staffed
by multidisciplinary teams treating patients with different expertise and equipped with on-site
laboratory and X-ray center closing to the patients for medical testing (Figure 7).


Figure 7 Structure of specialty hospital (Herzlinger, 1999)

Production/Services lines

Service lines in specialty hospitals are typically covering a limited handful of well-defined services
or interventions according to the hospitals business strategies and market requirements. Basically,
specialty hospital focuses on one type of disease (main service line) and handles seamless sub-
services lines are located in different services units (e.g., diagnoses, treatment, and surgeries)
(Hyer et al.,2009). Production/services lines in specialty hospitals are characterized by high
volumes (Colin, 1998).
(Hyer;Wemmerlov;& Morris, 2009).
Human recourses
37
Caregivers in multi-skilled medical teams containing doctors, nurses, and anesthetists are
responsible for patients needs starting from the entry registration of the memberships and staffs
are special-trained and equipped with professional skills in one special area. Related data support
the hypothesis that when certain complex surgical procedures are provided by multi-skilled
surgical teams in hospital with specialty expertise, mortality rates are lower (Colin, 1998).

2.4.3 Pros and Cons of specialty hospital

There is no conformance on the issue whether specialty hospitals in reality will be attached with
permanent improvements and better performance when compared with general hospitals or
other medical institutes. Supportive signals have been observed in various researches using
different methodologies, but not all of researches approve that the specialized facilities can
provide services with more efficiency and effectiveness. Table 9 illustrates some representatives in
this intense debate.

Table 9 Debates over the effects of SH
Auther Title Research approach State (approval or
disapproval for efficiency
of SH)
SHs focus
level
(demographic,
clinic,
procedure)
Herzlinger,
R.
Market-driven
Health Care: Who
Wins, Who Loses in
the transformation
Of America's Largest
Service Industry
(1999)
Description Approval; Reduction in cost
can be achieved by
reengineering the hospitals
into focused hospitals
Foot center,
Clinic
Meyer,H. Focused factories
(1998)
Description Approval; High volume will
help boost the learning
effect, so that the staff will
achieve significant quality
and efficiency
improvements.
Heart center,
Clinic
Kumar, S. Specialty hospitals
emulating focused
factories (2008)
Comparison
between SHs and
GHs
Approval; Specialty
hospitals are more efficient
than general hospitals in
their chosen field of
expertise in the aspects of
costs, mortality rate, length
of stay and so on.
Mixed
Shortell, et
al.
The performance of
intensive care units:
does good
management make a
difference? (1994)

Comparison Approval; Focusing on a
narrow range of conditions
permits nurses and
physicians to coordinate
with less conflict and
makes it easier to deal with
problems.
Demographic
38
Peltokorpi,
et al.
Productivity effects
of a focused
ambulatory surgery
unit (2010)
Comparison Approval; Focusing on
certain sub-specialties or
procedures can bring high
productivity.
Procedure
Cram, et al. A comparison of
total hip and knee
replacement in
specialty and general
hospitals (2007)
Comparison Disapproval; Patients who
received care in specialty
hospitals

had less
comorbidity and resided in
more affluent zip codes

than their counterparts in
general hospitals
Procedure
Pieter, et al. No cure for all evils
(2010)
Comparison Disapproval; the care unit
is designed in line with
focused factory concept,
but the performance is not
satisfactory. The degree of
fit between strategy,
organizational design and
operational performance is
not deal with very well in
SHs.
Demographic
Carey, et al. Specialty Hospitals
Not More Cost-
Efficient Than Full-
Service Hospitals,
Study Finds (2008)

Comparison Disapproval; Results show
that orthopedic and
surgical specialty hospitals
appear to have significantly
higher levels of cost
inefficiency.
Clinic &
procedure

Additionally, there are also serious doubts on SHs success. Some scholars argue that specialty
hospitals can produce high productivity, because they may cherry pick the profitable and
healthier patients (Stuart, 2006); (Casalino et al., 2003). (Casalino;Devers;& Brewster, 2003),

2.4.4 Ideal model of specialty hospital

Targeting to these negative evidences and doubts for SH, many researches were organized to see
the problems behind the inefficiency of SH. One reason why SHs in reality are not performing well
relates to the degree or level of focuses (Peltokorpi et al., 2010). The products mix may have
influence on productivities. However, compact focus alone may be just a supportive but not
sufficient for the success of hospital. Pieter (2010) found that the degree of fit between strategy,
organizational design and operational performance is not dealt with very well in SHs in reality. He
believes that the consistency of the strategies and operations between different levels or between
different parts inside SH is significant for the success. The success also depends on many other
factors including patient severity, process and implementation management (Hyer et al., 2009).
We cannot deny completely that some enabling factors may exist in the conventional hospitals
and can be appreciated by specialty hospitals.

39
Peltokorpi et al. (2010) have proposed a model of ideal specialty hospital. There are three phases
and five steps towards the full utilization of focus concept in healthcare institutes. The first phase,
laying the foundation of the success of specialty hospitals, comprises of two steps: 1) segmenting
the whole catchment and focusing on a limited range of diseases, symptoms or population groups;
2) identifying and deciding the urgency level (acute or elective) that will be focused on. The second
phase organizes a focused unit by narrowing down the care procedures based on the selected
diseases, symptoms or population groups. Finally, the advantage of focused concept is fully
reached by integrating assistance of proper output per resource management and capacity
management. Variations in output achieved by resource (labor, facilities, etc.) can be reduced by
standardizing the expected output of employees. Variations in capacity used per patient can be
absorbed and cost-efficiency of process can be improved by proper estimation and prediction in
care pathways and times.
Additionally, some external co-operators and supporters are also affecting the achievement of
specialty hospitals. Government has to issue the supportive policies to ensure the executives of
the new approach (Niederman, 2006). As the insurance system is linking tightly with healthcare
system, perfecting the insurance system can improve the performance of the whole healthcare
system.
One ideal model of specialty hospital based on the above information is presented in figure 8.

Figure 8 An ideal model of specialty hospitals (Peltokorpi et al., 2010)
40
2.5 Summary of the literature review

Table 10 summarizes the existing knowledge related to this thesis and reveals the unknown and
gaps needed to be solved in this research.
Table 10 Summary of the existing theory and the identified research gaps
Subjects in this thesis Existing knowledge Unknown and gaps
Productivity 1. Available definitions of productivity in
manufacturing and services;
2. Available methods and techniques of
productivity measurements and evaluation
in healthcare services;
3. The requirements for indicators used to
measure productivity in hospitals;
4. Main factors affecting productivity
improvement of hospitals;
1. No specific methods of
productivity measurement and
performance comparison for
specialty hospitals;
2. No deep consciousness of or
systematic approaches to
improving productivity of
specialty hospitals;

Operations
management
1. linkages between operations
management and productivity
improvement;
2. Possible channels, available operations
and feasible practice at strategic level for
improving productivity in general;
3. Available indicators measuring the
effects of operations management in
general;
1. No framework that can reveal
the conductive connections of
operations, productivity
determinants, and productivity
improvement for hospitals;
2. No systematic approaches for
hospitals to find the deficiency in
operations management;
Specialty hospitals
(focus strategy in
healthcare)
1. Basic concepts of specialty hospitals and
successful factors of focus strategy;
2. Ideal model of specialty hospital;

1. No holistic reviews of specialty
hospitals in reality;
2. No deep consciousness of
improving the application of
focus strategy in healthcare;
3. Lack of the clear ideas of where
and how to improve the
productivity of specialty
hospitals;
4. More concerns are put at
strategy level not operations
level;

Literatures related to productivity have provided many ways to define, measure and evaluate
productivity. The main factors determining productivities of hospitals have been identified.
However, specific methods of productivity measurement and comparison for specialty hospitals
have not been presented yet. It is needed to provide a wide range of businessmen or civil servants
who have little knowledge of economic theory or mathematics with simple and understandable
model of productivity measurement. Complex measures often produce accurate results, but they
are time-consuming and difficult to implement. Meanwhile, in academia, there is no deep
consciousness of or systematic approaches to improving productivity of specialty hospitals.

41
For the subject of operations management, potential linkage between operations management
and productivity improvement has been proven. Some indicators enabling to measure the effects
of operations management in general have been invented. Possible channels, available operations
and feasible practice at strategic level for improving productivity in general have been found. But
there is lack of a framework that can reveal the conductive connections of operations, productivity
determinants, and productivity improvement for hospitals. It is also necessary to invent systematic
approaches for hospital to find the deficiency in operations management.

Existing knowledge has covered basic concepts of specialty hospitals and successful factors of
focus strategy and provided Ideal model of specialty hospitals. But it is still needed to review the
operations of specialty hospitals in reality, since many researches disapprove that this healthcare
specialized facility in reality can provide services with more efficiency and effectiveness. It is very
urgent to arouse the consciousness of people to improve the application of focus strategy in
healthcare and to help them decide where and how to improve the productivity of specialty
hospitals. Whats more, the concerns of scholars in this area are basically put at strategy level not
so much at operational or practical level.

In brief, for this research, it is necessary to develop a clear framework that can measure the
productivity and performance of specialty hospitals, compare operations management and
productivity, indicate the possible improvement in operations, and discover the opportunities of
productivity improvement in specialty hospitals.












42
3 A Framework for productivity and operations measurement in surgical unit of
specialty hospital

Literature has provided a lot of options for productivity and operations measurement in practice,
but for this thesis, none is perfectly suitable. This chapter creates one framework of productivity
and operations measurement in surgical unit of specialty hospital for this research.

3.1 Productivity definition for this research

In this research, productivity is defined as a combination of efficiency and quality, equal to the
number of outputs that meet the standard quality, per unit of input in a production process. The
production scope covered by this study is from input to output. Outcome of services, involving
customer perception, is not included, because it is not controlled by services providers and can
cause complex and difficulty in measurement of productivity.

3.2 Productivity measurement for this research

According to the literatures reviewed and data available in hands, this research focuses on labor
productivity and defines productivity as quality-adjusted productivity considering both quality and
efficiency aspects in surgical service production. The quality index comprises of patient severity or
case mix (inputs quality) and the percentage of surgeries meeting the standard (outputs quality).
The efficiency is measured by the ratio of number of surgeries operated (outputs quantity) to the
labor hours used to produce these surgeries (inputs quantity).

3.2.1 Output and input

In theory, while some people simply view output as the result of production, some people define
that output is the result of production, which is meeting with a certain quality standard. But in
practice, people usually just count outputs with the number of goods or services, without
considering whether all the results are reaching the standard level of quality. Sometime it is hard
to immediately estimate the quality of the result. In this thesis, Output is a surgery completed and
reaching the standard level of quality. Both quality and quantity aspect of outputs are considered.
In the specification and elaboration, it is hard to count the number of output directly, because it
needs time to prove the effect and quality of surgery. Fortunately, case hospitals in this research
have the statistics about the rate of surgeries that meeting with the quality standards. Therefore,
output is represented by multiplying the number of all surgeries completed within a given time
with rate of surgeries that meeting with the quality standards (quantity * quality).

In this research, input includes provider input and patient input. Labor force and human body are
taken into account for surgical productivity measurement. Quantity is the main aspect to consider,
43
when the labor force is analyzed. Increasing the number of labors and extending labor hours may
enhance the output within a given time. Quality of labor forces is not contained in the
measurement, because currently there is no perfect indicate to present that and the expertise of
professions is hard to measure. The healthy condition of patients accepted by surgical units is
analyzed in this measurement. Logically, the number of patients may not affect the final result, but
the condition of patients could affect the work and time of surgical services.

3.2.2 Quality measurement for this research

In the benchmarking, which compares the performance of hospitals from the same place with the
same standard of healthcare services, the output quality is reflected by the percentage of
surgeries meeting the quality standard.

In the international benchmarking for hospitals, where the standards or criteria could be different,
the output quality is represented by readmission rate. Readmission rate tackles, in one year
among all the surgical patients, percentages of surgical patients who experience unplanned
readmissions to the same hospital for the same medical reason after discharge within 30 days.
Patient readmission rate is the ratio of number of patients who were readmitted after surgeries
for the same problem to the total number of patients who experience surgeries in the medical
facility. In the calculation, readmission is counted if it occurs within 30 days after a hospital
discharge, and readmission over a longer term after discharge is not taken into account; Patients
transferred to another hospital will not be treated as a readmission; Patient being retreated for
the same problem in the some hospital several times within 30 days is counted as one readmission.
Obviously, less frequently patients are re-admitted to the hospital shortly after being discharged,
more higher the quality of surgical services is.

The input quality is reflected by patient severity (case mix). Patient severity or case mix is
measured with ASA physical status classification system (Appendix 2). In order to simplify and
unify the calculation, classes of different patients from class 1 to class 6 are scored with 6 to 1. The
class of patients with higher score holds better condition. The index of patient severity or case mix
could be obtained by summing the six results of multiplying score of class and its corresponding
percentage. Therefore, in this calculation, the higher the index of patient severity or case mix is,
the better the patients condition is.

The formula of index of quality is:

Index of quality = percentage of surgeries meeting quality standard/ index of case mix
or
Index of quality =1/ (readmission rate * index of case mix)

3.2.3 Efficiency measurement for this research

44
It is not easy to directly measure the quantity of output with quality adjustment, but number of
surgeries completed is easy to count. Efficiency refers to the number of surgeries per resource.
The measurement of efficiency for this research employs the ratio of number of surgeries to sum
of official working hours of different professions in one day.

Efficiency=number of surgeries completed in one days official daytime working hours / sum of
official working hours of different professions in the surgical units
In this research, the capital of labor is excluded, because hospitals in different places have
different salary systems.

3.2.4 Model and formula of productivity measurement for this research

This research relates to labor productivity in surgical unit of Chinese specialty hospital. The model
of productivity for this research and its elements are presented by figure 9.


Figure 9 Model of productivity for this research

The formula of productivity measurement for this research is:

Productivity=quality index X efficiency = (percentage of surgeries meeting the standard / index of
case mix) X (number of surgeries in one days official daytime working hours / sum of official
working hours of different professions)

Or
45

Productivity=(1/ (readmissions rate * index of case mix)) X (number of surgeries per days official
daytime working hours / sum of official working hours of different professions)

In fact, productivity here can be translated into quality-adjusted productivity in labor aspect,
which is measured by the ratio of quality-adjusted outputs to inputs. As it has been known,
outputs that are not with redefined standard quality should not be counted as proper output. But
In practice, it is hard to directly measure the outputs of surgical services in this sense, because the
quality of the results cannot be observed immediately. In this research, the number of surgeries
without being considered quality is easier to get. The quality index can be represented by patient
severity or case mix (inputs quality) and the percentage of surgeries meeting the standard or
readmission rate (outputs quality). So the so called quality-adjusted output is the result of
multiplying the number of surgeries with index of quality. The formula for productivity
measurement is:

Productivity= quality-adjusted output / input=(percentage of surgeries meeting the standard / index
of case mix X number of surgeries in one days official daytime working hours) / sum of official
working hours of different professions in the surgical units

Or

Productivity= (number of surgeries in one days official daytime working hours / (readmission rate *
index of case mix)) / sum of official working hours of different professions in the surgical units

In general, productivity measurement of this research focuses on input and output, both of which
can be controlled by service providers or operation managers in terms of quality and quantity.

3.3 Linkages between operations management, productivity determinants and
productivity improvement of SH

Literatures provide a widely accepted theory that the productivities can be determined by some
factors that can be improved by operations management. Figure 10 illustrates the model of
productivity improvement used in this research.

As has been widely acknowledged and proved in theoretical and practical, proper process design
can streamline the production, reduce the throughput time, enhance the capacity utilization rate;
Good resource management can optimize the resource allocation and configuration, so the high
resource or capacity utilization can be achieved; Optimal planning and scheduling can minimize
the idle time and increase the utilization; Proper quality management can help to control,
maintain and improve the quality of production. (Stevenson, 2009); (Johnston & Clark, 2008).


46

Figure 10 Productivity improvement model


3.4 Measurement of operations management

The measurement of operations management in this research covers four aspects--resources,
process, planning and quality management, whose impact on productivity have been widely
acknowledged (e.g. Stevenson, 2009; Peltokorpi, 2010). The aspect of process relates to how the
surgical unit organizes their services processes and facility layouts. The aspect of resources
considers the configuration of resources in surgical unit. The aspect of planning identifies how
surgical unit arranges the surgeries and makes scheduling. The aspect of quality management is
concerned about how the surgical unit guarantees its service quality.

3.5 A framework for measurement and comparisons of operations management and
productivity in SHs

Table 11 illustrates the framework for measuring and comparing the operations management and
productivity in SHs. This framework has the ability to present the profiles of operations
management of surgical unit in the aspects of process, resources, planning and quality control, to
figure out the productivities under certain operations management, to compare the differences of
productivities and operations management among hospitals, to help hospitals find deficiencies
through comparison and to find the possible solutions for the operations and productivity
improvement. The items of comparison are made up by reviewing related articles and materials
(e.g., Peltokorpi, 2010)

Table 11 Items and their descriptions in the framework for measuring and comparing operations management and
productivity in SHs
Items and some explanations
Resource
number of ORs It counts the number of operation rooms in real use. OR is the abbreviate of
Operation Room that is the place where the surgeries operations are carried
out from cutting or stitching (Peltokorpi, 2010).
number of PACU beds It counts the number of beds in real use for recovery care. PACU is the
abbreviate of Post Anesthesia Care Unit that is a place normally attached to
operating theaters and designed to provide care beneficial for patients to
47
recover from anesthesia (Sandberg, 2005).
induction rooms Induction room could be an independent space adjacent to the operating
theatre and used for induction of anesthesia (Bromhead, 2002).
number of nurses per
OR or per surgery
It counts the number of nurses in one surgical team in average.
numbers of
anesthesiologists per OR
per surgery
It counts the number of anesthesiologists in one surgical team in average.
number of surgeons per
OR per surgery
It counts the number of surgeons in one surgical team in average.
ratio of nurses to
patients
It counts the number of patients per nurse.
fixed surgical team Members (nurses, anesthesiologists, surgeons)in one the surgical team are
fixed, but change is possible if it is needed
Planning & Scheduling
evidence of scheduling It answers what kind of information the scheduling of surgeries depends on.
decision unit It answers who makes the decision of the surgery and decides the date.
frequency of scheduling It measures the frequency of remaking the surgical schedule for the whole
surgical unit. daily or weekly
separation of emergency
and electives
It answers whether the surgical unit only deals with elective cases, leaving the
emergency out to other department.
sequence policies the rules of sequencing
block scheduling or open
scheduling
In block scheduling, time blocks of operation rooms are assigned to different
surgeons first and it is surgeon who schedules the surgeries for different
patients into his own time blocks (Peltokorpi, 2010); In open scheduling, time
sessions are assigned to different surgical patients directly (Peltokorpi, 2010)
responds to the
cancellation
It answers how the surgical unit deals with the time session of case that is
canceled by accident.
Production process
layout It describes the layout of facilities including induction rooms, operation rooms
and recovery rooms. (Table 4)
parallelized process or
sequent process
In sequent process, the operations of induction, operation and recovery are
following in sequence; In parallelized process, anesthesia is given in the
induction room located next to the operating room. An additional team
prepares the next patient while the previous patient is still in the operating
room (OR). PACU with some nurses monitors the recovery of patient while the
OR can be prepared for the next patients. (Friedman;Sokal;& Chang, Increasing
Operating Room Efficiency Through Parallel Processing, 2006)
Quality management
standard and criteria It describes the quality standard or criteria followed by hospitals.
(recommended)methods
of quality controlling
and monitoring
It describes the ways of controlling and monitoring quality in surgical services.
Operational numbers
resource mix ratio of nurse to doctor
throughput time
average operation time
per surgery (hours)
average time for patient to move through the surgical unit, from the start of
induction to the end of recover care
utilization rate of OR It is the result of dividing realized OR time of daily operations performed during
office hours by daily available OR time (Peltokorpi, 2010)
48
index of case mix It measures the severity of patients who get surgical services.
percentage of surgeries
meeting the quality
standard or criteria
It counts how many surgeries are reaching the standard level of quality.
patient readmission rate percentages of surgical patients who experience unplanned readmissions to
the same hospital for the same medical reason after discharge within 30 days
quality index quality index=percentage of surgeries meeting the quality standard or criteria /
index of case mix or quality index=1/ (readmissions rate * index of case mix )
number of operations
per day
amount of surgeries per day during official working time
official hours per day official working hours per day
sum of working hours of
different professions
sum of official working hours of different professions in the surgical units per
day
efficiency efficiency=number of surgeries in one days official daytime working hours /
sum of official working hours of different professions in the surgical units per
day
productivities Productivity= (percentage of surgeries meeting the standard / index of case
mix) X (number of surgeries in one days official daytime working hours / sum of
official working hours of different professions)
Or
Productivity= (1/ (readmission rate * index of case mix)) X (number of surgeries
per days official daytime working hours / sum of official working hours of
different professions)

49


4 Research methodology

The chapter is aiming to introduce the research approaches and research methods used by this
study. The research process is also explained after that.

4.1 Research approach

Several research approaches that assist in the whole research are listed and explained in this part.

4.1.1 Inductive reasoning

This research employed inductive reasoning, where a generalization proceeds from a premise
about a sample to a conclusion about the population (Holland et al., 1989). In this research,
hospitals in one Chinese city are studied for deriving knowledge about characteristics or
phenomena that would be applicable for the Chinese hospitals as a whole.
(Holland;Holyoak;Nisbett;& Thagard , 1989).
4.1.2 Qualitative and quantitative approaches

Through different kinds of research methods, such as interviews and questionnaires, both
qualitative and quantitative data are collected to answer the research questions.

4.1.3 Comparative study and benchmarking

Benchmarking, as the process of comparing business processes and performance of one entity or
organization with the best or better practices of other entities or organizations, is a multi-faceted
technique that can be utilized to identify operational and strategic gaps and to search for best
practices that would eliminate such gaps (Yasin, 2002). Benchmarking is the practice of comparing,
on certain measurable scale, the performance of a series of business operations of different
organizations (Elnicki, 1972). It is a process of measuring products, services and practices against
the competition or those organizations with better or optimal performance. Benchmarking against
a competitor is an excellent way to improve productivity by saying if the competitor can do it,
why cant I ? (Report, 2005).

Benchmarking has been widely acknowledged and applied in healthcare industry. As an efficient
approach to find best practices, benchmarking is increasingly used by healthcare institutions for
reducing expenses and simultaneously improving product and service quality (HR, 1994).
Capturing the notion of efficiency, benchmarking reflects the best current assessment of optimal
care and efficiency rather than average performance (AQA, 2006). A WHO European group has
50
been trying to build and validate a flexible and comprehensive hospital performance assessment
modela benchmarking network at the international level (WHO, 2003).

As one of the most significant research approaches for this research, comparative study and
benchmarking are used to find differences or gaps between productivities of different hospitals
and some good operating ways can be appreciated from the organizations with better
performance. The relevant operational measures learned from previous studies of HEMA are
reflecting the basic performance of surgical units in different hospitals. These measurements are
basically meeting the criteria identified by John Griffith and Kenneth White in their publications,
that is, the measures must be practical to present the real situation, valid enough to identify real
objectives, reliable enough to measure actual change in performance, and comparable over time
to detect trends (Griffith & White, 2002). Since the purpose of this research is to find out the
problems existed in operation management and operation systems in Chinese specialty hospitals
as well as some possible solutions regarding to these problems, the relevant measures are
supposed to reflecting the current situation of operation systems of case hospitals and be able to
indicate the potential improvements.

The framework for measurement and comparisons of operations management and productivity
in SHs proposed in the end of Chapter 3 is the main structure of benchmarking for this research.
Benchmarking is based on the fact that, for every surgical unit, the daily number of patients who
need surgeries in the waiting list excesses the daily number of patients who actually get surgeries.

4.2 Research methods

This report is based on data collected from different sources. The secondary data about the
information of hospitals in Finland were extracted from the existing database of HEMA. The first
hand data were gathered from the main research base located in Jinhua City, which is a middle
size city in China and has four specialty hospitals with different focuses in the urban area. Table 1
in appendix is describing main hospitals in JinHua urban area, including general hospitals and
special hospitals, in terms of general indictors (Statistics J. , 2008).

Generally speaking, Jinhua Central Hospital and Jinhua No.1 People Hospital have better
performance among the general hospitals in the relative terms, so these two general hospitals are
selected as the reference substances for specialty hospitals. As Jinhua No.2 People Hospital
specialized in services for mental diseases that need long term cares and treatments has no
sufficient data for procedures, so other three specialty hospitals--Jinhua Eye Hospital, Women
hospital, Guangfu Tumour and Cancer Hospital, are studied in this research.

First hand data about these five hospitals was collected through (1) questionnaire (2) interviews (3)
site visits. Most of the data is presenting the performance of organizations from 2008 to 2010.

51
4.2.1 Questionnaire

Some questionnaires sent to these five hospitals in Jinhua hospitals in October 2010 consisted of
two sections: general performance information and surgical unit operations. Specialty hospitals
and general hospitals got different versions of questionnaires but with similar questions for being
imposed with conformable measurements and comparison. The questions for general hospitals
cover all three different medical departmentsophthalmology, gynecology and tumor & cancer,
corresponding to the three specialties of the three selected specialty hospitals. (Appendix 3)

4.2.2 Interviews

As the complement of questionnaire, interviews proceed through telephone and video and were
aiming to clarify some uncertain in answers got by questionnaires, to complete some unfinished
questions in questionnaires and to obtain information that was hard to inquire about by the form
of questionnaire.

4.2.3 Site visits

The main goal of the site visits which was carried out in November 2010 is to deepen the
understanding of the layouts and operations in hospitals. These five hospitals in Jinhua city
successively arranged meetings involved with introductions and discussions and followed by tours
in hospitals. One Finnish focused care unit for women was visited in the beginning of December,
2010.

4.3 Research process

The research was carried out through the following four phases.

Phase: Constructing productivity measurement and comparison
The framework for measurement and comparisons of operations management and productivity
in SHs, proposed and presented in the end of Chapter 3, is the main structure of measuring and
benchmarking for this research.

Phase: Outlining the basic condition and situation of specialty hospitals in China
It is necessary to get to know the basic condition and situation of Chinese specialty hospitals
before deepening the research into surgical services of Chinese specialty hospitals. The internal
organization and market position of Chinese specialty hospitals were discerned and the gas to
ideal model of focus care unit was discovered.

Phase : Comparing Chinese specialty hospitals with Chinese general hospitals
52
Each section of benchmarking focused on one medical branch of hospital (ophthalmology,
gynecology or tumor & cancer). The bases of comparisons were laid on surgical units and the
comparison work applied the framework for measurement and comparisons of operations
management and productivity in SHs. The productivities of surgical units belonging to the same
medical branch were measured and compared. The comparison logic is that if Chinese general
hospital has higher productivity than specialty hospital, the operations employed in Chinese
general hospital could be thought as the potential solutions for improving the productivity of
Chinese specialty hospitals.

Phase : Comparing Chinese specialty hospitals and Finnish specialty hospitals
This phase is similar to the third phase. This phase was focused on gynecology. The bases of
comparisons were laid on surgical units and the comparison work applied the framework for
measurement and comparisons of operations management and productivity in SHs. The
productivities of two different surgical units mainly operating gynecological surgeries were
measured and compared. The comparison logic is that if, the Finnish specialty hospital has higher
productivity than Chinese specialty hospital, the operations employed in Finnish specialty hospital
could be thought as the potential solutions for improving productivities of specialty hospitals in
China.


















53

5 Results

This chapter presents results of the research and describes new knowledge contributed by the
study. They are reported with four steps: 1) outlining general conditions and situation of Chinese
specialty hospitals, 2) comparing Chinese specialty hospitals with Chinese general hospitals in the
aspects of productivity and operations management, 3) comparing Chinese specialty hospitals
with Finnish specialty hospitals in the aspects of productivity and operations management, 4)
Proposing possible solutions for productivity improvement in Chinese specialty hospitals.

5.1 General conditions and situation of specialty hospitals in China

General conditions and situation of Chinese specialty hospitals are outlined from three
perspectives: survival environment, competitiveness and development stages.

5.1.1 Survival environment

It is Chinas real national condition that requires Chinese healthcare system to be built up with
government intervention. The central government is responsible for speculating and formulating
national policies and programmes for general healthcare system. Local governments have to
institute local healthcare policies and regulations according to the real situation and administer
the local healthcare institutes. It is local government to enact and control the price of cares and
medicines.
Going through nearly 30 years reform launched by Chinese government, Chinese healthcare
system underwent radical changes affecting forms and structures of clinical institutes.
Government owned hospitals are the backbone of Chinese hospital industry (Jen et al., 2008), but
other forms of healthcare institutions are co-existed. Different from US healthcare system, there
are little General Practitioners in Chinese healthcare system and it is patients themselves who
directly choose the hospitals they want to visit and go to outpatient department straight without
any referrals or formal recommendation. (Jen;Lars;& Yi, 2008)

5.1.2 Competitiveness

Even through the number of specialty hospitals has a considerable increase from 1998 to 2008,
Chinese specialty hospitals are still occupying a small portion of Chinese healthcare market,
accounting for less than 20% of the total number of hospitals in China (Figure 11). Obviously,
general hospital is the main choice of Chinese people and occupies the major part of Chinese
healthcare market (Figure 12). The loyalty of patient towards to general hospitals somehow
hinders the development of Chinese specialty hospitals in scale and quantity. Chinese specialty
hospitals havent gotten enough strength to act as a counterweight to general hospitals.
54


Figure 11 Numbers of Chinese specialty hospitals (1998-2008) (Statistics N. , 2009)


Figure 12 Numbers of visits and inpatients per general hospital and specialty hospital (2008) (Statistics N. , 2009)

0,00%
2,00%
4,00%
6,00%
8,00%
10,00%
12,00%
14,00%
16,00%
18,00%
20,00%
0
500
1000
1500
2000
2500
3000
3500
4000
1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008
Numbers of Chinese specialty hospitals (1998-2008)
Number of Chinese specialty hospitals
Percentage in Chinese hospitals
102,22
5,63
40,15
1,60
0,00
20,00
40,00
60,00
80,00
100,00
120,00
Visits (1000 person-times) Inpatients (1000 persons)
Numbers of visits (1thousand person-times) and Inpatients (1000 persons)per Chinese
specialty hospital and Chinese general hospital in average (2008)
General hospitals
Specialty hospitals
55
In addition, figures 13 indicates that compared with other types of medical institutes, Chinese
specialty hospitals in reality provide no permanent improvements or better performance that is
praised by the advocates of specialty hospitals. Actually, there is no obvious difference between
the utilization rate of Chinese specialty hospitals and that of Chinese general hospitals. The
average length of stays of inpatients in Chinese specialty hospitals is much longer than in Chinese
general hospitals, which is betraying the goals or tenet of specialty hospitals.


Figure 13 Average utilization rates and stay days in hospitals of Chinese specialty hospitals and general hospitals
(Statistics N. , 2009)


5.1.3 Gaps to ideal model

Through comparing specialty hospitals in Jinhua city with ideal model of focused care units
proposed by Peltokorpi et al.(2010), gaps are discovered (Table 12). Generally speaking, there is a
huge space for Chinese specialty hospitals to progress before turning into the ideal specialty
hospitals, where permanent improvements and better performance brought by focus principle
have been proved.





82%
10,1
82%
17,6
0%
200%
400%
600%
800%
1000%
1200%
1400%
1600%
1800%
2000%
Utilization rate Stay days in Hospitals
Average utilization rate and stay days in hospitals of Chinese specialty hospitals and
general hospitals
General hospitals
Specialty hospitals
56
Table 12 Comparison between Chinese specialty hospitals and an ideal specialty hospital
JinHua eye hospital JInhua women
hospital
Jinhua tumour and
cancer hospital
Reviews and Comments
Demands based
on a limited
range of
diseases,
symptoms, or
population
groups
Ophthalmology

Western medicine
gynaecology
;Chinese traditional
medicine
gynaecology
;obstetrics;
paediatrics

Tumour and cancer
surgery; and other 7
departments
(Tumour and cancer
medicine; pulmonary
medicine;
pneumology;
cardiologue; cerebral
surgery; orthopedics;
empyrosis)
The services range is relatively
broad. The range of diagnoses
and treatments are not
narrowed.
Focusing on
either acute or
elective cares
exclusively
both both both Cases with different urgency are
treated simultaneously and fairly,
which overwhelmingly challenges
case scheduling, capacity
utilization and waiting time.
A limited set of
care procedures
relatively yes,
covering cataract and
also other eye
illnesses

no no Specialty hospitals in China have
not narrowed down the scopes of
procedures to enable
standardization of care pathways
and reduction of functional
variety
Proper output
per resource
management
the criteria of
minimum numbers of
surgeries or cared
patients per period;
personnel bonus
systems linking with
produced output and
outcomes;
objectives of
average output per
person;
personnel bonus
systems linking
with produced
output and
outcomes;

objectives of average
output per person;
personnel bonus
systems linking with
produced output and
outcomes;

Chinese specialty hospitals
usually make considerable efforts
to standardize different types of
processes and outputs and pay a
lot of attentions to make
different criteria for different
services.
Proper capacity
management
sequence of
difference cares,
time-based
milestones, recovery
and throughput
times of different
phases are
standardized
sequence of
difference cares,
time-based
milestones,
recovery and
throughput times
of different phases
are not easy to
standardize
sequence of
difference cares,
time-based
milestones, recovery
and throughput
times of different
phases are difficult
to standardize
It is not easy to control capacity
utilization and define, measure,
or monitor the expected output
of various processes and
resources.
Cooperation
with other
organizations:
government,
insurance
companies, and
other
healthcare
institutes
Owned and
supported by local
government; limited
cooperation with
insurance companies;
Owned and
supported by local
government;
limited cooperation
with insurance
companies;
Owned by a private
group; supported
and monitored by
local government;
limited cooperation
with insurance
companies;
Chinese governments impose
considerable intervenes into the
management and operations of
hospitals in China. There is no
referral system that is suspected
of hindering the development of
healthy competitiveness in
healthcare market. Most
government-owned Chinese
specialty hospitals in China have
been well linked with public
insurance systems and private
insurance companies.

57
5.2 Difference between Chinese specialty hospitals and Chinese general hospitals

This part shows the results of comparisons between three Chinese specialty hospitals with two
Chinese general hospitals in the aspects of productivity and operations management. The
benchmarking in the research was carried out at clinical levels and around the three realms--
ophthalmology, gynecology and tumor & cancer. The benchmarking employed the framework of
measuring and comparing the operations management and productivity in SHs proposed in
chapter 3. All the measured items are related the operations in surgical units. Findings from these
comparisons are explained after the comparisons.

5.2.1 Ophthalmology

The following benchmarking was organized between one ophthalmology specialty hospital and
two ophthalmology departments respectively from two general hospitals. (Table 13)

Table 13 Benchmarking between Jinhua eye hospital and two Jinhua general hospitals in the aspect of
ophthalmology
Hospitals
Indictors
JinHua Eye Hospital JinHua Central Hospital
Ophthalmology
Department
JinHua NO.1 People
Hospital Ophthalmology
Department
Resource
number of operation
rooms
3 (5 operation beds) 1 1
number of PACU beds 0 2 1
induction rooms 0 0 0
number of nurses per OR 1 2 1
number of
anesthesiologists per OR
1 0-1 (depends on regional
anesthesia or general
anesthesia)
0-1(depends on regional
anesthesia or general
anesthesia)
number of surgeons per
OR
2 2 2
ratio of nurse to patient 1:5 1:4 1:2.5
fixed surgical team No Yes Yes
Planning & Scheduling
evidence of scheduling Requirements from
different surgeons;
Estimated length of
surgeries
The volume of surgical
patients; Complexity of
surgeries
Types, urgency, infections,
anesthesia conditions
decision unit Department of
anesthesiology
Head-nurse in surgical
units
Surgical unit
58
frequency of scheduling Per day Per day Per day
separation of emergency
and electives
No Focusing on elective
surgeries. Emergency is
handled by emergent
department
Focusing on elective
surgeries. Emergency is
handled by emergent
department
sequence policies Emergency first Long surgery first Similarity first;
block scheduling or open
scheduling
Open scheduling Open scheduling Open scheduling
responds to the
cancellation
The following one occupies
the time sessions
The following one occupies
the time sessions
To reorganize the whole
scheduling
Production Process
facilities layout Cellular layouts Process layout (operations
rooms are shared by
different departments)
Process layout
(operations rooms are
shared by different
departments)
parallelized process or
sequent process
Sequent process Semi-parallel process Semi-parallel process
Quality management
standard and criteria Issued by local government Issued by local government Issued by local government
(recommended)methods
of quality controlling and
monitoring
Real-time monitoring in
every stage of operation
Real-time monitoring in
every stage of operation
Real-time monitoring in
every stage of operation
operational numbers
resource mix (ratio of
nurse to doctor)
0.33 0.80 0.4
throughput time average
operation time per surgery
(hours)
1.5 1 1
utilization rate of OR 70% 90% 80%
index of case mix 5.16 5.31 5.27
Percentage of surgeries
meeting standards
1.0 1.0 1.0
quality index 0.19 0.19 0.19
number of operations in
one days official hours
20 3-5 5 (Ophthalmology
operations are arranged
2days per week in the
surgical units)
official hours per day 8 8 8
sum of official working
hours of different
professions
140 36 28
efficiency 0.12 0.14 0.18
productivities (*100) 2.00 3.00 5.00

59
It is obvious that the surgical units of the two Chinese general hospitals produce higher
productivities than the surgical unit of the Chinese specialty hospital. Since the quality indexes
show no significant difference, the differences of productivities is greatly due to the differences of
efficiency. For the three main factors determining productivity, Chinese general hospitals has
higher utilization rate of OR, higher ratio of nurses to doctors in quantity and shorter throughput
time. The figures indicate that the Chinese specialty hospital does not have better performance
than general hospitals.

The differences of operations management of these hospitals are apparent. The eminent
differences are:
1. The two general hospitals provide recovery rooms, but the specialty hospital does not.
2. For a certain service scale, the two general hospitals employ more nurses in surgical units.
3. The specialty hospital doesnt set up fixed surgical teams.
4. Scheduling and sequencing in these three hospitals have big differences. One of the
eminent distinctions is that Jinhua No.1 People Hospital Ophthalmology Department
emphasizes the similarity of surgeries and arranges surgeries with higher similarity closely.
5. General hospitals assign the emergency operations to emergency departments. But the
surgical unit in specialty hospital operates both kinds of operations.
6. In the specialty hospital, it is department of anesthesiology who decide the arrangement of
surgeries. In general hospital, surgical units make the surgical arrangement.
7. The layouts of services process are different. In the specialty hospital, workstations for
similar surgeries are grouped into one operation room, and all the activities related to a
surgery task are accomplished in the same space. In general hospital, the surgery task is
divided into operation (induction and operation) and recovery that are carried out in
difference space.
8. Due to the usage of PACU in general hospitals, when the first patient is transferred to
recovery room, the operation room can be prepared for the next case. The second patient
can start to get operation when the first patient is still accepting the recovery care.

5.2.2 Gynecology

The following benchmarking was organized between one Gynecology & Obstetrics specialty
hospital and two Gynecology & Obstetrics departments respectively from two general hospitals.
Performances on gynecology operations are compared. (Table 14)








60
Table 14 Benchmarking between Jinhua women hospital and two Jinhua general hospitals in the aspect of
gynecology
Hospitals
Indictors
JinHua women Hospital JinHua Central Hospital
Gynecology Department
JinHua NO.1 People Hospital
Gynecology Department
Resource
number of genecology
operation rooms
4 2 1
number of PACU beds 0 2 2
induction rooms 0 0 0
number of nurses per OR 2.5 2.5 2.5
number of
anesthesiologists per OR
1.5 1.5 1.5
number of surgeons per
OR
3 3 2.5
ratio of nurse to patient 1:5 1:3.5 1:2.5
fixed surgical team No Yes Yes
Planning & Scheduling
evidence of scheduling Requirements from
different sub-
specialties;
The volume of surgical
patients; Complexity of
surgeries
Types, urgency, infections,
anesthesia conditions
decision unit Department of
anesthesiology
Head-nurse in surgical
units
Surgical unit
frequency of scheduling Per day Per day Per day
separation of emergency
and electives
No Focusing on elective
surgeries. Emergency is
handled by emergent
department
Focusing on elective
surgeries. Emergency is
handled by emergent
department
sequence policies No infection first;
emergency first
Long surgery first Similarity first;
block scheduling or open
scheduling
Open scheduling Open scheduling Open scheduling
responds to the
cancellation
The following one
occupies the time
sessions
The following one
occupies the time sessions
To reorganize the whole
scheduling
Production Process
Layout Celluar layout Process layout Process layout
parallelized process or
sequent process
Sequent process Semi-parallel process Semi-parallel process
Quality management
standard and criteria Issued by local
government
Issued by local
government
Issued by local government
(recommended)methods
of quality controlling and
monitoring
Real-time monitoring in
every stage of
operation
Real-time monitoring in
every stage of operation
Real-time monitoring in every
stage of operation
61
operational numbers
resource mix (ratio of
nurse to doctor)
0.56 0.56 0.63
throughput time average
operation time per surgery
(hours)
1.5 1.5 1
utilization rate of OR 70% 90% 80%
index of case mix 5.41 5.33 5.38
percentage of surgeries
meeting standards
0.99 0.98 0.99
quality index 0.18 0.18 0.19
number of gynecology
operations per day
12 5 3 (Gynecology operations are
arranged 2days per week in
the surgical unit)
official hours per day 8 8 8
sum of working hours of
different professions
224 112 52
efficiency 0.05 0.05 0.06
productivities (*100) 0.90 0.90 1.14

The figures also indicate that the Chinese specialty hospital does not have better performance
than general hospitals. It is obvious that the surgical units of the two Chinese general hospitals
produce higher productivities than the surgical unit of the Chinese specialty hospital. Since the
quality indexes show no significant difference, the differences of productivities is greatly due to
the differences of efficiency. For the three main factors determining productivity, Chinese general
hospitals has higher utilization rate of OR, higher ratio of nurses to doctors in quantity and shorter
throughput time.

The differences of operations management of these hospitals are apparent. The eminent
differences are:

1. The two general hospitals provide recovery rooms, but the specialty hospital does not.
2. For a certain service scale, JinHua No.1 People Hospital employs more nurses in surgical
unit.
3. The specialty hospital doesnt set up fixed surgical teams.
4. Scheduling and sequencing in these three hospitals have big differences. One of the
eminent distinctions is that Jinhua No.1 People Hospital Gynecology Department
emphasizes the similarity of surgeries and arranges surgeries with higher similarity closely.
5. General hospitals assign the emergency operations to emergency departments. But the
surgical unit in specialty hospital operates both kinds of operations.
6. In the specialty hospital, it is department of anesthesiology that decides the arrangement
of surgeries. In general hospital, surgical units make the surgical arrangement.
7. The layouts of services process are different. In the specialty hospital, workstations for
similar surgeries are grouped into one operation room, and all the activities related to a
62
surgery task are accomplished in the same space. In general hospital, the surgery task is
divided into operation (induction and operation) and recovery that are carried out in
difference space.
8. Due to the usage of PACU in general hospitals, when the first patient is transferred to
recovery room, the operation room can be prepared for the next case. The second patient
can start to get operation when the first patient is still accepting the recovery care.

5.2.3 Tumor & Cancer

The following benchmarking was organized between one Tumor & Cancer specialty hospital and
two Tumor & Cancer departments respectively from two general hospitals (Table 15).

Table 15 Benchmarking between JinHua tumor & cancer hospital and two Jinhua general hospitals in the aspect of
tumor & cancer
Hospitals
Indictors
JinHua Tumour and Cancer
Hospital
JinHua Central Hospital
T&C Department
JinHua No.1 People
Hospital T&C Department
Resource
number of operation
rooms
7 No independent OR
(arranged in one day per
week with 2 operation
rooms )
No independent OR
(arranged in three days per
week with 2 operation
rooms)
number of PACU beds 0 No independent PACU No independent PACU
induction rooms 0 0 0
number of nurses per OR 2.5 3 2
number of
anesthesiologists per OR
2 2 2
number of surgeons per
OR
4 3 3
ratio of nurse to patient 1:10 1:5 1:2.5
fixed surgical team Yes Yes Yes
Planning & Scheduling
evidence of scheduling Requirements from
different sub-specialties;
The volume of surgical
patients; Complexity of
surgeries
Types, urgency, infections,
anesthesia conditions
decision unit Head-nurse in surgical
units
Head-nurse in surgical
units
Surgical unit
frequency of scheduling Per day Per day Per day
63
separation of emergency
and electives
Yes Focusing on elective
surgeries. Emergency is
handled by emergent
department
Focusing on elective
surgeries. Emergency is
handled by emergent
department
sequence policies Emergency first; The long
and short operations are
arranged in intersectional
Long surgery first Similarity first;
block scheduling or open
scheduling
Block scheduling Open scheduling Open scheduling
responds to the
cancellation
The following one occupies
the time sessions
The following one occupies
the time sessions
To reorganize the whole
scheduling
Production Process
Layout Celluar layout Process layout Process layout
parallelized process or
sequent process
Sequent process Sequent process Sequent process
Quality management
standard and criteria Issued by local government Issued by local government Issued by local government
(recommended)methods
of quality controlling and
monitoring
Real-time monitoring in
every stage of operation
Real-time monitoring in
every stage of operation
Real-time monitoring in
every stage of operation
operational numbers
resource mix (ratio of
nurse to doctor)
0.42 0.60 0.40
throughput time average
operation time per surgery
(hours)
3.5 2 2
utilization rate of OR 85% 90% 90%
index of case mix 5.35 5.34 5.36
percentage of surgeries
meeting standards
1.0 1.0 1.0
quality index 0.19 0.19 0.19
numbers of T & C
operations in one days
official hours
13 5 per operation room 4 per operation room
official hours per day 8 8 8
sum of official working
hours of different
professions
476 112 128
efficiency 0.03 0.04 0.04
productivities (*100) 0.57 0.76 0.76

Table 15 shows the same findings as the previous comparisons that the Chinese specialty hospital
does not have better performance than general hospitals. It is apparent that the surgical units of
the two Chinese general hospitals produce higher productivities than the surgical unit of the
Chinese specialty hospital. Since the quality indexes show no significant difference, the differences
of productivities is greatly due to the differences of efficiency. For the main factors determining
64
productivity, Chinese general hospitals has higher utilization rate of OR and shorter throughput
time.

The differences of operations management of these hospitals are apparent. The main differences
are:
1. The two general hospitals provide recovery rooms even they are not exclusively occupied
by T&C department, but the specialty hospital has not provided any special recovery room
yet.
2. For certain service scale, Jinhua Center Hospital employs more nurses in surgical unit.
3. Scheduling and sequencing in these three hospitals have big differences. One of the
eminent distinctions is that JinHua No.1 People Hospital emphasizes the similarity of
surgeries and arranges surgeries with higher similarity closely.
4. The hospital specialized in T&C uses block scheduling mode, while the two general
hospitals use open scheduling mode.
5. The layouts of services process are different. In the specialty hospital, workstations for
similar surgeries are grouped into one operation room, and all the activities related to a
surgery task are accomplished in the same space. In general hospital, the surgery task is
divided into operation (induction and operation) and recovery that are carried out in
difference space.
6. Due to the usage of PACU in general hospitals, when the first patient is transferred to
recovery room, the operation room can be prepared for the next case. The second patient
can start to get operation when the first patient is still accepting the recovery care.

5.3 Difference between Chinese specialty hospitals and Finnish specialty hospitals

The following benchmarking was organized between one Finnish women specialty hospital and
one Chinese women hospital (Table 16).
Table 16 Benchmarking between Jinhua women hospital and one Finnish focused care unit for women in the aspect
of gynecology (Torkki et.al, 2007)
Hospitals
Indictors
Finnish focused care unit for women JinHua women Hospital
Resources
number of operation
rooms
7 (6 in daily use, 1 for emergency) 4
number of PACU beds 5 No
induction rooms 0 0
number of nurses per OR 3 2.5
65
number of
anesthesiologists per OR
1 1.5
number of surgeons per
OR
1 3
ratio of nurse to patient 1:4 1:5
fixed surgical team Yes No
Planning &Scheduling
evidence of scheduling 3 short or 2 long surgeries per day
per OR
Requirements from different sub-
specialties;
decision unit Surgeon Department of anesthesiology
frequency of scheduling Weekly Daily
separation of emergency
and electives
Yes No
sequence policies Longer first No infection first; emergency first
block scheduling or open
scheduling
Block scheduling Open scheduling
responds to the
cancellation
Replaced by one from the waiting list The following one occupies the time
session
Production process
layout Product layout & process layout Celluar layout
parallelized process or
sequent process
Semi-parallel process Sequent process
Quality management
Standard and criteria No written down criteria; Standards are
adjusted in accord with the real
situation.
Issued by local government
Recommend methods of
quality controlling and
monitoring
Total quality management; Real-time
monitoring in every stage of operation
Real-time monitoring in every stage of
operation
Operational variables
resource mix (ratio of
nurse to doctor)
1.5 0.56
throughput time
average operation time per
surgery (hours)
1.3 1.5
utilization rate of OR 77 % 70%
index of case mix 5.43 5.41
readmission rate (within
30 days) (*100)
0.5 0.5
quality index 0.37 0.37
number of gynecology
operations in one days
official hours
25 12
official hours per day 7.25 8
66
sum of official working
hours of different
professions
217.5 224
efficiency 0.10 0.05
productivities (*100) 3.70 1.85

Operational variables indicate that the surgical unit of Finnish women hospital has better
performance than that of Jinhua women hospital in the aspect of productivity. Since the quality
indices show little significant difference, the differences of productivities is greatly due to the
differences of efficiency. For the three main factors determining productivity, the Finnish women
hospital has higher utilization rate of OR, higher ratio of nurses to doctors in quantity and shorter
throughput time. The main differences in the aspects of operations management are:
1. When the Chinese specialty hospital carries out all activities of induction, operation and
recovery in OR, the Finnish specialty hospital introduce PACU that provides early recovery
care to patients.
2. For certain service scale, the Finnish women hospital employs more nursing cares in
surgical unit.
3. The Finnish women hospital is managing emergency and electives separately. But most
cases with different urgency in Chinese women hospitals are treated in mixed.
4. In Finnish women hospital, the decision of daily case management is made by surgeons and
based on the length of surgeries. But in Chinese women hospital, department of
anesthesiology coordinates different demands from different sub-specialties.
5. The Finnish women hospital uses block scheduling mode to arrange surgeries, while the
Chinese women hospital uses opening scheduling mode.
6. The sequence polices are different
7. For the layout, in the Finnish women hospital, operation rooms are assigned for different
kinds of surgeries. One operation room is specialized for one type of surgery or surgeries
family (surgeries with high similarity). Operation rooms and PACUs, which are established
for special purposes, are adjacent and connected, so patients can be transferred for
different operations (induction, operation or recovery care) with short time. In the Chinese
specialty hospital, workstations for similar surgeries are grouped into one operation room,
and all the activities related to a surgery task are accomplished in the same space.
8. Due to the usage of PACU in the Finnish women hospital, when the first patient is
transferred to recovery room, the operation room can be prepared for the next case. The
second patient can start to get operation when the first patient is still accepting the
recovery care.

5.4 Summary of benchmarkingdeficiencies and possible solutions

Apparently, Chinese specialty hospitals in real have lower productivity in surgical services
compared with Chinese specialty hospitals and Finnish specialty hospitals. Surgical units of Chinese
specialty hospitals dont show any advantages in utilization rate of OR, throughput time or
67
resources mix. Table 17 summaries the results of this series of benchmarking through presenting
eminent deficiencies existed in the operations management of Chinese specialty hospitals and
proposing the solutions that could be learned from Chinese general hospitals and Finnish specialty
hospitals.

Table 17 Summary of comparisons and benchmarking
Deficiencies in Chinese specialty hospitals Possible solutions could be learned from counterparts
Services types and ranges are not limited enough to
reduce varieties and standardize care pathways.
Narrowing down service scope and minimizing the
service types should possess the highest prioritization
among possible solutions for improving productivities of
Chinese specialty hospitals. The concrete measures
include: focusing on a limited set of demands from
patients and exclusively arranging certain types of
procedures with one certain level of urgency.
Surgical decision making unit is not professional enough
to make appropriate surgical schedule.
If the hospital uses open scheduling mode, surgical unit
have to coordinate between different subspecialties and
schedule surgeries for all patient; if the hospital uses
block scheduling, surgeons should book the surgical time
by themselves.
The sequence policies guiding the surgeries orders are
not efficient.
To try different methods and find the most effective one.
The recommended polices are: short first and similar first
Lack of PACU To introduce PACU into surgical unit
The layout of surgical unit is not effective It is recommended to use the combination of process
layout and product layout, standardizing the process,
dividing the surgery into different tasks, and assigning
the tasks into different spaces.
The process design is not optimal To introduce semi-parallel or parallel process into
surgical unit
No fixed surgical team To fix the members in one certain surgical team
The nursing care is not enough To employ more well-trained nurses and enhance to
ratio of nurse to doctors and ratio of nurse to patients.














68
6 Conclusion and discussion

This chapter draws conclusion from the analysis above. Issues of managerial implication and
validity and reliability of this research are discussed.

6.1 Key findings

Generally, the productivity of Chinese specialty hospitals is relatively low. This research has found
differences and gaps between Chinese specialty hospitals in reality and ideal specialty hospitals in
the aspects of operations management. The differences between Chinese specialty hospitals and
Chinese general hospitals and the differences between Chinese specialty hospitals and Finnish
specialty hospital in the aspects of OR management and productivity are also discovered. Through
a series of case studies and benchmarking, deficiencies existed in the Chinese specialty hospitals
and spaces for improvement are emerging. Obviously, the service types and ranges in typical
Chinese specialty hospitals are relatively broad. The items of diagnoses and choices of treatments
are not so limited. Cases with different urgency are mixed and treated simultaneously. The
activities of operations management in surgical units are not consistent with each other and not
following with optimal principles.
6.2 Recommendations

Some recommendations on productivity improvements in Chinese specialty hospitals are
presented in this part in the following aspects:

Focus

Inducted from previous literature, evidences show that narrowing down and compacting focuses
can increase overall productivity. There are many aspects hospital can go to focus on at certain
level: business strategy, operations management, demography, clinic, procedures, etc. The model
of ideal specialty hospital indicate that focusing on certain type of procedures in elective can in
maximum reduce variation, bring convenience into operations management, and improve
productivity. The fact is that specialty hospitals in China have not narrowed down the scopes of
procedures to enable standardization of care pathways and reduction of functional variety. As the
most important precondition and principle for the presence of specialty hospitals, narrowing down
service scope and minimizing the service types should possess the highest prioritization among
possible solutions for the improvement in the operation systems of Chinese specialty hospitals.
The concrete measures are focusing on a limited set of demands from patients and exclusively
arranging certain types of procedures with one certain level of urgency.

Planning and scheduling

69
Focus strategy alone is not enough to prompt productivity. Without appropriate operations
management, productivity improvement is still an unachievable goal. In surgical unit, planning
and scheduling affect the efficiency of services.
If OR concentrate on certain type of elective procedures, the arrangement and sequencing
become less complex. Both block scheduling system, in which time blocks of operation rooms are
assigned to different surgeons first and it is surgeon who schedules the surgeries for different
patients into his own time blocks, and open scheduling system, in which time sessions are
assigned to different patients directly, have their own advantages and disadvantages. Chinese
specialty hospitals can be suggested to make an attempt to use block-scheduling system. If the
hospital uses block scheduling, it will be surgeons who should book the surgical time and make
surgery timetables by themselves, because surgeons know the cases better than others. Block
scheduling may produce waiting lists. Some empirical evidences show that an increase in the
average length of time that patients wait to have surgery within 2 weeks may cause an increase in
OR utilization without irritating patients and losing them (Dexter et al., 1999).

The sequence of cases affects the efficiency of operations in surgical units (Denton, 2007).
Different sequence rules can bring out different results of surgical units. Some Chinese general
hospitals managing a broad set of services, utilize similarity first principle that has the potential
to reduce the pressure brought by variety. Specialty hospitals can also consider this approach and
make an attempt to use it to arrange daily cases based on similarity ranking system, which lists
cases based on similarities and puts the cases with highest similarities closely. In addition, other
characteristics, like length also should be considered during the arrangement and scheduling. Lots
of evidences have proved that short procedure first can improve OR efficiency (Lebowitz, 2003).

Process design
Different types of processing and layouts affect the efficiency of surgical unit. When surgical unit
focuses on certain type of procedures, repetitive processing that produces high-volume and high-
standard services can be easily realized. The work for one type of procedures can be arranged in
one specialized operation room with specialization of equipment and labor force. Different
activities for the operation can be divided into a series of standardized tasks (induction, operation
and recovery care) operated in different spaces with spatial proximity. In such classification and
division, the combination of process layout and product layout, which produce high-volume
standardized services with certain flexibility, can be realized (Figure 14).
70

Figure 14 Possible layout of surgical unit

With the existence of induction room and PACU, the parallelized process can be realized.
Operations can be paralleled in this way that for most procedures, anesthesia is given in the
induction room located next to the operating room, induction of anesthesia with an additional
team prepares the next patient while the previous patient is still in the operating room (OR), and
PACU with some nurses monitor the recovery of patient while the OR can be prepared for the next
patients (Figure 15). Some studies have found that number of operations in given time can
increase by concurrent induction of anesthesia and recovery. Some scholars evaluated that the
setting up of one induction room and PACU in an operating theatre department can improve the
productivity of the operating room (Friedman & Sokal, 2006). (Friedman & Sokal, Increasing
operation room efficiency through parallel processing, 2006).
71

Figure 15: Parallelized process of surgical unit (Friedman & Sokal, 2006)
(Friedman & Sokal, Increasing operation room efficiency through parallel processing, 2006).
Resource management
Fixed surgical team, which consists of surgeons, anesthesiologists, and nurses, may increase the
service quality and efficiency in the whole operation process. Treated and responsible by the
multi-skilled team, the patient will be prevented from the masses and problems in the process of
handover, since everyone in this team knows the patients condition and other members in the
team very well and gives cares collaboratively. Collaboration among personnel is an enormously
significant factor for the success of daily operations. Chinese specialty hospitals have to contribute
more endeavors to build satisfactory collaboration and cooperation systems among personnel.
(Greenwald et al., 2006)(Greenwald;Cronwell;& et.al, 2006)

Nurse plays a significant role in building well-collaborated operation team. As assistants of
surgeons and anesthesiologists, nurses should be equipped with more basic knowledge of
surgeries to coordinate between surgeons and anesthesiologists. Because low rates of nurse to
patient can lead surgical patients to experience higher risk of mortality and higher rates of failure-
to-rescue and can lead nurses to experience burnout and job dissatisfaction (Aiken, 2002), Chinese
specialty hospitals should employ more well-trained nurses and replace some surgeons and
anesthesiologists with them. Hospitals in China can take the advantage of low nurse-labor cost in
Chinese market.

72
6.3 Managerial implication

On the basis of the study, this part presents some implications and recommendations in terms of
improving productivity of specialty hospitals in general. As specialty hospital or focus care unit has
become the indispensible form of healthcare institutes in the development of healthcare industry
of the world and has been widely existing, improving productivity of specialty hospital will bring
great benefits for the whole healthcare industry.

The focus of organization should be compact and clear

Without any question, specialty hospital is supposed to take the advantage of focus strategy that
limits the service tasks and brings high productivity. Focus also can be translated into
professional that can enormously attract people. Therefore, how to deal with focus and how to
organize the business around the focus are the issues that should be solved with the highest
priority.

Particularly, hospitals can focus on certain level of demography (e.g., women hospital), clinics (e.g.,
eye hospital) or procedures (e.g., cataract hospital). As it is indicated in the ideal model of focused
care unit, focusing on certain type of procedures may be the best pathway towards the success.
Focused procedures can in maximum limit the types of resources needed in operations, reduce
the conflicts between handover of sub-processes and maximize the learning effect. If the hospital
focuses on certain group of people, like women hospital and children hospital, or if the hospital
focus on certain type of diseases, like tumor and cancer hospital, the variety brought by
different subspecialties still cannot be magnificently absorbed. The suggestion for this type of
hospital is to reclassify the services into independents departments that could focus on certain
type of procedures, that is, plant within plant model can be used.

Handling the electives cases and emergency cases in mixed is not a wise choice for specialty
hospital, because that will bring lots of complex in arrangement and scheduling. Separating
electives cases and emergency cases can relieve the pressure of unexpected changes and enhance
efficiency of operations.

Process design and layout determine the efficiency of operations

When the focus is decided and confirmed, all the resources, like facilities, equipment and
personnel, have to be organized in an effective and efficiency way in order to optimize the
processes and layouts. Operations managers have to understand different types of processing and
process layouts and choose the best one under certain conditions. Additionally, different types of
process layouts can be used in combination, so that the efficiency and effectiveness can be
achieved in greatness.

73
Operations should be managed in cooperation and coordination
Focus strategy alone is not enough to prompt productivity. Without appropriate operations
management, productivity improvement is still an unachievable goal. When the main strategies
are set, the effects will depend on the concrete operative practices. Specialty hospitals have
significant potential to improve their productivity through active selection and implementation of
best operative practice.

However, no signal operation practice alone can fulfill the ambition of an organization. Harmony
between different operations should be managed and realized. Trade-off should be considered.
Different aspects of operations management, like process management, resources management
and capacity management, are depending on each other and mutually affecting. For example, the
realization of parallel process depends on the choice of process layout and also the allocation of
resources.

6.4 Validity and reliability of this research

Essentially, validity of the research presents the answers to the question of whether the research
truly measures that which it was intended to measure and how truthful the research results are
(Golafshani, 2003). The validity consists of construct validity, internal validity and external validity
(Yin, 2009). In the aspect of construct validity that determines the correctness of operational
measures, this research built a framework of for measurement and comparisons of operations
management and productivity in specialty hospitals. All the measures or variables were supposed
to reveal the facts of operations management and the final productivity in specialty hospitals. All
benchmarking using this framework indicated the uniformity of practices in this research. In the
aspect of internal validity that refers to correlation between phenomena, this research grasped
the linkage between operations management and productivity. In benchmarking, several aspects
of operations management were concerned and reviewed regarding to the results of
productivities of different units. External validity concerns the generalization of the results of a
study from a certain area to a broader one. This research did study in several Chinese hospitals in
one middle-size city in China. Healthcare services in Jinhua is at an average level of the whole
healthcare services of China, so the knowledge about characteristics or phenomena of hospitals in
this city would be applicable for the Chinese Hospitals at a general level.

Reliability of research basically answers the question of whether repeated measurements or
assessments will provide a consistent result given with the same initial circumstances (Kirk &
Miller, 1986). In this research, the framework of measurement and comparison of operations
management and productivity in surgical units of hospitals can be repeatedly used and freely
modified in different conditions. The phenomenon may change over time, as the operative
practices or other conditions of hospitals change, but the internal relation between operations
management and productivity is relatively stable. Therefore, the measurements and comparisons
74
can be repeatedly implemented, and the results will be consistent: the productivity of Chinese
specialty hospitals can be improved by optimal operations management. In addition, the data for
this research is collected and refined by questionnaire, interviews and site visit, and data are
updated to a uniform period.












































75
7 Limitation and further research

Some limitations during the process of research and study are uncovered here. Firstly, because of
time and resources constraints, it is not realistic and practical to study all hospitals in China. This
research was targeting to a middle size city in China, with the assumption that general hospitals
and specialty hospitals in this city can reveal general characteristics or phenomena of Chinese
hospitals. However, we still cannot ignore that other areas in China covering different patient
populations may generate different phenomena and performances. So the generalization has to
be strictly proven and analyzed. Whats more, without sufficient monitoring, some self-assessment
answers of the questionnaire may not be accurate enough so that some problems existing in the
hospitals could be hided. Meanwhile, due to the limitation of data sources, some measures used
for quantifying productivity of surgical services were not fully reflecting the truth. Readmissions,
considered as index of rework and supposed to reveal the services quality, may be affected by not
only surgical services but also home cares. Technically, this study was organized at clinical level (in
three respects: ophthalmology, gynecology and tumor & cancer) but hospitals may focus on
different types of procedures, so some statistical noises were hard to eliminate.

Further researches can be carried out to analyze the possible solutions deeply and fully and ensure
their availability before application. During testing and analysis, some computing methods, such as
simulation modeling, can be applied to simulate the reality and cope with a wide range of complex
operation systems fully filled with uncertainty of healthcare needs, demands and outcomes (Fone
& Hollinghurst, 2003). In addition, researches can be organized to focus on certain types of
procedures and provide more accurate statistical results.



















76
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84


Appendixes

1. Statistics of hospitals in JinHua City (source: JinHua Municipal Bureau of health, Zhejiang
Province, http://www.jhwsj.gov.cn/html/jgjs/tjsj/5864.html, updated to Sep.2010)

Name of
the
hospital
Type
Number
of Beds
Average
number of
daily
Outpatients
and
emergent
patients
Number
of
inpatients
per year
Utilizati
on of
Beds
Length
of stay
(day)
Rate of
recovery
(%)
Rate of
diagnoses
meeting
standards
(%)
Rate of
surgeries
meeting
standards
(%)
Rate of
infection
(%)
Rate of
success of
emergency
(%)
Charges
per
outpatient
(Yuan)
Charges
per
inpatient
(Yuan
Rate of
Revenue
from
pharmacy
to the total
revenue(%)
JinHua
CentralH
ospital
Public
and
general
900 2300 32000 99.01 11.63 95.16 95.26 99.76 0.34 87.84 168.50 8892.8 49
Jin
HuaNo1.
people
hospital
Public
and
general
600 2000 20000 100.06 12.35 95.3 99.28 99.95 0.03 87.73 165.17 6724.71 51.64
Jin Hua
hospital
of
Chinese
medicine
Public
and
general
400 1020 10970 110.13 15 94.7 95.2 99.8 0.12 96.5 149.30 7242.46 55.5
JinHua
No .5
hospital
Public
and
general
200 868 5000 71.11 14.25 97.2 98.39 99.4 0.43 92.88 125.47 4813.67
54.15

WenRon
g
Hospital
Private
and
general
400 208 4800 52.04 10.25 96.87 98.02 98.62 0 91.13 127.06 554.77 34.7
Women
hospital
blic and
specialty
60 600 4000 104.96 5.04 94.87 99.91 99.88 0 100 99.93 2153.60 30.24
JinHua
Eye
Hospital
Public
and
specialty
200 500 5000 70.27 3.81 93.38 100 100 0 / 272.70 3296.84 15.47
85
Guangfu
Tumour
and
Cancer
Hospital
Public
and
Semi-
specialty
500 480 15000 75.93 9.42 91.31 98.60 100 0 91.80 117.78 3301.24 58.42
JinHua
No. 2
people
Hospital
Public
and
specialty
hospital
for
mental
disease
420 145 2173 100.66 80 76.7 / / / / 229.42 11165.26

43.26



























86


2. ASA physical status classification system

Class No. Status Description (examples) quality Scores Percentage quality Scores*
Percentage
1 Patients with
normal healthy
condition
No organic, physiologic, or
psychiatric disturbance;
excludes the very young and
very old; healthy with good
exercise tolerance
6
2 Patients with mild
systemic disease
No functional limitations; has
a well-controlled disease of
one body system; controlled
hypertension or diabetes
without systemic effects,
cigarette smoking without
chronic obstructive
pulmonary disease (COPD);
mild obesity, pregnancy
5
3 Patients with
severe systemic
disease
Some functional limitation;
has a controlled disease of
more than one body system or
one major system; no
immediate danger of death;
controlled congestive heart
failure (CHF), stable angina,
old heart attack, poorly
controlled hypertension,
morbid obesity, chronic renal
failure; bronchospastic
disease with intermittent
symptoms
4
4 Patients with
severe systemic
disease that is a
constant threat to
life
Has at least one severe
disease that is poorly
controlled or at end stage;
possible risk of death;
unstable angina, symptomatic
COPD, symptomatic CHF,
hepatorenal failure
3
5 Moribund patients
who are not
expected to
survive without
the operation
Not expected to survive > 24
hours without surgery;
imminent risk of death;
multiorgan failure, sepsis
syndrome with hemodynamic
instability, hypothermia,
poorly controlled
coagulopathy
2
6 A declared brain-
dead patient who
organs are being
removed for
donor purposes
1
index of case mix= _ quality scores - percentage
=1
1 to 6

87



3. Questions used in the questionnaires and interviews

Part 1. Questions for general hospitals

1. General information
-Operations per year
-Number of Operating Rooms
-Number of beds in surgical wards
-Number of doctors (in Surgery: surgeons and anesthesiologists)
-Number of Operating Room nurses (or other personnel, who are directly caring the patient)
-Number of Ward nurses (or other personnel, who are directly caring the patient)
-Number of other personnel (e.g. secretary, clean-up staff, etc.)
-What Surgical specialties are included in the hospital: (orthopedics, traumatology, gastroenterology,
neurosurgery, plastic surgery, general surgery, other..)
-Using plant within plant model?
-Is the testing unit shared by all departments?
-Is the surgical unit shared by all departments?
-using fixed care team for one patient?
-Competition with specialty hospitals? Does have any threaten from special hospitals?
-top 10 procedures

2. Departments information (Ophthalmology, Gynaecology, Cancer &Tumour)
-Operations per year
-Number of Operating Rooms
-Number of beds in surgical wards
-Number of doctors (in Surgery: surgeons and anesthesiologists)
-Number of Operating Room nurses (or other personnel, who are directly caring the patient)
-Number of Ward nurses (or other personnel, who are directly caring the patient)
-Number of other personnel (e.g. secretary, clean-up staff, etc.)
-Daily working hours and shifts in Operating Rooms (typical occupied hours in OR)
-Typical staffing of Operating Room team (e.g. surgeon + anesthesiologist + nurses)
-How many patients who had been treated by specialty hospitals before they selected the general hospital?
-Patient visits (outpatient and inpatient)
-Patient-to-nurse ratios
-Average ages of patient
-Available procedure types and their volume
-Severity and complex of cases)
-Types of patients accepted, and their amount per year
-Percentage of high risk patients
-Fixed care team for one patient?
-Nurse staffing models
-Length of stay of patients
-Ward bed utilization
-Transferring patients (inpatient and outpatient)
-Number of overnight surgeries per year
-Mortality
88
-Salaries for different staffs (surgeon, nurse, anesthesiology)
-National pricing? How to pricing?
-Numbers of inpatient discharges
-Typical number of operations per OR per day
-Typical number of operations per surgeon per year
-Proportion of emergency surgeries
-Typical waiting time in not-emergency operations (from decision for surgery to day of surgery)
-Do you have any certain type of measurement and evaluation for performance? Describe the type of data
you monitor to assess quality and efficiency of care at this hospital

Part 2. Questions for specialty hospitals

-Focuses and specialization
- Any other Health care services?
-Any researches on Specialty? (properties, advantages, competitions, operation, management)
-Operations per year
-Number of Operating Rooms
-Number of beds in surgical wards
-Number of doctors (in Surgery: surgeons and anesthesiologists)
-Number of Operating Room nurses (or other personnel, who are directly caring the patient)
-Number of Ward nurses (or other personnel, who are directly caring the patient)
-Number of other personnel (e.g. secretary, clean-up staff, etc.)
-Patient visits (outpatient and inpatient)
-Patient-to-nurse ratios
-Average ages of patient
-Available procedure types and their volume top 5 procedures
-Severity and complex of cases
-Types of patients accepted, and their amount per year
-Percentage of high risk patients (ASA classification)
-How many patients who had been treated by general hospitals before they selected the specialty hospital
-Fixed care team for one patient?
-Nurse staffing models
-Typical staffing of Operating Room team (e.g. surgeon + anesthesiologist + 3 nurses)
Daily working hours and shifts in Operating Rooms (typical occupied hours in OR)
-Communication between staffs (tools, activities, meetings)
-Who make the technical decision of one surgery? Can anyone make protest?
-Level of mutual learning (1-10)
-Level of trust (1-10)
-Any other ways or resources to facilitate collaboration
-Length of stay of patients
-Ward bed utilization
-Transferring patients (inpatient and outpatient)
-Number of overnight surgeries per year
-Mortality
-Salaries for different staffs (surgeon, nurse, anesthesiology)
-National pricing? How to pricing?
-numbers of inpatient discharges
-Typical number of operations per OR per day
-Typical number of operations per surgeon per year
-Proportion of emergency surgeries
-Typical waiting time in not-emergency operations (from decision for surgery to day of surgery)
89
-Share of patients transferred to other hospital / rehabilitation center / other organization?
-Do you have any certain type of measurement and evaluation for performance? Describe the type of data
you monitor to assess quality and efficiency of care in this hospital?