Conflict in the Capital Budgeting Process at University Medical Center: Let’s Al

Question

Conflict in the Capital Budgeting Process at University Medical Center: Let’s All Just Get Along

Windsor Sherrill

Introduction: The Challenge of Limited Resources

In healthcare organizations, the business interests of clinicians and management are intricately tied to one another. This is particularly the case in the process of making capital purchase decisions. A good capital budgeting process ensures optimal allocation of resources and helps management and physicians work toward improved services. If clinicians and health services managers are to be partners in creating programs and services that are responsive to a competitive healthcare environment, capital budgeting and capital acquisition decisions must be managed in a way that minimizes conflict and maximizes organizational resources.

Long-term investment decisions should provide a level of unity within the organization. An effective capital budgeting process must manage the interests of the numerous constituencies in the healthcare organization, while coming to an agreeable way to allocate scare resources. The process can be inherently filled with conflict. Clinicians expect participation in decision making from the healthcare organization (Griffith, 1999). To achieve optimal outcomes, physicians and managers must be allies in making capital decisions.

Different interest groups in the organization have different objectives. Primary care physicians might favor increased funding for ambulatory care, while surgeons might desire more operating or diagnostic tools. Various clinical groups compete among themselves for scarce organizational resources, particularly funding for capital purchases (Kovner & Neuhauser, 2001). In an environment of scarce resources, units of the organization compete for funding.   If the interests of various groups are not managed in the capital budgeting process, conflict will inevitably result.   

An Example of an Approach to Capital Budgeting: The Budget Hearing Process at University Medical Center

University Medical Center has faced reduced resources for capital purchases each year. As reimbursements decrease and third-party payers negotiate ever more stringent contracts, funds are limited, yet requests for purchases seem to be limitless. Such an environment inevitably produces potential for conflict among units of the organization as they compete for limited resources.

One approach to the assessment of capital equipment proposals that has been used effectively at University Medical Center is the budget hearing process. A review process provides structure to capital decisions and reduces associated conflict. Capital proposals are presented before a review panel by the stakeholders who are advocating for their purchase. This provides an opportunity for accountability in feedback on proposals as well as transparency in evaluation of each proposal. Panel members have an opportunity to ask questions concerning each proposal.   A consistent set of questions is asked by the review committee. Evaluation focuses on financial impact as well as how well the proposed purchase supports the overall strategy of University Medical Center. The hearing process reduces conflict by providing each requester an opportunity to present their “case” for a capital purchase. The proposal is then considered based on a set of evaluation criteria that are consistently applied across all projects under review.    

The Budget Review Panel

Capital planning is designed to be a team process at University Medical Center. The budget review team consists of management representation, clinical representation and financial services staff. Members of clinical staff are partners in both preparation and evaluation of capital requests. Participation of individuals such as the CEO, CFO, clinical staff leaders and middle managers reduces conflict in the process, ensures broad representation in assessment of project proposals, and increases commitment to decisions concerning which projects will be funded.   

There are several key elements to successful decision making with clinicians: clearly perceived representative structures, visible processing of decisions and clear decision rules (Delbecq and Gill, 2001). There are 440 physicians on staff at University Medical Center. Including appropriate physicians in representation and communication of the capital budgeting process assures that they are empowered to influence decisions that affect clinical practice. Medical staff organization bylaws provide a basis for representation of physicians and specify the roles of each committee of the medical staff. This organizational structure is used to identify appropriate representation of each clinical department in the capital budgeting process. For example, the clinical chiefs of service are always asked to sit on the budget review panel for their respective units.

Physicians are also involved in the capital budgeting process for clinical areas because they are typically in the best position to assess patient preferences concerning services. Proposals for new capital equipment include medical review of scientific merit as well as benefits and risks to patients, and this is facilitated by clinical staff at University Medical Center. The process facilitates the belief that physicians have had fair opportunity to be heard on issues, and that final capital decisions take their perspectives into account and optimize market opportunities for both the organization and its medical staff. The involvement of the physician organization in the budgeting process often identifies potential conflicts in advance and responds in a way that is constructive.

Consistent Timeline

To reduce conflict, the process of generating and evaluating capital purchase proposals is consistent from year to year at University Medical Center. So that the process for making capital decisions can be shared across the organization, all units are provided with a schedule of deadlines and structures for the submission of a capital budgeting request. Although the capital purchasing and evaluation cycle is a continuous process, the request and approval process occurs on a regular and consistent schedule. Consistency in calendars facilitates improved evaluation of capital investment requests and minimizes conflict. Once set, the organization rigorously adheres to the established timeline. The schedule is shared across the organization so that any potential requestors have an opportunity for development and evaluation of their desired purchases. These processes should be familiar to all stakeholders who are interested in proposing capital projects. University Medical Center leadership is cognizant of the importance of all stakeholders having an opportunity to submit capital budget requests; the perception of an “insiders’ game” is carefully avoided. Failure to do so can be detrimental to buy-in of final capital purchase decisions.

Consistent Evaluation of Alignment to Organizational Mission

An effective capital budgeting process reduces conflict by making capital decisions that clearly support the mission and strategic objectives of University Medical Center. The best capital management decisions should align with an organization's long-range strategic, financial, and related operating plans (HFMA, 2005). Many projects might have merit or financial viability, but an environment of limited resources dictates that selected projects integrate with the long-term strategy of the institution. Potential proposers are required to demonstrate that funding of capital projects will support University’s strategic plans. To facilitate proposals that are consistent with organizational mission, University leaders ensure that mission and vision for the organization are clearly articulated, and strategic direction is understood throughout the organization. As such, physicians and managers appreciate and accept the capital decisions that emerge through the budgeting process and understand how the selected projects support long-term plans of the organization.

Consistent Data Requirements and Analysis

University Medical Center places a priority on consistency in the type of information required in each capital equipment proposal, as well as its approach to evaluating them. Project justification is required following a very specific set of guidelines developed by the organization. Using consistent methodologies to evaluate capital proposals establishes a “level playing field” between competing groups within the organization (HFMA, 2005).

Consistency enhances the perception of equity in the process. If one proposer is required to produce a more detailed justification than another, then conflict and perceived inequity result. Examples of the types of required data are market share, assessment of market needs, physician staff and employees to support a project, competitive costs and charges, payer mix, and operating impact of a project (Grube & Wareham, 2005). University provides guidelines for documentation for a capital project request, and conflict is reduced in the final selection of projects. Consistency in format facilitates better evaluation of capital investment opportunities.    

Who Facilitates – A Team Approach

To evaluate proposals, credible utilization and financial projections are required for each project request. Capital purchase proposals must include sufficient information, including identifying and forecasting of cash flows, applying capital budgeting tools and market analysis. In most cases, proposers are assisted in the development of such data. Clinical leaders are involved in developing project requests at University, but they typically do not have the skills to prepare requests according to organizational requirements. The financial staff in the organization shares responsibility for analysis and data preparation with clinical users of equipment. Planning and finance personnel provide important information related to patient population, revenue and expense projections, and markets. As such, finance staff and managers are partners with clinicians in the preparation of capital equipment proposals.

Conclusion

Viability of University Medical Center depends on wise capital investment decisions, and it is important that such decisions be reached without conflict that disrupts organizational processes and relationships. Improved capital budgeting processes can reduce conflict as well as increase accountability for project success. A process that is effective generates detailed and consistent capital project proposals and uses objective data in a fair and consistent process to analyze and select proposals.

The process at University Medical Center involves the participation of key clinical and management stakeholders, uses a consistent timeline, uses consistent evaluation methods, has consistent data requirements for project proposals, and facilitates the buy-in of key constituencies. Effective alliances between managers and clinicians empower a more competitive organization. Capital decision procedures that reduce conflict provide for an organization that integrates goals of physicians and managers, aligning the interests of both at University Medical Center.

Discussion Questions

According to Delbecq and Gill (2001), physicians value majority rule in circumstances in which opposing views are presented. Morale can be improved in an organization through the use of due process, and by treating clinical staff as involved constituents. Without sufficient attention to majority rule, clinical staff might withdraw from interaction or engage in potentially destructive behaviors. Does the capital budgeting process used at University Medical Center support the “majority rule” approach to conflict management? How might the process be improved, particularly in regard to due process and ensuring the involvement of appropriate clinical stakeholders?

An environment of limited financial resources infers that there will be winners and losers. No matter how standardized the evaluation process for capital proposals, some requests will not be funded. How should the process of communicating funding decisions be handled to reduce conflict, minimize destructive behaviors and maintain morale?

It is important that conflict in the capital budgeting process be resolved with an emphasis on fairness and long-run benefit to the organization. The process followed in decision making should be one that is transparent to all constituencies. What conflict resolution guidelines are appropriate for University Medical Center in the capital budgeting process? How should a circumstance be handled in which clinical leaders from different areas disagree with the funding decisions of the committee? Is there a process for review of grievance or are committee decisions final?  

please answer all discussion question

Explanation / Answer

As,we know that health care organizations are key stakeholders in providing patient care to the American citizens. Both organizations and its managers are facing the following three challenges,

a) Changing medical technology: Due to global innovation in different countries , people tends to seek newer technology and embedded interventions of digital and computer related technologies. Now time has come to focus on technology driven training and developement of the professionals.

b) Bigger expectations of workforce : Now a days, due to global competition people have greater work opportunities. Individuals seeks better salary and work recognition. So, health care organizations should have to change their policies related to employment and organizational development.

c) Lack of specialized Human Assets: Most of the organization from worldwide are facing crunch of talented, skilled and specialized healthcare professionals like, physicians, surgeon, neurologists, specialists, staff , technical professionals etc.

it can be improved through proper focus on education, awareness, government policies towards health care organizations etc.

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