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Background: Why do we implement business principles in healthcare?

Positive correlation between management and performance in business firms

20 years ago Charan and Colvin identified poor strategy execution as the primary cause for 70% of the fortune 500 companies` failures. In 2003 Joyce, Nohria, and Roberson investigated why some companies performed better and looked for management tools that would warrant this success. They did not identify the one magical management instrument but found that a disciplined application of management basics is the key to outstanding company performance. This result is in line with ex-Stanford professor James C. Collins` findings on successful leadership and management, precipitated in his 2003 management bestseller “Built to last.”

The effect of management in healthcare?

Is the correlation between management quality and company success transferrable into the health care sector? Will professional management lead to better outcomes of hospitals?

To answer this question McKinsey and the London School of Economics and Political Science carried out an international study to assess the correlation between hospitals` management and their economic and medical results in 2010. The authors developed a management score and measured parameters like return on investment, patient satisfaction, EBITDA, income per bed and the like. The study revealed that hospitals with a superior management score excelled in all categories. There was even a significant 6% advantage in the mortality rate of patients after a heart attack in hospitals with better management.

Increasing outcomes by management: Our experience

Our own experience in the Hannover Medical School evidence the management-performance-correlation in hospitals: We could increase the revenue, reduced some complication rates following cardiac surgery, increased the number of applications of physicians, and established closer relationships to the external partners (general practitioners, partnering hospitals, industry) after implementing basic management principles into the clinical routine.

Additionally some of the top private and public hospital networks in India have designed and evolved cost-efficient programs that provide useful tips and indicators to hospital leaders and clinicians.


Charan R, Colvin G. Why CEO`s Fail. Fortune, 21.05.1999

Joyce W, Nohria N, Roberson B. What really works. Harvard Business Review. 07/2003

Collins CJ, Porass IJ. Built to Last: Successful Habits of Visionary Companies. Harper Business. 2004

Dorgan S et al. Management in Healthcare: Why Good Practice Really Matters. McKinsey&Compnay, London School of Economics and Political Science. 2010