CHAPTER I

INTRODUCTION
1.1

Background
According to WHO (World Health Organization), the hospital is an integral part of
an organization with a social and health care functions to provide complete
(comprehensive), healing (curative) and disease prevention (preventive) to the public.
The hospital is also a training center for health workers and medical research centers.
Hospitals are usually funded by the public sector, by health organisations (for profit or
nonprofit), health insurance companies, or charities, including direct charitable
donations. Historically, hospitals were often founded and funded by religious orders or
charitable individuals and leaders. Today, hospitals are largely staffed by professional
physicians, surgeons, and nurses, whereas in the past, this work was usually performed
by the founding religious orders or by volunteer.
With lives in their hands, hospitals have to function very precisely, executing
high-quality services every hour of every day. Organizations that have this sort of
requirement usually take on a vertical organizational structure having many layers of
management, with most of the organization's staff working in very specific, narrow,
low-authority roles. The numerous layers of management are designed to make sure that
no one person can throw the system off too much. This structure also ensures that tasks
are being done exactly and correctly.
Hospitals are corporations and are therefore overseen by boards of directors.
Nonprofit hospitals have boards that often consist of influential members of health care
and local communities. Many hospitals were founded by a religious group and maintain
religious affiliation. These hospitals often include clergy and congregation leadership in
their boards. Educationally affiliated hospitals are often overseen by universities.
Therefore, university boards of trustees or regents may double as the board of directors
for a hospital. Multi-hospital systems, particularly for-profit ones, usually have one
board of directors overseeing numerous facilities.
Boards of directors leave it to their executives to see that their decisions are
carried out and that the day-to-day operations of the hospital are performed successfully.
The chief executive officer is the top boss responsible for everything that goes on in a
hospital. However, hospitals usually have chief nursing officers, chief medical officers,
1

chief information officers, chief financial officers and sometimes chief operating
officers, who also carry a lot of weight. This group of top executives forms the central
core management.
Governing body means the Board of Trustees, Board of Directors, partnership,
corporation, association, person or group of persons who maintain and control the
hospital. The governing body may or may not be the owner of the properties in which
the hospital services are provided.
1.2

Identification Problem
1. What are Introduction-Common Organizational Management Principles?
2. How the hospitals are organized?
3. What is line and staff functions?
4. What is the organization chart?
5. What is a team of three-a very important concept?
6. What is a power?
7. What is corporate restructuring in the hospitals?
8. What is multihospital system?
9. What is alliance?
10. What is a profile of the governing body?
11. What are functions of the board of trustees?
12. What are selection and evaluation of the chief executive officer?
13. What is the relationship with a medical staff?
14. How does the board operate?

1.3

Goals
1. To know about introduction-common organizational management principles.
2. To know about the hospitals are organized.
3. To find out line and staff functions.
4. To know about the organization chart.
5. To know a team of three- a very important concept.
6. To know what is the power.
7. To find out corporate restructuring in the hospitals.
8. To know about multihospital system.
9. To know about alliances.
10. To know about introduction of governing body.
11. To know about a profile of the governing body.
12. To find out about functions of the board of trustees.
13. To find out about selection and evaluation of the chief executive officer.
14. To determine about the relationship with a medical staff.
15. To know about the board operate.

CHAPTER II
ORGANIZATION
2.1

IntroductionCommon Organizational Management Principles

Hospitals are mainly bureaucratic organizations and use bureaucratic principles. A
principle of bureaucratic organization that applies effectively to hospitals is the
grouping of individual positions and clusters of positions into a hierarchy or pyramid.
Another effective principle of hospitals, or, for that matter, any business organization, is the consistent system of rules. Hospital rules are official boundaries for
3

actions within the hospital. Examples of such rules include personnel policies outlined
in the personnel handbook and written nursing procedures for patient care in each
patient care unit.
Hospitals also use the principle of span of control, which states a manager can
effectively supervise only a limited number of people. In a hospital, a span of con-trol
of between 5 and 10 people in a given functional area is normal to achieveoperational
effectiveness. This is especially true in classical functional areas such as housekeeping,
dietary, and nursing.
There is also a division and specialization of labor in hospitals. Specialization
refers to the ways a hospital organizes to identify specific tasks and assign a job
description to each person. For example, a nurses aide has a specific job that is
different from that of a licensed vocational nurse (LVN), sometimes called a licensed
practical nurse (LPN), or from that of a registered nurse (RN).
2.2

How Hospitals Are Organized

The most popular and traditional hospital structure is a pyramid or hierarchical
form of organization. In this arrangement, individuals near the top of the pyramid (e.g.,
department heads) have a specified range of authority, and this authority is passed down
to employees at the lower levels of the pyramid. This is known as a chain of command
In this way, hospital authority is dispersed.

throughout the organization. In hospital pyramid-type structures, supervisors

delegate to two or three subordinates who, in turn, delegate down the pyramid.
A second type of organizational scheme is to form teams that are organized for
specific projects and for a limited time. An excellent example is preparing for a Joint
Commission survey. While the hospital should always be ready when the Joint
Commission surveyors arrive, usually an intense effort is begun 1218 months before
the survey is scheduled. Teams can be formed to focus on eachstandard.
Another example is to form a team to study anticipated projects or productlines
before the hospital commits large resources to such an effort. For example,a team could
be formed using talented personnel from the accounting, marketing,engineering, and
dietary departments to study the cost and profitability of a new food service area, then
when the status of the project is decided (go or no go), the team would be disbanded.
Teams are a very useful management tool in that they foster cooperation, place authority
and responsibility in the hands of those who best know the processes, and can be
disbanded easily and reformed for other proj-ects when they arise.
There also could be a hybrid organizational arrangement known as product
linemanagement. Under this scheme, hospitals or divisions within hospitals are
organizedaccording to product line categories. These categories may be referred to as
5

strate-gic business units. For example, a hospital might elect to organize around its surgical or obstetrical services (called products), within formal departments such as
nursing.
2.3

Line and Staff Functions

Line managers are usually viewed as supervisors who direct workers and
sometimes have the authority to hire and fire, whereas staff members are usually
assigned routine tasks they are expected to complete. Nurse managers have line
authority, and floor nurses have staff functions.
Another important principle of organization that works well in the hospital is the
differentiation between line and staff work. Perhaps the best way to view the difference
between line and staff is to regard the line authority in the hospital as advocating direct
supervision over subordinates (e.g., the nurse manager is directly responsible for the
work of employees under the nurse managers supervision). The delineation between
line and staff is very noticeable in the nursing services department; managers (that is,
directors, assistant directors, supervisors, and nursemanagers) carry out the line
authority, and the educational component (in-service nursing) is an advisory or staff
function that supports the line authority.

2.4

The Organization Chart

In an overall view of a hospital, the board of direction (sometimes called the
board of trustees) occupies the position at the top of the chart. The board hires and fires
the CEO (sometimes called the executive director, administrator, or president), and also
sets policy for the hospital. It is the final authority for the hospital and bears a fiduciary
(greater-than-normal) responsibility for the people the hospital serves.
The CEO is responsible for the day-to-day operations of the facility and usually
has some flexibility in managing it. The same general administrative hierarchical
principles apply, whether the organization takes the form of a pyramid or a more
modern, flatter organizational shape. Depending on the size of the organization, the
administrator may be aided by associate administrators, assistant administrators, a chief
operating officer (COO), or in a very small operation, an administrative assistant who
report to the administrator in an informal manner.
In a 100-bed hospital, one would expect to find a COO or a single assistant
administrator. In a 200-bed operation, there may be a couple of assistant administrator.
In addition to this, in nearly all cases, there is also a chief financial officer (CFO) and a
chief nursing officer (some times called the director of nursing (DON) or VP of nursing.
These senior staff personnel (COO, DON, and CFO) stand ready to oversee the hospital
6

in the absence of the CEO. The number of senior staff personnel will vary with the size
of the hospital, which is usually measured by the number of beds. (In counting beds, it
is wise to understand what the hospital is claiming when it is speaking of its
capabilities. The hospital may be licensed by the state for 342 beds, but it may only
have set up 250 beds, and may only have an average daily census and personnel capable
of caring for 150 patients. The remaining space may simply be used for storage).
Just below the senior staff (COO, CFO, and DON) is the middle management
group, which represents the departmental level of management. At the departmental
level, generally four major types of functions are carried out :
1. Nursing functions;
2. Business or fiscal functions;
3. Ancillary or professional services, and
4. Support services.
It is usual in a mid-sized hospital to have at least four distinctive administrative or
functional groups that answer to the CEO or COO, with a VP responsible for each area.
Although an organization chart serves to portray formal lines of reporting, it
certainly does not portray informal lines of authority and reporting. Many leaders may
not be included in such a chart, yet they are the personnel to whom the rank and file turn
in times of misunderstanding or confusion. Those in top-and mid-management positions
would be wise to understand this structure and keep those people informed and close by
when needed.
2.5

A Team of ThreeA Very Important Concept

One of the reasons that hospitals are complex to manage lies in the relationships
among three major sources of power:
1. The board of directors.
2. CEO or management.
3. The hospitals medical staff.
Each board is unique, and it is imperative that the CEO and the governing board
work cooperatively to define their respective roles and relationships. Continuing review
and evaluation of the CEO by the board is then necessary to ensure that the
responsibilities are being appropriately carried out. Several issues and options that
boards may wish to consider to help build strong relations between the board and the
CEO of the hospital include:
1. Understand that the selection of CEO is a major responsibility, and that the
CEO will significantly shape the future of the hospital;

2. Create an employment contract for the CEO which identifies terms of

employment, job duties, compensation and benefits, and renewal and
termination agreements;
3. Use incentive compensation targeted to the achievement of strategic objectives
as a way to motivate, challenge and reward the CEO;
4. Have realistic expectations of the CEO;
5. Clarify performance expectations for the CEO in writing, identify measurable
goals and evaluation guidelines, and conduct annual reviews of the CEOs
performance;
6. If problems are identified, be sure that they are communicated to the CEO in a
timely manner, and then allow the CEO sufficient time to correct the problems
which are under his/her control;
7. Recognize that the board shares ownership and bears overall responsibility for
the success of the hospital. By approving a plan or recommendation made by
the management, the board is approving the work to be done, and bears
responsibility for its successful completion and outcomes;
8. Support the CEO through the many difficult challenges that he/she will face;
and
9. Ensure that the CEO is challenged and satisfied with his/her work.
One of the most important board responsibilities is hiring and retaining the
hospitals CEO. ThiS process involves ensuring an appropriate compensation and
benefits package for the CEO, conducting an annual CEO performance appraisal, and
setting realistic expectations and maintaining a productive, continuous dialogue on
progress and performance.
In addition to hiring and retaining the hospital CEO, the board must work with the
CEO to define its role in relation to managements role. Although it is not the role of the
hospital board to manage or operate the hospital, it is the boards role to monitor how
the hospital is managed. This means working closely with the CEO, and monitoring and
evaluating the CEOs performance. Maintaining a positive, productive board-CEO
relationship requires a context of mutual commitment where interaction and
performance can occur.
In order for the hospital to achieve its strategic objectives, medical staff leaders
must be committed to the hospitals direction, and closely aligned with the strategies
and objectives for achieving it. Achieving medical staff alignment with the hospitals
vision and strategic direction should be one of the boards most important strategic
imperatives. And while building strong and lasting relationships with physicians can be
a challenge due to sometimes conflicting priorities and viewpoints, there are several
8

common sense approaches that boards can take to assure success in this vitally
important area. Alignment between the hospital board and medical staff ensures strong
participation and collaboration. It also encourages empowered and interdependent
interaction between the two groups and leads to agreement on and commitment to a
strategic direction.
The medical staff must participate meaningfully in hospital governance, serve on
committees and actively contribute to strategic directions and decisions. Board members
must act as catalysts for physician participation, and ensure that decisions benefit both
the at-large communitys interests as well as the interests of the physician community.
Board members must assure that discussions and analysis are missiondriven and meet
conflict-of-interest standards. Finally, trustees must consistently monitor strategic
direction and hold both managers and physicians accountable for achieving the targeted
outcomes. The relationships among them may be regarded as a kind of three-legged
stool or a tripartite hospital governance concept. Just as the activities of the medical
staff significantly affect management and the governance of the institution, the boards
actions also impinge on the physicians. The main organizational units that enable the
medical staff to relate formally to the board are the medical staffs executive committee
and the boards joint conference committee. Consequently, there is a team approach to
hospital organization, sometimes called a team of three.
2.6

Power
One should not generalize about power relationships in hospitals. Historically the
board of directors, management, and physicians or medical staff have all had power in a
hospital. Today the power of the administrator appears to be increasing compared to the
board (trustees) and the medical staff. This may be because many of the physicians on
the medical staff are present (in the hospital) only part time, whereas the CEO and the
management team have full-time hospital responsibilities. Despite the growing power of
the administrator, there are more physicians employed in and using hospitals than ever
before. Their presence is still integral to both hospitals and the organization of those
hospitals. Since US courts have decided that boards of trustees have ultimate
responsibilities, particularly in quality improvement, the boards importance is growing.
The first constraint on the medical staffs authority and responsibility is, of
course, the power granted by law, policy or agreement to the other parties, namely, the
governing body and the administration. To the extent the government, the Joint
9

Commission, and the bylaws grant power to the hospital administration or its governing
body, such grants limit what the medical staff can or even should do.
The second constraint is, however, entirely practical. The medical staff lacks three
things the administration has plenty of: time, operational expertise, and continuity.
Whereas the medical staff operates on a volunteer basis, and its leadership must split its
time between medical practice, on one hand, and staff work, on the other, the
administration works full time, for salary, on hospital operations. Further, the
administration has more business and management training than most physicians.
Finally, administrators expect to serve continuously for years in a system with
lines of responsibility and authority leading to a chief executive. All of this gives the
administration a practical power that the staff does not naturally have. It is worth noting
that the governing body also has practical constraints on it similar to those on the staff.
Its members are largely volunteers. They generally have other daily responsibilities.
They often do not have business backgrounds or, at least, healthcare business
backgrounds. The governing bodys membership probably turns over more often than
the administration. All these make it harder for the governing body to operate as it
might want to.
Still, the governing body has ultimate legal power and responsibility in several
key respects (see below). So, in the authors experience, unhealthy competition between
the administration and the organized medical staff often turns into competition for the
governing bodys attention, trust, and deference.
Among the medical staffs prerogatives is the power to create a medical review
committee to evaluate the quality, cost or need for hospitalization or health
(Interestingly, this is a power the staff shares with the governing body. Either the
medical staff or the governing body alone may create a medical review committee. Id.
The administration alone cannot.) This power to create a medical review committee
implies the extent of the medical staffs power over clinical matters at the hospital. As
the statute suggests, it is not an exclusive power, but it is a power that cannot be taken
away. The medical staff also has the power to write bylaws, rules, and regulations which
all staff members must obey. This is mandatory.
2.7

Corporate Restructuring in the Hospitals

In the main, the literature on corporate restructuring has concentrated on
discussions of why hospitals restructure, what they hope to gain from restructuring, and
10

what types of hospitals have undergone restructuring (Johnson, 1986; Memel, 1986;
Wiles, 1981; Ewell, 1972). The literature suggests that corporate restructuring is a
strategic vehicle that allows the hospital to adapt to a rapidly changing and uncertain
environment (Porter, 1981). The literature suggests that corporate restructuring is a
strategic vehicle that allows the hospital to adapt to a rapidly changing and uncertain
environment (Porter, 1981). It is the hospital's response to such environmental changes
as decline in philanthropic giving, reduced ability to shift cost, lower occupancy rates,
increased competition, medical staff resistance under prospective payment, shrinking
capital markets, and a general shift to a more "business-liken orientation in the health
care sector (Ernst and Whinney, 1982; Gerber, 1983).
Expectations of restructuring benefits vary widely. However, those most
commonly cited include increased management efficiency, removal of activities that
would jeopardize the tax-exempt status of the hospital, creation of a shield from state
regulation for activities not directly related to inpatient services, avoidance of
certificate-of-need regulations, more favorable treatment by third-party payers, reduced
legal liability and, perhaps most importantly, increased flexibility and the creation of an
organizational framework for diversification in the face of an uncertain and increasingly
competitive health care market (Gerber, 1983; Ernst and Whinney, 1982).
With few exceptions, the literature citing the causes and effects of corporate
restructuring has been theoretical rather than empirical. Few studies have attempted to
test the precise causes of corporate restructuring or the resulting benefits from
reorganization. To assess such questions, it is first necessary to describe what happens
when a hospital undergoes corporate restructuring.
Two forms of corporate restructuring tend to dominate. The first is the
establishment of a related or unrelated foundation (see Figure 1). In most cases, the
hospital establishes a foundation to broaden the base of fund raising and/or
philanthropic giving to the hospital. A key characteristic of this restructuring form is the
absence of direct lines of control between the hospital and foundation.

11

The second, more common form of corporate restructuring consists of

establishing a parent holding company under which the hospital and a number of other
subsidiary organizations fall (see Figure 2).

A key feature of the parent holding company model is the exercise of direct
control over the hospital and other subsidiaries by the parent. corporation (Ernst and
Whinney, 1982). This may be accomplished through several legal mechanisms, such as:
1. The charter and bylaws ofthe hospital. Total control of the hospital is given in
these documents to a named holding company.
2. Sol member of a menbership corporation. Often the hospital's governing board
becomes the board of directors of the holding company. The hospital becomes
a membership corporation whose sole member is the holding company, which
thus controls the operations of the hospital.
3. Overlapping board of directors. Members of the hospital board also sit on the
board of the holding company. Control is exercised in that the same individuals
direct both organizations.
4. Stock ownership. When the hospital is legally a stock company, the holding
company can exercise control by owning stock in the hospital corporation.
Several general points are important to consider in corporate restructuring. First,
corporate restructuring is usually instituted by the hospital. This suggests that the
hospital and its functions remain the focal point of this expanded organization form,
despite any organizational changes that subordinate the hospital to a higher
12

organizational entity (Hoch, 1984). Second, corporate restructuring is essentially a legal

rearrangement of a hospital and its related components. It does not in and of itself
require major alterations in the management and governance of the hospital. Third,
corporate restructuring is an ongoing process rather than a one-point-in-time
occurrence. Typically, a hospital will begin with a "mainframe" organization and add on
to that structure as the strategic plan of the hospital dictates.
Finally, corporate restructuring should be a vehicle for implementing a strategic
plan and not an end in itself. Indeed, a primary purpose of this investigation is to
examine whether hospitals appear to implement restructuring in order to effect
substantive changes in their operations, as opposed to mimicking fashionable trends in
the hospital industry (Gerber, 1983; Squires, 1984).
2.8

Multihospital Systems
An increasing number of free-standing hospital became part of the larger
Multihospital system. A multihospital system is two or more hospitals managed, leased,
or owned by a single institution. Some general advantages multihospital systems
including economies of scale and management purchases, the ability to provide a broad
spectrum of care, and improved access to capital markets.
Defines "hospital organization" as an organization that operates the facilities
required by a State must be licensed, registered, or recognized as the same hospital
("hospital facilities state-licensed"), and other organizations that have provisions. Secret
Determiningary care in the hospital as a primary function or purpose constituting the
basis for the exemption under section. If a hospital organization operates more than one
hospital facility, section requires the organization to meet the requirements of all parts,
separately with respect to each hospital facility. Part ovides or ganization that will not
be treated as described in the section along with respect to hospital facilities.
Hospitals with institutional forms of foundations, or associations are managed by
management companies like Management Company Limited. Based on the fact that
there is a dilemma in the management of the Hospital, on the one hand must be
managed by the Foundation based on the legal entities that are social and should not
benefit, while on the other hand with the need for modern equipment and skilled
professionals, hospital management should be conducted for profit. With the enactment
of Law No. 16, 2001, on the foundation, hospital managers should determine the choice
of institutional form with all its consequences.
13

There are three forms of institutional choice in the management of the Hospital,
namely:
1. Hospital Foundation / Society, the Hospital of the founding of a unilateral legal
acts of the Hospital Foundation and is a business unit of The Foundation,
therefore, all the policies in the management of the Hospital are the Foundation
organs, so that the Hospital Foundation is a unity of management;
2. Hospital Foundation was established, in this case the Foundation serves as the
majority shareholder. Basic stance is an agreement between the founders and
not a unilateral act of the Foundation Board. Hospital is not a unit of the
Foundation but it is one of the business activity. So in this case there is a
separation management and the management of Foundation Hospital;
3. Hospital established Financier, the hospital set up by the private sector
independently without having to set up a foundation or association.
2.9

Alliances
Another development among nonprofit hospitals has been the creation of
alliances. An alliance is a formal arrangement among several hospitals and/or hospital
systems that establishes written rules for its members to follow. Unlike hospitals within
a multihospital system, those in an alliance retain their autonomy. The advantage of an
alliance is the development of a network of support among hospitals. For example,
hospitals might join in an alliance to gain purchasing power or form a preferred
provider organization to offer selected services to customers or patients at special rates.
A disadvantage is that antitrust issues may arise from such alliances; each hospitals
legal counsel should be consulted before the hospital commits to an alliance.
An expert management, Kenichii Ohmae states that "In a highly dynamic business
environment, tend turbulent, in which nothing is more certain in addition to the change,
the concept is a wise .... do not try it yourself". The statement was in the context of
hospital management means that hospitals in health care organizations to improve the
health status of the community. The organization of health services is not an exclusive
institution that does not cooperate with other party. The Alliance is a global
phenomenon that is relevant to the health sector.
The Alliance is designed to obtain strategic results may not be achieved if done by
only one organization alone. In doing this alliance system strives to be flexible and
responsive to changing circumstances without having to leave the identity of the
14

organization. Thus the relationship between the medical school teaching hospitals
should be in the context of mutual benefit.
In the health care system, alliances can be classified into 2 types. First called the
lateral alliances where similar types of organizations gathered together to obtain
benefits such as economies of sale, increase access to resources and a step increase joint
strength. (An example of this type of alliance is a network of organizations - religious
health care organizations such as YAKKUM, Mukisi (Moslem), or possibly a network
of hospitals in the province. The Alliance is taking advantage of the resources collected,
so as to increase the strength and ability of each of its members to ultimately improve
the performance of the entire network. Areas of integration can vary for example: joint
purchasing, information sharing, education and training, joint promotions, to human
resource management.
The second type is an integrative alliance whereby organizations - health care
organizations can work together with the aim mainly to strengthen its market position
and improve competitive advantage. The alliance is often referred to as an alliance of
stakeholders that connect buyers, suppliers, and even up to the customer. Thus, this type
of alliance leads to a structured system of vertical integration. Vertical Integration is a
system that coordinates, connects or managing activities of an organization at various
stages of the production process of health. Popular term is the activity of the production
process from upstream to downstream. This type of alliance is very relevant to what was
developed by the medical school teaching hospitals.

CHAPTER III
GOVERNING BODY
3.1 A Profile of the Governing Body
The governing body is responsible for ensuring the mission and vision of the
hospital, in addition to being legally responsible for the operation of the hospital. The
governing board must see the big picture, and work with all of the information
available to it in order to lead the hospital forward in carrying out its mission and vision.
The hospital shall have an established and functioning governing body that is
15

responsible for the conduct of the hospital as an institution and that provides for
effective hospital governance, management, and budget planning.
a. The governing body shall be organized under bylaws and shall be responsible
for ensuring the hospital functions within the classification for which it is
permitted by the Department.
b. The governing body shall appoint members of the medical staff within a
reasonable period of time after considering the recommendations of the
medical staff, if any, and shall ensure the following:
1.

That every inpatient is under the care of a qualified member of the medical
staff;

2.

That the medical staff is organized and operates under medical staff bylaws
and medical staff rules and regulations, which shall become effective when
approved by the governing body; and

3. That the medical staff is responsible to the governing body for the quality of
all medical care provided to patients in the hospital and for the ethical and
professional practices of its members while exercising their hospital
privileges.
c. If the hospital does not provide emergency services as an organized service, the
governing body shall ensure that the hospital has written policies and
procedures approved by the medical staff for the appraisal of emergencies, the
initial treatment of emergencies, and the referral for emergency patients as
appropriate.
d. The governing body shall identify an administrator or chief executive officer
who is responsible for the overall management of the hospital. The
administrator or chief executive officer shall:
1. Ensure that there are effective mechanisms in the hospitals organization to
facilitate communication between the governing body, the medical staff, the
nursing staff, and other departments of the hospital;
2. Ensure that patients receive the same quality of care throughout the hospital;
and
3. Be responsible for reporting to the appropriate licensing board any member
of the medical staff whose privileges at the hospital have been denied,
restricted, or revoked, or who has resigned from practice at the hospital, to
the extent required by state law.
16

e. The hospital shall advise the Department immediately and in writing of a

change in the designation of the administrator or chief executive officer.
f. The governing body shall ensure that the hospital is staffed and equipped
adequately to provide the services it offers to patients, whether the services are
provided within the facility or under contract. All organized services providing
patient care shall be under the supervision of qualified practitioners.
g. The governing body shall be responsible for compliance with all applicable
laws and regulations pertaining to the hospital.
3.2 Functions of the Board of Trustees
Trustees authorized to act for and on behalf of the builder. Obliged to protect the
organization's Board of Trustees in accordance with the vision and mission set within
large

Deliberation

1ST

TSF

'in

2012.

Authority builder include:

a. The decision regarding the amendment and ratification of the annual report.
b. The appointment and dismissal of members of the Management and
c.

Supervisory.
Determination of general policy is based on the Articles of Association

Foundation (Foundation).
d. Approval of Work Program and the draft annual budget Foundation
e.

(Foundation).
Determination of the decision regarding the merger or dissolution of the

f.

Foundation (Foundation).
The appointment of a liquidator in the case of Foundation (Foundation) was

dissolved.
In case there is only one member of Trustees, all duties and authority granted to
the Chairman of the Trustees or members of the Trustees shall also apply to him. Board
of Trustees has the right and obligation to provide an input, suggestions and ideas as
well as the approval of the Board in the implementation of the work program of the
organization in accordance with AD / ART and other provisions in force in the
organization. The organization has insight in the future according to the needs and
challenges of the development of science, society and the nation state of Indonesia.
Task Board of Trustees :
1. In order to maximize the responsibility and the process of the organization, the
Board of Trustees composed of a maximum of five (5) persons to provide
advice into the Organization.

17

2. Who can be appointed as the Board of Trustees is a person said to be the

Founder / Activator founding organizations and are considered to have high
dedication to achieving the aims and objectives of the Organization.
3. The Board of Trustees has the power and authority to act for and on behalf of
the Organization.
4. The Board of Trustees has the highest power to give a decision in the Articles
of Association / Bylaws Organization.
5. The Board of Trustees shall not concurrently hold a position on the Board or
the Board and the Advisory Board.
6. The Board of Trustees reserves the right to determine and or take the general
policy of the Organization.
7. The Board of Trustees reserves the right to perform the duties and authority of
each Board Member and on the basis of consensus.
8. The Board of Trustees reserves the right to provide input, advice to the Board.
9. The Board of Trustees is responsible for implementing the Annual Meeting,
Coaching / Training to the Officers and Members of the Organisation.
Essential Functions of the Board of Trustees:
1. Ensuring quality and patient safety, including medical staff credentialing and
privileging.
2. Financial oversight of the organization.
3. Advocacy and community relations.
4. Development of and ensuring adherence to the mission, vision and strategic
direction.
5. Maintaining strong board/medical staff relationships.
6. Maintaining strong board/CEO relationships, including CEO selection,
evaluation and compensation.
The board of trustees is accountable to the community for the quality of care
provided by the hospital and the efficacy of the various services provided by the
hospital. In order to carry out its community accountability role, the board must have
effective mechanisms for ensuring two-way communication, community involvement,
and maintaining a high level of awareness and prominence in the community. Trustees
must ensure that the hospitals community service role is well-articulated in the
hospitals mission statement, and ensure strong and meaningful understanding by
various community segments of the challenges facing the hospital today and the
challenges it will face in the future. By building this level of awareness and
understanding, the hospital will be in a better position to solidify needed community
support, build strong bridges, and ensure broad based and wide-spread loyalty to the
hospital as an economic engine and as a vital health care resource.
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3.3 Selection and Evaluation of the Chief Executive Officer

To assist the board of trustees in managing the hospital, the trustees have an
obligation to hire a competent chief executive officer to oversee the day-to-day
management of the hospital. One of the boards most important functions is the
investigation, review, and selection of the CEO. Hospitals are a big business, and
trustees must seek executives who have strengths in planning, organizing, and
controlling, as well as proven leadership skills. The board then delegates to the CEO the
authority and responsibility to manage the everyday operations of the hospital while
retaining the ultimate responsibility for everything that happens in the hospital. The
relationship between the CEO and the governing board is primarily that of employeeemployer, but not in the usual sense of the term. Since the hospital is a very special type
of organization, the relationship between the CEO and the governing board is in fact
similar to a partnership. Just as it is the responsibility of the governing board to hire the
CEO, it is also their responsibility to discharge the CEO if necessary. Determining if
this is necessary can best be accomplished by having a contractual arrangement
described in clearly understandable terms.
One of the most important responsibilities of the Governing Board is the selection
of a qualified administrator. To properly perform the duties of the position, the CEO
must possess the qualifications necessary to manage and direct the complexities of a
modern patient care facility. Whether the hospital is a small, rural facility, a large, urban
health center or a multi-hospital health system, many of the demands, issues and
problems of management are the same. In the larger hospital environment, the
administrator has complex problems associated with the extensive services offered, the
number of staff required to provide those services and the financial demands of the large
number of patients. A number of associate or assistant administrators are necessary to
oversee the various department heads and specialty areas.
The administration of a small hospital involves responsibilities in many areas.
The lack of assistance in areas like finance, personnel administration, purchasing,
employee relations, public relations and governmental affairs demands that the
administrator be knowledgeable in all of them.

In addition to the internal

responsibilities of small hospital management, increasing external forces require travel

to meetings and seminars of all kinds.
Selecting a CEO takes time. The Governing Board should develop a selection
process to find the right leader for the hospital/health system. The Board should identify

19

skills and talents that the hospital/health system needs now and in the future. This
examination should include:
a. A review of the hospitals mission.
b. A review of the hospitals long-range strategic plan.
c. An objective evaluation of the reasons why the former CEO left.
d. An objective evaluation of both the hospitals and communitys environment.
e. A determination of the problems the hospital must face today and plans for
addressing them.
f. An assessment of the Governing Board and its present functioning.
The steps included in the selection process are:
a. Select a search committee.
b. Develop job specifications.
c. Recruit candidates.
d. Screen resumes and develop a list of top candidates.
e. Develop a rating system.
f. Arrange and conduct interviews with the top three to five candidates.
g. Review evaluations and hold follow-up interviews, if needed.
h. Select a candidate and develop the hospitals offer.
i. Present the offer to the candidate and manage negotiations.
j. After the candidate has accepted the offer, notify other candidates of your
selection.
The individual characteristics of a CEO will have a significant effect on his or her
performance as an administrator.

In selecting a CEO, the following individual

characteristics should be considered:

a. Personal factors such as character, stability, dependability, initiative,
decisiveness, ability to conceptualize and articulate ideas.
b. Human relations skills motivation, leadership, sensitivity, communications,
team building.
c. Managerial skills.
d. Involvement in professional and community activities.
e. Track record whether the candidate has turned a profit, helped achieve
growth and shown community benefit and support.
CEO performance evaluation is part of the governance of todays hospital/health
system. It should be a formal and ongoing system for assessing the performance of the
hospitals administrator. It is conducted in some form by nearly all hospitals. The Joint
Commission on the Accreditation of Healthcare Organizations mandates that this
process be carried out in accredited hospitals.
THE EVALUATION PROCESS

20

The purposes of the evaluation should be clear and useful to the CEO and
Governing Board. The Board and CEO jointly should develop the evaluation process.
The purposes of the evaluation include:
a. Identifying the CEOs areas of strength and weaknesses.
b. Ensuring that the CEOs personal goals and the hospital/health system goals
are compatible.
c. Measuring the CEOs performance.
The Board should adopt an evaluation policy. The policy needs to include:
a. Frequency and time of evaluation. Evaluation is an ongoing process. There
should be an understanding that the CEOs performance will be looked at
continually. The CEOs performance should be formally assessed at least once
a year.
b. Who will be involved in the evaluation process. The chair, the executive
committee, an ad hoc committee or the whole Governing Board can evaluate
the CEO. A small committee working with the Board chair in doing the
evaluation may be best. Some continuity in the committee composition is good
since many evaluation considerations are carried over from year to year. When
evaluating a new CEO, some members of the search committee should be
included since they know the criteria which were used in selecting the CEO. A
procedure should exist for customers, suppliers, peers and community
members to give the committee their assessment of the CEOs performance.
c. Assessment criteria and standards for satisfactory performance. These must be
established prior to conducting the performance appraisal. They should be
determined at the beginning of each year (calendar year, fiscal year or
anniversary of employment). The CEO must be included in determining the
assessment criteria and should agree to them in writing.
d. Procedures for reporting findings. The Board chair should review the
evaluation committees performance appraisal with the CEO, giving the CEO
the opportunity for comments and inclusion of self-assessment data.
In those areas where performance has not met the standards, suggestions for
improvement should be developed jointly and then reviewed at set future intervals. The
Board should receive a report which should include:
a. The special or unique strengths the CEO has demonstrated .
21

b. The areas in which improvement is indicated.

c. The management and/or organizational development activities that should be
carried out in the future.

CEO EVALUATION IN A TOTAL QUALITY MANAGEMENT ENVIRONMENT

In evaluating the performance of the hospital CEO in a Total Quality Management
Environment, the American College of Healthcare Executives recommends that the
CEO be evaluated on service area health status, institutional success and professional
role fulfillment.
Service area health status includes the role of the hospital in improving the health
of people in the hospitals service area. Because the CEO is an important leader of the
communitys health care delivery system, part of the CEO evaluation should be focused
on what the hospital is doing to improve community health, by reducing unnecessary
disease, disability and death.
Institutional success represents the core of a CEOs evaluation.

Among the

factors to be considered are planning, human resource management, quality health care
services, allocation of resources, regulatory compliance, influencing legislation and
regulations, promotion of the hospital and leadership.
a. Planning is the process and result of working with the Board in meeting
community health needs.
b. Human resources management makes certain the hospital objectives are carried
out by selecting, developing, motivating and evaluating personnel.
c. The provision of quality health services involves establishing and carrying out
policies and monitoring patient care activities to ensure their acceptable
delivery.
d. Resource allocation considers the cost effective use of financial, physical and
human resources to produce quality services.
e. Regulatory compliance ensures compliance with regulations governing
hospitals and standards governing accreditation.
f. Influencing legislation and regulations determines if the CEO, in coordination
with the Board, works with legislators, regulatory agencies and trade agencies.
22

This ensures that the health of the community is promoted and unreasonable
burdens are not placed on the hospital.
g. Promotion and marketing encourages the appropriate utilization of hospital
services with effective communication and public relations programs.
h. Leadership deals with the CEOs vision of the hospitals future and ability to
communicate this vision.
The final area of the evaluation process is that of professional role fulfillment.
This concerns itself with the CEOs own professional development and continuing
education, involvement with trade and professional groups and comportment.
Evaluators should ensure that the CEO has attended meaningful continuing education.
Many Boards use the credentialing program of the American College of Healthcare
Executives as evidence that their CEO is developing and maintaining competence.
For hospitals that have adopted the total quality management concepts of W.
Edwards Deming, these five principles should be part of the CEOs evaluation:
a. Skills in allocating resources and creating a hospital-wide culture that is
dedicated to continuously improving patient care
b. Ability to strengthen middle management decision making
c. Ability as mentors to advocate for continuous quality improvement
d. Ability to monitor the environment, including the use of the concept of
benchmarking. Benchmarking involves comparing current activities and
performance with the best of other organizations and using these comparisons
as a basis for improving the hospitals current practices.
e. Willingness to modify the reward system.
3.4 Relationship with the Medical Staff
The hospital medical staff operates under its own bylaws, rules, and regulations,
but the physicians on the medical staff are accountable to the board of trustees for
professional care of their patients. The board of trustees is responsible for exercising
care in the appointment of physicians to the staff. The medical staff carefully reviews a
physiciansapplication file, including credentials and privileges requested. The medical
staff then recommends to the board of trustees which privileges should be granted to the
applicant. The trustees act upon these recommendations. The board could choose to
grant privileges, to request further information from the medical staff, or to reject
privileges outright.

23

The hospital must have an effective governing body legally responsible for the
conduct of the hospital as an institution. If a hospital does not have an organized
governing body, the persons legally responsible for the conduct of the hospital must
carry out the functions specified in this part that pertain to the governing body.
a. Standard: Medical staff. The governing body must:
1. Determine, in accordance with State law, which categories of practitioners
are eligiblecandidates for appointment to the medical staff;
2. Appoint members of the medical staff after considering

the

recommendations of the existing members of the medical staff;

3. Assure that the medical staff has bylaws;
4. Approve medical staff bylaws and other medical staff rules and regulations;
5. Ensure that the medical staff is accountable to the governing body for the
quality of care provided to patients;
6. Ensure the criteria for selection are individual character, competence,
training, experience, and judgment; and
7. Ensure that under no circumstances is the accordance of staff membership
or professional privileges in the hospital dependent solely upon certification,
fellowship, or membership in a specialty body or society;
8. Ensure that, when telemedicine services are furnished to the hospitals
patients through an agreement with a distant-site hospital;
9. Ensure that when telemedicine services are furnished to the hospitals
patients through an agreement with a distant-site telemedicine entity.
The board of trustees is legally responsible for care provided in the hospital by
attending physicians and hospital employees. The courts pointed out in Darling v.
Charleston Community Memorial Hospital that the board of trustees has a duty that may
go beyond simple delegation of authority to the medical staff. In the Darling case, the
court held that the hospital corporation was liable because it did not intervenethrough its
employees to prevent damage that occurred to a patient through the negligence of one of
the hospitals physicians. In another landmark case in 1973, the courts found in the case
of Gonzales v. John J. Nork, MD, and Mercy General Hospital of Sacramento,
California, that a hospital owes the patienta duty of care. In this case, Dr. Nork
performed 36 unnecessary operations over a 9-year period. The court noted that the
board of trustees has an obligation to purge the hospital of incompetent physicians. This
case reconfirmed the boards corporate responsibility for quality. It cannot be delegated.

24

The CEO and the chief/president of the medical staff also have major roles to
play. Together with the board, they develop and implement a quality improvement
program. Theboards job is to monitor the program. This includes receiving monthly
reports on the medical staffs performance as measured against standards, concurring
with medical staff recommendations, or developing the boards own recommendations
to improve quality in the institution.
Boards of trustees generally delegate the daily hospital medical affairs to the
medical staff. The medical staff carries out these functions according to its own bylaws
and regulations, but these bylaws and regulations are periodically reviewed and
approved by theboard. The boards joint conference committee has representatives from
the medical staff and administration and serves as the main committee between the
medical staff of the board and its administrator.
3.5 How Does the Board Operate?
The board of trustees operates under the bylaws of the hospital. The by laws spell
out how a hospital board operates to attain its objectives. Typical by laws include a
statement on the hospitals purpose and the responsibilities of the board. They also
contain a statement of authority for the board to appoint the administrator and the
medical staff. Additionally,bylaws outline how board members are appointed and for
what period. Most bylaws indicate an elaborate committee structure. It is through these
board of trustees committees that the governing board usually accomplishes its goals.
This committee structure is frequentlyestablishedalong special functional lines. There is
remarkable consistency throughout the nations hospitals in board committee structure.
Perhaps the reason for this consistency is the impetus toward review of hospital bylaws
and suggestions from the JCAHO.
The most common committee is the executive committee, which exists in the vast
majority of hospitals. Other examples could include a finance committee and a
planningcommittee. Generally, recommendations through the separate committees affect
thegovernance, management, and administration of the hospital, as well as the hospitals
medicalstaff.
It is the duty of the board to carefully select the members of these board
committees. The caliber of the recommendations that emerge from these committees
25

and subsequently the caliber of the resulting board action is frequently a result of the
quality of the committeeassignments. Through the application of leadership skills and
management delegation and in close relationship with these board committees, the CEO
frequently provides the ultimate key to success in all aspects of the hospital operation.
Hospital boards are operating more and more like other corporate boards.
Corporate board members are accustomed to providing an independent voice. Clearly,
hospital trusteesare respected for their independence and their overview of the hospital.
This is the result ofan increasing need to make hospitals more efficient and competitive.

26

CHAPTER IV
CLOSING
4.1

Conclusion
According to WHO (World Health Organization), the hospital is an integral part of
an organization with a social and health care functions to provide complete
(comprehensive), healing (curative) and disease prevention (preventive) to the public.
There are many types of hospital organizations, such as pyramid or hierarchical form of
organization, form teams that are organized for specific projects and for a limited time,
and hybrid organizational arrangement known as product line management. Important
principle of organization that works well in the hospital is the differentiation between
line and staff work. In an overall view of a hospital, the board of direction (sometimes
called the board of trustees) occupies the position at the top of the chart. Each board is
unique, and it is imperative that the CEO and the governing board work cooperatively to
define their respective roles and relationships. Historically the board of directors,
management, and physicians or medical staff have all had power in a hospital.
Governing body means the Board of Trustees, Board of Directors, partnership,
corporation, association, person or group of persons who maintain and control the
hospital. The governing body may or may not be the owner of the properties in which
the hospital services are provided.

4.2

Suggestions
1. Improve the principle of bureaucracy in the hospital in order to be more effective
2. Every worker in hospital should strive to achieve the vision and mission of the
hospital organization
3. Should have specialization jobs desk and employment at the hospital so that no
vacancy control and the work can be completed efficiently and responsibly
4. Each hospital should work oriented to the vision and mission of the hospital
5. Improving the organizational management and the governing body in the hospital
6. The governing body shall be responsible for compliance with all applicable laws and
regulations pertaining to the hospital.

27

7. Should have effective mechanisms in the hospital's organization to facilitate

communication between the governing body, the medical staff, the nursing staff, and
other departments of the hospital.
8. Improve the organizational structure in the hospital as well as vertical andnhorizontal

relationships within the organization

28

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