There are pitfalls to establishing hospital chains, but if management is given enough independence and cultures across sites are harmonised, it can work wonders, Swiss chief executive Axel Paeger tells Jennifer Trueland
Leadership at all levels committed to and capable of involving all staff in a common set of core values
Since Dr Paeger became chief executive of the Zurich based AMEOS Group - which he founded in 2002 - it has become one of Europe’s leading healthcare providers, with 61 healthcare facilities, including 39 hospitals and a workforce of more than 10,000.
‘The company’s success is in part due to a strong focus on regionality’
An important part of the company’s success has been a strong focus on regionality, effectively building health services into chains covering a radius of around 50 miles between around 10 hospitals.
There are, he says, valuable synergies created by the chains, which have been built up in various ways including acquisitions of existing facilities.
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“There are synergies of cost,” Dr Paeger says. “The administration services for our hospitals are run at regional level. If you have two people in a finance department [in one hospital] looking after salaries and both are ill you have to employ a third person [as back up].
“In a regional office you have 16 people that will do that job so if you have two people ill, then you still have 14 who are able to do it. It avoids waste.”
Secondary and tertiary services, such as radiology, laboratory services, facilities management and cleaning, are also run at a regional level. For example, while scans and X-rays are performed at any site, the radiologist works regionally.
“Only primary services need to be delivered at hospital sites,” he says.
Getting the culture right within a chain is important, Dr Paeger stresses. “It is our philosophy to have similar cultures in the hospitals in a region. If there were differences [between hospitals] it would be our aim to bring them together, to harmonise these cultures.
‘There is still individualism but the culture is harmonised’
“There is still some individualism but the culture is similar or harmonised.
“There needs to be lots of cooperation and trust: if a surgeon from one hospital refers a patient to another, he has to trust that the other surgeon is the best person to do the job.”
Harmonising cultures can be a challenge, he acknowledges.
“It derives from the top,” Dr Paeger says.
“There has to be a regional management in place that lives this common culture. What wouldn’t work is for every hospital to have its completely individual leadership.
“It needs common leadership with a strong interest in running the region.”
‘Harmonising cultures can be a challenge’
AMEOS has bought county hospitals and merged them into regions or chains, he says, but there have been difficulties to overcome.
“They often come from an enemy culture; they can be hostile to their neighbours. There can sometimes be rivalries and that needs to be overcome. Certain, moderate rivalry can be good - it motivates people to deliver good services but we don’t want too much rivalry.”
Again, it is about good leadership, implementing a common culture and exploiting synergies, Dr Paeger says.
What doesn’t work
What does not work, he says, is bringing together “back room” functions into one headquarters but still running them on a hospital by hospital basis.
“The division of labour must not be by hospital, but across functions,” Dr Paeger adds.
He sees no reason why such chains should not work in the UK, but says research shows that privately run chains are more effective than those in public ownership.
‘Public chains were less profitable after the chain was formed’
“One question would be whether we are talking about putting NHS hospitals together and making a regional chain or a concept where hospitals for a region are transferred to a private provider,” Dr Paeger explains.
He cites a paper from Germany’s respected RWI economic research organisation which compares chains run publicly, privately and by the church.
While most of the hospitals in the private chains were more profitable after the chain was formed, the inverse was true of the public chains.
“The result was stunning,” he says.
“This is my opinion - and it is very opinionated - but my view is that the public chains were not successful due to the fact that, in a chain the labour unions get stronger.
“In an individual hospital where there are problems, the labour unions might want to help, but in a chain everything gets political on the Labour union side. The needs of the hospital are no longer the focus - it’s a bit of an enterprise; it’s more of a political thing.”
Advice for England
So does he believe this would be an issue for the largely publicly run NHS?
“I think so,” he says.
“The other issue for the NHS is involvement from politicians. In an individual hospital there is involvement, but it is limited. The management of the hospital have the real say.
In chains, there is a high temptation for politicians and labour unions to get involved because it is a big conglomeration.”
What is his advice for potential chains in England?
‘In a public setting you have to give management enough independence’
“When chains are formed, it is important to make sure there is common leadership,” Dr Paeger advises.
“You must give management high independence and incentives for being successful.
“In an entrepreneurial, private setting, that is a given. We’re not troubled by politicians, although there are regulations we have to respect. But in a public setting, this is not a given, so you have to make sure you give management enough independence.”
He highlights a regional chain in East Germany which had nominally been brought together, but culturally remained disparate.
“Legally everything was together but there was a leadership issue between two hospitals.”
There is a danger, he adds, that forming a chain without getting the culture, leadership and focus right, will not have a real effect.