Book | Trade and Globalization

Committing to Care: Labor-Management Cooperation and Hospital Restructuring

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1998 | EPI Study

Labor-Management Cooperation and Hospital Restructuring

by Gil Preuss

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Executive Summary

This study focuses on a health care industry in the midst of transition. Although we look specifically at hospitals in the Minneapolis/St. Paul area, this study’s findings are pertinent to all health care organizations that seek to provide high-quality, low-cost care in today’s rapidly evolving, competitive environment. These increasing competitive pressures are forcing hospitals to respond in various ways – some are closing, some are merging, and others are building integrated delivery networks. A central component of this restructuring for greater cost effectiveness is the development of new staffing and work organization practices. Existing research suggests that changes in hospital work organization will have important consequences for all parties, but the hospital administrators making these important decisions have few theoretical or practical models available to guide them in understanding how different practices will affect the quality of patient care.

This report is part of a larger study focusing on two main issues critical to guiding hospitals through the restructuring process. The first issue (explored in this report) is the role that labor-management relations play both in shaping the work practices adopted by hospital administrators and in determining the financial performance of hospitals. The second issue, examined in the report Sharing Care, is the affect of changes in nursing work organization on the patient care process and the quality of care.

Through a multivariate analysis of 14 Minneapolis/St. Paul area hospitals over a 10-year period, this report finds that the existence of union labor-management committees improves communication and eases the process of implementing new hospital practices in response to changing market demands. More importantly, labor-management cooperation leads to three critical outcomes: higher registered nurse staffing ratios for patients, higher levels of employee involvement throughout the hospital, and better hospital financial performance. These findings lead to the following recommendations:

  • Hospitals and unions should form labor-management committees. As mentioned above, these committees result in three desirable outcomes – greater organizational flexibility, higher nursing staff levels, and better financial performance. The development of cooperative relations between management and just two occupational groups is correlated with an increase of $26 in income per patient-day (measured as income loss or surplus from hospital operations divided by total patient days). Comprehensive cooperation across all unionized groups is correlated with nearly $80 more in income per patient-day when compared to hospitals with no cooperative relations with unions. Either way, this is a dramatic economic benefit, since hospital income has ranged from -$147 to $284 per patient-day over the course of the study.
  • Hospitals and unions should expand employee involvement and participation to all occupational groups. Wide differences in the level of employee involvement both on the job and on cost-cutting and quality improvement teams reduce potential hospital gains. This report finds that variations in cooperation and involvement levels across occupational groups may constrain a hospital’s capacity to develop and implement the new practices that help it compete in an evolving market.

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