| Background InformationCore Competence Theory is put forward with the development of strategic management. In the 1960s, the first theory of strategic management was made, represented by Ansoff and Andrews who clearly brought forward corporate strategy and competitive strategy. They emphasized strategy management as the key to the success of corporate competition and practised strategy in corporate management. In the 1970s, strategic management of the second generation was represented by Chandler whose famous idea was "Structure Follows Strategy" which gave strategic importance to organization structure design, emphasizing that the organization structure should be adjusted with strategy and that multi-division structure is the main form of diversified companies. In the 1980s, Michael E. Porter’s competitive strategy became the mainstream, which took industry as its object of researches and represented the emergence of the strategic management of the third generation. He put forward five models for competitive strategy analysis which helped corporates define their strategies according to circumstances. He also pointed out three basic industry competitive strategies, that is, overall cost leadership, diversity and objective focus. In the 1990s, C.K.Prahalad and Gary Hamel, scientists of western strategic management, discussed the core competence of enterprises in Harvard Business Review for the first time and introduced Core Competence, an important concept, to the management sector, which marked the emergence of strategic management theory of the fifth generation, namely, Resource-Based View of Strategic Management Theory. This theory holds that shared assets should be labeled with heterogeneity through the accumulation and allocation of resourses to gain sustainable competitive advantages.It considered that a diversified enterprise is a combination of business and capacity, which should develop and implement strategies based on core competence management and pay attention to its heterogeneity and growth. It held that Porter’s five competitive models overemphasized the analysis of circumstances, attaching not enough importance to the inner capacity of enterprises which is the basic of strategy implementation. They suggested that core competence is the source of competitive advantage. It is fundamental to cultivate, improve and use core competence for enterprises to achieve sustained competitive advantage. In Harvard Business Review, C.K.Prahalad and Gary Hamel defined the core competence of enterprises as "a unique skill and technology allowing companies to provide customers with particular interests." They also noted that core competence is the organization’s collective knowledge and collective learning or internal knowledge accumulation (in particular knowledge on how to coordinate the integration of different production technologies and various technology flows.) The proposal of core competence marked the new stage of strategic management, which focused on enterprise quality. Strategic management experts from around the world make a lot of researches on connotations, characteristics and elements, etc, of core competence, making strategic management theory focus on enterprises’ core competence as an alternative of Michael Porter’s industry structure models.Analyzing various theories, Li Xingwang, a Chinese scholar, holds that core competence is a kind of special organizing capacity which integrates enterprise resources organically and forms the core technology and spread the core technology through core products to achieve sustainable competitive advantage. This definition includes the following meanings:1. core competence is not a technology but a special organizing capacity; 2. core competence is formed through core technology to which different enterprises have their own definitions; in terms of manufacturing industry, core technology is a comprehensive one, but to non-manufacturing or service industry, it is a key technique; 3. core technology plays a role in the heterogeneous products (manufacturing) or a form of heterogeneous services (services) through core products; 4. resources are the basis for the formation of core competence. Core competence is formed only through the organic integration of resources and the ability to keep the core technology continuously forming and spreading.As China’s reforms of economic and health systems have been deepened, market economy is playing an increasingly important role in hospitals’development and management. Public hospitals’position is shifted from social welfare to non-commercial management for the public good. The hospital’s own performance and development capacity are not only related with its own position in the medical market but also affects the efficiency of the entire health care system. Medical institutions must seek benefits for patients, hospitals and the community.The future development for public hospitals’reforms may be the following:on one hand the management of public hospitals will be shifted into models of enterprise management which allows them enjoy full autonomy; on the other hand, the supervision from the government and civil society organizations should be greatly strengthened to enable public hospitals to meet health needs of patients and the community. But changes and reforms of the external management structure and the social supervision can only be used as external causes. The internal management of hospitals works as internal factors. Therefore, I think that reforms of internal hospital management systems and strategies will be more important and urgent issues worthy of further study in the context of our current health care system, medical environment and our country’s economic development, etc. The core competence of hospitals or its construction will be the social ties to achieve benefits for hospitals, patients and the community.After 1996, theories related to core competence were introduced into domestic economy and management circles and applied to daily operations, strategic management and sustainable developments of enterprises. It was after 2000 that core competence was introduced into hospital management. From 2000 to 2009, research papers which include the core competitiveness of hospitals and hospital core competence as key words total 952 in terms of the number published in academic journals, showing that the related researches are very active. In 2000, Zhu Yuzhang, a member of Jinlin Health and Economy Institute, published his paper To Cultivate Hospitals’Core Competence for Their Development in Health Economics Research, which is the first journal article retrieved about core competence of hospitals. From the perspective of fierce competition in health care market, and integrated with the actual situation of hospitals’ operations, this article proposed the core competence of the hospital should be built up. It also initially described elements of hospitals’core competence and put forward four approaches to cultivating hospitals’core competence. In 2003, Wang Xiangdong of the Second Military Medical University published his paper What is the Core Competence of the Hospital in Journal of Military Hospital Management, which gave comparatively detailed studies on hospitals’core competence.Resorting to researches of core competence and integrating with industry characteristics of medical institutions, I think that core competence means a kind of unique capability of a hospital organically formed by a series of complementary technologies, knowledge and a lot of resources inside and outside the hospital to achieve sustained competitive advantage (expressed as quality, high efficiency, low consumption of comprehensive services) in certain areas. This concept has the following meanings:First, core competence of the hospital is set in the intense competition of medical market; second, core competence aims to sustainable competitive advantage; third, core competence covers a range of complementary skills, knowledge and various resources (such as human resources), which is not only a certain kind of technical expertise but also includes organizational management, innovation and learning abilities as well as operational capacities; fourth, core competence mainly characterizes in its integration, value-added significance, leadership, heterogeneity (uniqueness), difficulties in imitation, scalability, sustainability and dynamics; fifth, core competence and the hospital culture are inseparable. Core competence is not equivalent to core technology; isolated resources do not mean abilities or even core competence.In recent years, the related theories of core competence focus on the following areas:its connotations and characteristics, its constituent elements, its identification and evaluation and its formation, development and construction. Although the findings of enterprises’core competence benefit researches on hospitals’ones, looking at the current literature, we can find that researches on hospitals’core competence still attach more focus to theories and lack empirical and micro-based foundations and, in particular, quantitative analysis from the financial perspective and the non-financial one. They even lack their evaluation index systems and methods for hospitals’core competence.In nowadays research concerning about hospital performance evaluation, only a few have connection with financial analysis which depend on the short-term performance evaluation too much and ignore the evaluation of hospital consistent core competition. Although we can retrieve that in many hospital performance evaluation indexes some non-financial index appeared, it was a very simple combination of financial index and non-financial index. It did not emphasize the connection between the index and the strategy, such as the market share of hospital products(or service), the financial cooperation with rivals, and the satisfaction of the clients. Most of the researches focus on the single key elements which influence the hospital core competence and only talk about the importance and effect, such as technology innovation, human resources, hospital culture, management innovation, brand, study competence, competence to deal with conflict, building preponderant academic subjects, performance management, the relationship with the patients and the strategy alliance.Objectives of This Research ProjectThis research project explores win-win strategies for the hospital, the patient and the community (hospital management system reforms, hospital internal management mechanism (the construction of core competence), patient-centered service philosophy, the harmonious relations between doctors and patients, the hospital’s sense of social responsibility and its supervision). Through theoretical researches, this paper analyzes elements of core competence of the hospital and their effects and roles on hospital management behavior, clients (patients, sub-health groups, and healthy groups with demands), hospital performance and social benefits and responsiveness to prove that the construction of core competence is the most important factor to achieve three-way win-win for clients, hospitals and the community from the angle of hospitals. Finally, by local hospitals’case studies and empirical researches on the hospital representative, this paper makes quantitative researches of core competence from a financial perspective. Combining core competence and financial analysis for building up its evaluations, this paper adopts characteristics of core competence to evaluate its internal and external factors and evaluates, analysizes and sorts the core competence of the local representatives upper first-class hospitals. On one hand, the research ideas can make core competence of the hospital more closely with its management practices so that its core competence is no longer abstract and difficult to grasp; on the other hand, the hospital’s financial analysis adopts a more long-term objectives, more scientific evaluation standards, more extensive context analysis and more comprehensive evaluation index, which further improve the existing hospital financial analysis systems.Contents and Processes of This ResearchContents and processes are as follows: Research MethodsThis paper uses the established norms and standards to decide the representativeness of samples and the measuring validity; it also adopts theories to guide research designs and interpret findings, so the scientific researches are systematic. During the process of studying and designing, we not only discover significant factors but also eliminate or control interference ones to valid conclusions, so the scientific researches are controlled. In the course of the study we make use of empirical observations to confirm the validity of theoretical explanation, so the scientific researches are empirical. We are skeptical to the validity of theories, data qualities, the credibility of results and interpretations, thus the scientific researches are critical. Scientific process is a systematic, controlled, empirical and critical investigation of a natural or social phenomenon, which can be started and finished in theories. Based on the above-mentioned scientific research process, we construct ideas and methods of this project.Based on the specific characteristics of core competence of the hospital, this project makes a detailed analysis of its different internal determinants and external financial or non-financial performances by the organic combination of decomposition and measurement, so as to provide a new perspective to evaluate core competence of the hospital.Based on literature review and theoretical evidences, screening and summarizing from the investigation on 52 relative surveyed subjects chosen freely and 30 professionals in finance and management of hospitals, we get 61 measurable evaluation indexes from 74 ones. First-order indexes include:(1) indexes of value-added, danamics and sustainability; (2)indexes of integration, coordication and balance; (3) indexes of heterogeneity and non-sunstitutability; secondary indexes include:(1) financial indexes; (2) non-financial indexes. Every secondary index includes several third-order ones. When constructing third-order indexes, we integrate four dimensions of the balanced scorecard, namely, finance, customer, process and learning and growth.Specific methods for case studies include the following:1. data’s observation and collection: (1) questionnaires which are designed based on literature review and specific evaluation indexes and filled in by the surveyed subjects.(2) Interviews which are conducted with some surveyed subjects face to face in accordance with real situations and outlines.(3) the existing statistics:research reports, official statstics{the country’s population, industrial census data, yearbooks, reports and statements prepared by governments at all levels and professional bodies, etc}, the database of information research organizations and consulting firms.2. methods for data analyses(1)the constructing methods for the comprehensive evaluation index model of the core competence---principal component analysis and factor analysis; (RSR)、TOPSIS(2) methods for analyzing the effects of elements of core competence on hospital performance, clients and the community--- x2 test, t test and related statistical methods.(3) The subjects:(1) select an upper first-class comprehensive public hospital for case studies; (2) select eighteen upper first-class non-profit comprehensive public hospitals with more than five hundred beds to evaluate their core competence, which include three teaching hospitals attached to universities, two provincial ones and thirteen municipal ones.(4) The study’s duration:objects of the case study focus on changes of hospital financial data from 2002 to 2009 while other qualitative indicators are analyzed through surveys conducted in 2010. The comprehensive evaluation of the core competence for eighteen hospitals are done by analyzing their financial statements and health statistics from 2007 to 2009.Findings of the case study in this project1. findings of one upper first-class comprehensive hospital (1) its learning abilitiesAmong nine learning abilities of the investigated hospital, the ability to reflect ranks first, favored by 75.46% while the minimum is the ability to find with 64.13%. The average recognition rate of learning abilities is 69.83%, higher than its competitor, a similar peer hospital with 55.77%.2. structures of human resourcesAccording to investigations, until 2009, among the permanent staff of the investigated hospital, health technicians with bachelor degrees account for 53.99%, masters for 6.27%, doctors for 0.93%, staff with higher titles for 2.01%, honor experts for 4.43% and non-medical undergraduates or above for 3.33%. In the light of the data provided by China Health Statistics Yearbook 2009, in 2005, among health workers of the whole nation’s hospitals, health technicians with bachelor degrees account for 20.3%, masters for 1.9%, doctors for 0.5%, staff with higher titles for 2.0%, staff with high titles for 7.6% and non-medical undergraduates or above for 27.4%. Compared with itself, during five years from 2005 to 2009, the investigated hospital have seen growth of personnel at all levels, with the average rate for doctors of 56.51%, for masters of 36.99%, for honor experts of 3.04%, for undergraduates of 11.19%, for higher titles of 26.98% and for non-medical undergraduates of 9.42%. Compared with the average level of the national hospitals in 2005 (for the Ministry of Health hasn’t published data of other years or even more detailed data), the surveyed hospital’s proportions of undergraduates, masters and doctors are higher than the national average ones, and its proportion of higher titles is similar to the national average rate of 2.01% while its proportion of non-medical undergraduates of 9.42% is much lower than the national average of 27.4%. Because the national average data were obtained five years ago, if compared with the data of 2009, the national average must have increased significantly, so we need to make further investigations on whether the surveyed hospital’s proportions of undergraduates, masters and doctors are at the top ranks.3. Factors of productive equipmentsTo 2009, there are XXX equipments worthy of 500 thousands yuan in the surveyed hospital. From 2002 to 2008, the earning rate of medical equipments have changed a lot. In 2002 and 2005, the rate appeared negative growth. But to 2009, its earning rate of medical equipments (equipment efficiency) have increased significantly from 0.15% to 14.17% with growth rate of 9446.67%. If we deduce the negative growth in 2002 and 2005 and the influences in 2009, the average earning rate of medical equipments is 36.81%. The average growth rate of 36.81%-100%=63.19%, that is, during the five years of 2003, 2004,2006,2007 and 2008, the surveyed hospital’s medical equipment revenue declined at an annual rate of 63.19 percent with inefficient use of medical equipments, so problems existed in the management of medical equipments. However,2009 witnessed a radical change.4. Brand factor59.76% patients mention the surveyed hospital when conducted a survey, higher than other local hospitals while other similar ones with the highest level of 11.92%. its prompted awareness scores 154 points, higher than that of other local hospitals at the same level, and its aided awareness was 71.37%, also higher than that of other local hospitals at the same level. When measured its brand awareness, the surveyed hospital enjoys 71% brand awareness of the patients; patients’loyalty towards the surveyed hospital reaches 60.62%, higher than that of other local hospitals at the same level. For emotional loyalty measurement,74.99% of the surveyed patients enjoy emotional identity to it. The data above show that the surveyed hospital enjoys higher awareness in the local place, which explains why it can maintain its advantages there. Of course, its brand recognition is still not solid, which is only 70%, required to be further improved. In further surveys about market behaviors of the surveyed hospital’s brand, we found that in eight years the hospital’s outpatient share remained at 17%-20%,without any significant changes. The inpatient market share maintain 23%-26%, without great changes, too. These results suggest that there is still much room to increase the hospital’s market share. If they want to develop the market, they need to do a lot of work. Compared with its counterparts, the surveyed hospital does not enjoy distinct advantage.To the surveyed hospital, the investigation results of its relative market prices show that from 2005 to 2009 the average relative market price of its outpatient service is 1.21 while that of its inpatient section is 1.20, which are very close and do not exceed the region’s annual average price of medical services 2 times. Different from enterprises, prices of medical services are decided by the nation, therefore there are no differences for the same service in hospitals of the same types at the same level. In order to attract patients or clients, hospitals sometimes decrease service price for clients in large volumes, such as physical examination population. The low relative market price of the hospital presents quality services and good prices for clients. It also suggests that the hospital must take some internal management strategies and measures, such as controlling its costs, optimizing its service processes or improving its service efficiency, to increase its economic profits when it wants to realize its social benefits with the inadequacy of national investments.The surveys of hospitals’goodwill values indicate that goodwill values of the investigated hospitals are 0.84227362 million yuan in Guangxi province. In Liuzhou, from 2008 to 2009, its main competitors’ situation is:the income returns of Liuzhou People’s Hospital were-0.61% and -8.35% with the average goodwill value of -6109505.38 yuan. Liuzhou Municipal Liutie Central Hospital’s counterparts are -0.22% and 0.39% with the average goodwill value of -1341390.68 yuan. The First Affiliated Hospital of Liuzhou Medical College’s counterparts are -3.73% and -1.02% with the average goodwill value of -52143.37 yuan.5. Culture FactorsDenison Organizational Culture Model is used to measure the culture of the surveyed hospitals in four aspects, that is, involvement, consistency, adaptability and mission. The results are as the following:Involvement deals with donor, team-orientation and ability development. The average satisfaction is 56.55% and the satisfaction of donor culture is the lowest 49.04%. these scores reflect that hospitals do not attach enough importance to training and communicating with their staff as well as staff involvement and commitment. Consistency involves core values, coordination, cooperation and integration with the average satisfaction of 56.88%, among which cooperation and integration’s satisfaction is the lowest 49.94%. The results show that there are still many problems in whether the hospital should build up its powerful and cohesive internal culture and whether a set of common values exist in the hospital, which help its staff have strong identity senses and clear future expectations. They also suggest that there are problems in whether the hospital’s leaders have sufficient abilities to make their staff reach a high degree of agreement and reconcile different views in key issues, for example, the functional departments and business units have problems in close cooperation, and boundaries between departments or teams often have become obstacles to cooperation.Adaptability relates to innovation, customer first and organizational learning with the average satisfaction of 60.80%, among which innovation’s satisfaction is the lowest 53.89%. The results show that 60% hospital staff has recognized the response abilities to various signals from external circumstances which include customers and markets while about 40% think the hospital needs to improve its response abilities. The lowest satisfaction towards innovation suggests that the hospital fears the risks brought about by innovation and that it doesn’t learn to observe external circumstances carefully, predict the relative processes and changes in procedures and timely implement reforms, which means inadequacy of innovation spirits in the hospital.Mission refers to vision, strategic direction and objectives with the average satisfaction of 64.91%, among which satisfactions of two index are very close. The results show that the hospital focuses on systematic strategic actions instead of immediate benefits, especially at the beginning of 2009, after taking office, the new leadership of the hospital made a new layout and work out systematic projects of hospital construction and expansion which has been universally recognized by the staff. The hospital also develops a series of objectives closely relative to mission, vision and strategy which each of its staff can make for reference at work. 6. Management factorsManagement reflects coordination and integration of core competence, and a hospital’s management capacities have a significant impact on its core competence through multiple links. We often adopt employee satisfaction to measure the subjective index of management factors. Questionnaires were conducted and a total score was used to measure one’s satisfaction. The investigated results show that 54.78% staff show contentment to the general management of the hospital; 44.09% staff are satisfied with its culture; 42.01% staff are content to its regulations; 35.68% staff to its individual development chances and outlooks; 37.18% staff to the justice of its management,36.93% staff to communications with their peers or seniors and 31.63% to performance evaluation and salary distribution. Among seven aspects of staff satisfaction measurement, the highest is 54.78% while the others are less than half, especially the satisfactions towards performance evaluation and salary distribution are only 31.63%. The results show that the management of the surveyed hospital is still very weak, which needs improving. Hospital administrators should shift from traditional empirical management to scientific and evidence-based management, from extensive one to sophisticated one, from subjective one to systematic one and from general one to strategic one. In this way, independent elements, such as human resources, properties, skills, technology and equipments, etc, can be organically integrated to form the hospital’s core competence.7. Case analysis of hospitals’finance(1) Total revenue and total expenditureFrom 2002 to 2009, the average growth rate of total revenue of the surveyed hospitals is 19.01% while their average growth rate of total expenditure is 17.52%. The average annual balance is 0.90% among which the average annual balance of medical payments is -7.045 and the average one of medicine payments is 4.35. The above-mentioned data show that in eight years the surveyed hospitals’financial position is that the reckoning-up of revenue and expenditure shows a small surplus or a slight loss. The balance of drugs is relied on to make up for losses resulting from health care revenue to maintain the hospitals’balance of payments.(2) Business income and expenseFrom 2002 to 2009, the surveyed hospitals’business income is lower than business expense in four years, that is, in 2008,2007,2005 and 2002. In these eight years, their average expenditure-to-income ratio is 99.90:1, which means the balance of payments and shows a slight surplus. In 2007, their expenditure-to-income ratio is 1.02:1, higher than the average ratio of national comprehensive hospitals at the same period, that is,0.976:1.Medical income has been lower than medical expenditure for six years. In 2009, the medical expenditure-to-income ratio is 0.899:1, producing a surplus again. In eight years the average medical expenditure-to-income ratio is 1.025:1, which means that medical income cannot make up for medical expenditure and that one has to pay 1.025 yuan of medical expense to gain one-yuan income. Two reasons can account for it. On one hand, prices of medical services are regulated by the state, which are unreasonable and far below costs of medical care. On the other hand, there are problems in hospitals’cost management.From 2002 to 2009, drugs’income-to-expenditure ratio decreased. In 2002, the ratio was 1.12:1 but it decreased to 1.01:1 in 2009. This reflects that the balance of drugs’income and expenditure continuously decreases, which is related with the national drug policy---controlling drug price addition and the drug proportion in total revenue.(3)Drug income and medical income and their proportions in total revenue of hospitals.From 2002 to 2009, drug income’s proportion in total revenue decreased year by year. In these eight years, the average proportion of drug income in total revenue is 43.45% in the surveyed hospitals. According to the data provided by the Chinese Health Statistics Yearbook in 2008, the proportion of drug income in total revenue in comprehensive hospitals is 42.68%. So the proportion of the surveyed hospital remains at the national average.The weighted mean value of the proportion of medical income in total revenue is 55.47% in the surveyed hospitals from 2002 to 2009.(the total medical income in eight years/total revenue in eight years *100%). According to the data provided by the Chinese Health Statistics Yearbook in 2008, the proportion of medical income in total revenue from 2000 to 2008 is 46.95%. Liuzhou Workers’Hospital’s proportion is 8.52% higher than it.(4)Personnel expenditure’s proportion in business expenditureFrom 2002 to 2009, the average business income of active staff in the surveyed hospitals increases year by year with the highest growth rate of 28.35% in 2003, followed by 2009,2004 and 2007. Its average growth rate is 14.26%. The weighted mean value of active staff’s average business income is one hundred and fifty-nine thousand yuan. The total revenue of the surveyed hospitals also increases year by year with an average growth rate of 19.09%. At the same time, the proportion of personnel expenditure in business expenditure (averagely 28.30%) and the proportion of personnel expenditure in total revenue(averagely 27.50%) increase year by year. These show that hospitals’staff enjoys the achievements brought about by hospitals’developments when making contributions.(5) The Profitability of the surveyed hospitals1) ROE (return on equity) and ROA (return on assets)ROE of the surveyed hospitals has risen from -1.89% in 2005 to 12.42% in 2009 with the average ROE of 3.12%. Their ROA has also risen from -1.13% in 2005 to 8.26% in 2009 with the average ROA of 2.47%. Both ROE and ROA are positive, which shows that hospitals have improved their operational efficiency and possess certain profitability. However, their profitability is not so strong and lower than the present cost of capital (5.6%). In 2009, their ROE rises to 12.42%, which means that they have made great progress in profitability.2) Income profit marginThe main business profit margins of the surveyed hospitals in five years show that the main business profitability is not strong although the hospitals have achieved positive development. In 2005,2007 and 2008, their main business profit margins are -3.60%、-2.66%、-4.86% respectively. However, the growth rate of business income at the same period (see Chart 9-21) are 10.52%、26.92%、12.99% respectively. From these we can see that hospitals cannot gain the appropriate balance while increasing their drug incomes partly due to the unreasonable pricing of medical services by the state. But we should notice that there are problems when hospitals control their costs of medical services and drugs.3) Profit rate on costsProfit rates on costs (business expenditure/business income) are lower than one in 2006 and 2009 but higher than one in other years, suggesting that hospitals need to cost more than one yuan to produce one-yuan income. The margins of total costs and profit margins of business costs (business profits/business costs) also sho... |
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