Canadian Business, March 1996

A week before last Christmas, Angela Graham went into University Hospital in London, Ont., to have her left hip replaced. The hospital, a state-of-the-art facility when it was built in 1972, had seen its enviable reputation threatened over the past few years as government funding declined. Graham had witnessed the cutbacks firsthand when she had her right hip replaced by the same orthopedic surgery unit two years earlier. “They’d just lost a large number of staff” she remembers. “People were nervous — standing in corners, talking among themselves, worrying. The care was excellent, but you could tell they were uncertain about the future.”

Graham was surprised and impressed on her second visit. “I was prepared for less than super service. But all the key staff I appreciated so much the first time were still there. And I was really impressed by the friendliness, the courtesy of each service provider — everybody: the X-ray technicians, the people in the blood lab, the porters, the volunteers and the admission staff. They said they just wanted to maintain the quality and the philosophy of care they could provide that people were used to — that was what was most important to them.”

University Hospital had undergone some radical surgery of its own before Graham’s second visit. Rather than simply cut services as budgets dropped, the hospital’s board of directors decided to merge University Hospital with the city’s oldest hospital, Victoria (built in 1875), to form the new 976-bed London Health Sciences Centre. But the merger was just the first step in the center’s revolutionary approach to curing the sick; it is a complete rethinking of what hospitals are supposed to do and how they’re supposed to do it. And one of the bedrock principles of the merger was that the new hospital had to be run more like a private business, anathema in Canada’s health-care system.

The reborn London Health Sciences Centre is winning praise. In mid-March, the initiative garnered top marks from two hospital-rating agencies. It was recently named one of the best teaching hospitals in Canada by the Canadian Council on Health Services Accreditation, a non-government, non-profit national organization. The second edition of the independent guide, The Best Hospitals in America, ranked London Health Sciences Centre — alongside Stanford University Hospital, Johns Hopkins Medical Institution and the Mayo Clinic-among the top 87 such facilities (out of more than 10,000) in North America. And the hospital is toeing the bottom line. London Health Sciences Centre had to eliminate $32 million from its budget this year, but it won’t run a deficit.

The task of leading the change fell to the center’s president and CEO, Tony Dagnone. “We saw this financial crunch coming 30 months ago, and thank goodness we did,” Dagnone says. “There are five teaching centers in this province. Not all of them were going to be able to survive.” A graduate of the master’s program in hospital administration at the University of Toronto, Dagnone had worked for 25 years at Royal University Hospital in Saskatoon and was aware of the sterling reputation of London’s old University Hospital. “In Saskatoon, when we had patients we didn’t feel we could handle because we didn’t have the skills, we sent them to London. That’s what drives us here: to make damn sure we don’t lose our reputation as a standout hospital.” Dagnone and his team not only succeeded in merging and revitalizing the two London hospitals, but they also provided a lesson for both public and private institutions in how to manage drastic change while focusing squarely on the task of serving the customer-in this case, patients such as Graham.

The merger wasn’t the first attempt to renovate London’s aging hospital infrastructure. Three previous attempts to improve the region’s healthcare options had failed. “The city had not been bold enough to make changes that would have made the efficiencies we needed possible,” says Dr. Tim Frewen, vice-president of the center’s medical, dental and academic staff. The hospital’s board of directors hired management consultant Ernst & Young, which concluded that a single, large hospital made sense. Small organizations are often praised as agile, speedy and rapidly responsive. But, in health care, bigger is often better. In its first year, London Health Sciences Centre will take care of more than 500,000 people. It maintains a full schedule of major surgery, including complex, difficult procedures such as organ transplants, brain surgery and multiple bypasses. Its research department pioneers cutting-edge medical equipment. Its patient roster lists 28 countries of origin-patients from all over the world come to London for procedures and expertise unique to the facility. And as a teaching hospital, the centre is training the next generation of doctors, nurses and medical technology specialists. Doing all this will cost $392 million per year and involve 7,497 employees.

“You need a critical mass of both doctors and patients,” says Dr. John Girvin, director of neurosurgery and the senior medical adviser for London Health Sciences Centre. “Take teaching, for example. Residents can see many more people in this merged facility. That’s obviously better than having them see fewer patients. They’ll get more experience.”

Once the final decision was reached by the boards of trustees at both Victoria and University hospitals -- on July 11, 1995the speed of the merger astounded everyone. By Aug. 24 the new senior management and administrative structure was in place. “The longer it took, the more resistance would have formed,” Paul Faguy, the center’s vice-president of human resources and corporate services, says. “It took courage from the boards to back it, but they agreed unanimously.” Employees in every sector of the institutions were already nervous. Management allayed fears by framing the changes in terms everybody could understand. “Change means anxiety,” Frewen says. “We’ve tried to keep everyone focused on our main goal, which is taking care of patients.” Doctors and nurses were consulted, along with every other person on the hospitals’ staffs. “Hospitals are notorious for taking too long to make decisions. They solicit opinions from everybody beforehand,’’ says Glenda Hayward, a registered nurse in the cardiothoracic unit who also helps run the center’s human resources transition team. “This is working differently. We’ve made the decision; now we’re concentrating on making it happen.”

Putting the two operations together revealed a lot of needless duplication. “If a piece of equipment in your operating room costs $200,000 and you’re only using it a few times a year, it sits there idle and eventually has to be replaced when it’s outmoded,” Girvin says. “It makes more sense to have one of those machines and use it twice as often. There are people who think that all hospitals have to be all things to all people, but that’s a fading philosophy. Not every hospital can have every facility.” Both sites still have emergency rooms but the neuroscience unit will be moved to the University Hospital campus, for example. Victoria has always had more pediatricians, so the children’s services will be concentrated there.

Dagnone used the momentum of the merger to rethink the way the entire University Hospital was being run. “You usually hear, ‘If it ain’t broke, don’t fix it,’ “ Dagnone says. “Our attitude was, ‘If it ain’t broke, maybe it ought to be broken for the sake of future patients.’ “ He and other managers consulted staff, looking for improvements in every sector of patient care, from admission through release. “A lot of synergies came out of that,” Dagnone says. “The physiotherapist was saying, ‘If I could have Patient X for 15 minutes on Day 2 instead of waiting until Day 3, I’ll get him mobile a day earlier.’” The social worker was saying, ‘I could start planning for discharge on Day 1, and have some ready answers earlier.’ If we can treat you so that you’re back to work being a productive citizen earlier, we will have done our jobs.”

Reorganizing the hospital also meant getting more bang for the institution’s research buck. “Research isn’t an expense, it’s an investment,” Dagnone says. One project in the works is the development of a 3-D ultrasound-imaging system that will provide a more detailed view of a patient’s internal organs without using radiation. Three Canadian venture capital companies are putting a total of $4.5 million toward developing and marketing the technology, which will help pay for the research and defray the cost. “In the past, we would have done that research only to have to buy the product from a US company two years after developing it. Not this time,” says Dagnone.

 At the heart of the new hospital is the Customer Support Centre. The whole support staff was reorganized as a department unto itself, answering to patients, clinical staff and hospital visitors. Coordinators in the center’s nexus at the University Hospital campus field calls, then dispatch the right people to solve problems. That includes everything from delivering extra linen supplies and ferrying late meals to patients to booking conference rooms for meetings. Anyone needing any kind of assistance dials one phone number. “It used to be that each support department had its own phone number, its own staff and its own hierarchy,” says Hayward. “If you needed a light bulb changed, you’d have to make a series of phone calls just to find out whose responsibility that was. Physical plant? Housekeeping? Electricians? It got more complicated on weekends, when the whole structure changed. With one number to call, you spend less time figuring out who’s responsible for something and more time taking care of patients.”

“I’ll put that centre up against the service staff of any hotel in North America,” Dagnone says. “They can solve any problem in a matter of minutes and with no fuss at all:” To accomplish this, the hospital launched a partnership with ServiceMaster of Canada Ltd. of Mississauga, Ont., to set up its new customer service centre. The support service initiative at the hospital is the first such project for the company; its core business had been management services to hospitals and school boards. “Getting people [at the hospital] to understand the new skills they needed and to comprehend the vision of how this is all supposed to work was one of the biggest challenges,” says Brian John, ServiceMaster’s business leader of integrated support services. “One of the department managers asked me, ‘Are we McDonald’s, or what?’ Well, yes, we are. We have a product that has to be delivered correctly and on time”

The same philosophy is being applied in every one of the hospital’s support services. John drilled in the concept of adding value to everything the department does. “We’re trying to eliminate ‘That’s not my job’ as a response to any request from a customer,” says John. That extends to the hospital cafeteria, where servers should ask, “Would you like fries with that?”, which would increase revenue as well as the level of customer service. “People take pride in their work,” says John. “We’ve found most of the frontline staff want more responsibility.”

“The old system by which hospitals used to run needs to be restructured,” Frewen says. “That’s especially true of acute-care facilities such as this one. These are painful and challenging lessons, but we must create these efficiencies for the general health of Canadian society.” For Dagnone, the architect of the London Health Sciences Centre merger, the lesson of the private-business approach to running the hospital isn’t that governments and public institutions are incapable of becoming more efficient, but rather that they can accomplish a great deal when they put their minds to it. “It’s a precious commodity,” Dagnone says of Canada’s health-care system. “We can’t let politicians come to the conclusion that health care shouldn’t be supported. What have you got without health care? Everything else doesn’t really count.”