Hospital Administration

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The 1998 edition of Hospital Statistics published by the American Hospital Association reported that 6,021 hospitals existed in the United States. These included acute care general hospitals; federal, state, and local hospitals; psychiatric hospitals; and specialty hospitals such as children's hospitals, rehabilitation hospitals, and chronic disease hospitals. There were 5,015 short-term, acute care general facilities. Short-term, general hospitals are defined as those for which a patient stay is thirty days or shorter and which provide general medical and surgical care. General hospitals often provide additional services including prevention, treatment, rehabilitation, obstetrics, substance abuse, health education, and screening for cancers and other diseases.

Modern hospitals derive historically from the monastic "hospes" of tenth-century medieval England at which travelers stopped to rest. Later, in the thirteenth century, the hospice became a place for vagrants, invalids, and the infirm.

Benjamin Franklin founded the first hospital in the United States, the Pennsylvania Hospital, which was chartered in 1757. Hospitals during this period provided refuge and homes for the poor, ill, and infirm who had no other place to live. Nineteenth- and early-twentieth-century hospitals in the United States were primarily for the treatment of communicable disease, such as tuberculosis or leprosy, for which people were quarantined. Most people generally preferred to be treated for acute illness at home. Before the discovery of germ theory, the home was actually a healthier environment than the hospital. Later, as scientific medical practice developed, hospitals became more technical places of diagnosis and treatment for those who could afford to be hospitalized and pay for the new scientific technologies.

As a result of their increasing role in health care, hospitals became important community resources. The community not-for-profit hospital continued the role of providing charity care for the poor. After World War II, the Hospital Survey and Construction Act of 1946 (Hill-Burton Act) provided funding for communities across the country to build not-for-profit community hospitals and to modernize old ones. This legislation was critical to locating hospitals in previously underserved rural areas. Society has long viewed the hospital as a social service organization. Public hospitals serve an important public health function in caring for vulnerable and underserved populations, including the poor, immigrants, and the uninsured.


Government hospitals at the federal, state, or local level generally care for specified groups of individuals or diseases. This includes the military, the mentally ill, or the uninsured, among others. In addition, this includes educational or academic hospitals where medical education is taught. Private not-for-profit hospitals are usually owned by corporations, which are founded by private organizations. For-profit or investor-owned hospitals are those in which the shareholders receive dividends or financial distributions based on the profits made by the hospital or the hospital's corporation.

Regardless of ownership, most hospitals are community hospitals, which provide care for a wide range of acute episodes of illness. Acute episodes are serious short-term illnesses for which patients require immediate care and are then returned to their homes or community.


Hospital administration encompasses organizing and supporting the patient's total medical care during an episode of illness in the hospital, and is responsible for integrating the various functions and services. A hospital is a multifaceted organization comprising many committees, departments, types of personnel, and services. It requires highly trained employees, efficient systems and controls, necessary supplies, adequate equipment and facilities, and, of course, physicians and patients. It is a business as well as a caring, people-oriented institution and it has a similar structure and hierarchy of authority as any large business.

Board of Trustees. The "board of trustees," or governing board, operates the hospital in trust for the community and has a fiduciary duty to protect the assets of the hospital through efficient operation. The trustees are responsible for establishing the hospital's mission and establishing its bylaws and strategic policies. Trustees select the administrative leader of the hospital and delegate the hospital's daily operations and budgeting to the appointed executive. They ensure the quality of medical care through the selection of qualified physicians and by delegating quality assurance responsibilities to the medical staff.

Executive Administration. The chief executive officer (CEO) reports to the governing board and provides leadership in implementing the strategic goals and decisions set by the Board. The CEO also represents the hospital to the external environment and the community. In these tasks, the CEO must coordinate the collective effort of the hospital's personnel. The CEO delegates the clinical care and administrative duties to highly trained individuals and teams.

The Medical Staff. The physician is the leader of the clinical team and the major agent working on behalf of the patient. The physician's responsibility is to diagnose the patient's condition accurately and to prescribe the best and most cost-effective treatment plan.

The medical staff is a formally organized self-governing unit within the hospital, primarily comprised of physicians, but may also include other doctoral level health care professionals such as dentists or psychologists. Responsibility for the quality of medical care is exercised through the medical staff, whose major purpose is to ensure the highest quality of medical care to the patients. This is done through four functions: "Credentialing" determines and assesses the qualifications of physicians seeking to practice at the hospital. "Privileging" determines the specific types of care that individual physicians will be allowed to practice at the hospital. "Peer review" monitors how well a physician is performing. "Reappointment" ascertains whether a specific physician should be permitted to continue practicing at the hospital.

Nursing Services. Nursing services employees are responsible for carrying out the treatment plan developed by the physician. Nursing services, also called patient care services, is the largest component of the hospital. It is also the largest health care occupation in the United States. Nursing services provide round-the-clock health maintenance, treatment, and support of the patient. Important roles of nurses today also include those of patient advocate and health educator.

Members of the nursing staff represent a wide range of training and experience. A nurse manager has overall responsibility for the care of patients on a particular unit, including supervising other nursing and clerical staff, and for coordinating the services of departments such as social work and discharge planning. A nursing supervisor may have overall management responsibility for several units. A clinical nurse-specialist has specific expertise or competence in a particular field of nursing. These nurses are helped by licensed practical nurses (LPNs) and certified nurses aides (CNAs), who perform routine nursing functions.

Allied Health Services. A number of departments perform support functions that help with diagnosis and treatment. The clinical laboratory is a diagnostic center that performs a variety of functions, including autopsy, clinical cytology, and clinical pathology. Medical technologists perform most of the work of the laboratory under the supervision of a pathologist, who is a physician.

The radiology department provides radiographs to aid with diagnosis and performs radiation therapy for the treatment of some medical disorders.

Rehabilitation services provides assistance in enhancing the optimal physical, mental, and social functioning of the patient following an episode of illness. Physical and occupational therapy are the primary specialties in this service.

Clinical Support Services. The hospital pharmacy purchases and dispenses all the medications used to treat patients in the hospital. The pharmacist works directly with the medical staff in establishing a formulary, the listing of drugs chosen to be included in the pharmacy. Clinical pharmacy consists of communicating with patients, counseling patients and other members of the health care team, and consulting with regard to detailed drug information.

Social services integrates the patient, the medical team, and the community. The primary objective is to ensure that all environmental and emotional barriers to the patient's recovery are mitigated. Social services helps coordinate needed community-based services, and sometimes discharge planning. Hospital dieticians play an important therapeutic role in providing the patient with the appropriate food and nutrition, consistent with the treatment plan prescribed by the physician.

Administrative Support Services. Nonmedical administrative services are necessary to the hospital's business and physical plant management. The CEO leads these administrative services and is directly responsible for the day-to-day operations of the facility.

Business services manages the hospital's admitting and discharge functions, records charges to a patient's account, and handles accounts receivables with third-party payers such as insurance companies. The finance department advises the CEO on financial policy and long-range planning, establishes procedures for accounting functions, receives and deposits all monies received by the hospital, and approves the payments of salaries and other expenditures.

Accounting is central to the hospital's financial business. Detailed and sound accounting practices are fundamental to maintaining important organizational statistics for administrative decision-making. The accounting department is responsible for maintaining the general ledger and summarizing all the financial transactions performed by the hospital, preparing and dispensing the payroll, tracking and recording costs to enable appropriate reimbursement for services from insurance companies, and preparing the capital and operating budgets.

Admitting services is often where the patient first has contact with the hospital. The sensitivity and efficiency of this department can greatly influence the patient's perception of the quality of care received.

Information services and medical record maintenance are core functions of hospital management. Medical records have recently been designated a source of revenue as they have a direct bearing on reimbursement from insurance companies. Medical records are maintained on all admitted patients and they are indexed according to physician, disease, and operation.

The human resources department interacts with all departments in the hospital to ensure the quality and motivation of personnel working at the hospital. Human resources performs job analyses, develops job descriptions, and establishes competitive compensation for specific positions, as well as providing training to new employees and opportunities for growth and self-actualization for all employees.

Other important administrative and business functions may include marketing and planning, public relations, plant and materials management, fund-raising, housekeeping, and security.

Diana W Hilberman

Ronald M. Andersen

(see also: Careers in Public Health; Economics of Health; Health Administration, Career in; Health Maintenance Organization [HMO]; Nurse; Physician )


American Hospital Association (1998). Hospital Statistics. Chicago: Author.

Filerman, G. L. (1989). A Future of Consequence: The Manager's Role on Health Services. Washington, DC: Association of University Programs in Health Administration.

Griffith, J. (1999). The Well Managed Healthcare Organization, 4th edition. Washington, DC: Health Administration Press.

Sloane, R.; Sloane, B. L., and Harder, R. (1999). Introduction of Healthcare Delivery Organizations, 4th edition. Chicago: Health Administration Press.

Sultz, H. A., and Young, K. M. (1999). Health Care USA: Understanding Its Organization and Delivery, 2nd edition. Gaithersburg, MD: Aspen Publishers.

White, C. H. (1997). The Hospital Medical Staff. Albany, NY: Delmar Publishers.

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Hospital Administration

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