1st Edition

The Logics of Healthcare The Professional’s Guide to Health Systems Science

By Paul Lillrank Copyright 2018
    306 Pages 66 B/W Illustrations
    by Productivity Press

    306 Pages 66 B/W Illustrations
    by Productivity Press

    306 Pages 66 B/W Illustrations
    by Productivity Press

    Most of the current literature on healthcare operations management is focused on importing principles and methods from manufacturing. The evidence of success is scattered and nowhere near what has been achieved in other industries. This book develops the idea that the logic of production, and production systems in healthcare is significantly different. A line of thing that acknowledges the ingenious characteristics of health service production is developed.

    This book builds on a managerial segmentation of healthcare based on fundamental demand-supply constellations. Demand can be classified with the variables urgency, severity, and randomness. Supply is constrained by medical technology (accuracy of diagnostics, efficacy of therapies), patient health behavior (co-creation of health), and resource availability. Out of this emerge seven demand-supply-based operational types (DSO): prevention, emergencies, one-visit, electives, cure, care, and projects. Each of these have distinct managerial characteristics, such as time-perspective, level of co-creation, value proposition, revenue structure, productivity and other key performance indicators (KPI).

    The DSOs can be envisioned as platforms upon which clinical modules are attached. For example, any Emergency Department (ED) must be managed to deal with prioritization, time-windows, agitated patients, the necessity to save and stabilize, and variability in demand. Specific clinical assets and skill-sets are required for, say, massive trauma, strokes, cardiac events, or poisoning. While representing different specialties of clinical medicine they, when applied in the emergency – context, must conform to the demand-supply-based operating logic.

    A basic assumption in this book is that the perceived complexity of healthcare arises from the conflicting demands of the DSO and the clinical realms. The seven DSOs can neatly be juxtaposed on the much-used Business Model Canvas (BMC), which postulates the business model elements as value proposition; customer segments, channels and relations; key activities, resources and partners; the cost structure; and the revenue model.

    Chapter 1 Introduction

    • The healthcare crisis
      • Technology as a driver of disruption
      • Misalignment of demand and supply: non-communicable lifestyle-related problems meet reactive medicine
      • The unstable triangle: patient-provider-payer
      • Why Operational effectiveness (Lean) is only a partial solution

    • Unsorted complexity
      • Segmentation reduces complexity

    • End of import dominance: healthcare needs management methods that build on its own logic of production

    Chapter 2 Healthcare as a service industry

    • Industry or cluster?
    • The definition of services
      • Service-dominant logic and co-creation of value
      • The Resource Integration model

    • The logic of production: risks and uncertainties between output and outcome
    • The Power Gap between doctors and patients
      • Professional organizations and bureaucratic logic
      • Markets don’t work – for now

    • Integration (service design) and coordination (service production)
    • Open and closed systems
    • Service machines

    Chapter 3 Methodology

    • Concepts and constructs
    • Clinical medicine as a technology
      • The context, intervention, mechanism, outcome – model (CIMO)

    • Physical and behavioral technologies
      • Ontology, epistemology, dynamics, and technology
      • Known unknowns and unknown knowns

    • Designing service machines

    Chapter 4 Demand-Supply-based Operating Platforms (DSO)

    • The defining demand variables: urgency, severity, arrival
    • The defining supply variables: technology (what can be done), patient behavior, economic constraints
    • The seven DSOs
      • Prevention: something that could have happened does not happen
      • Emergency: save and stabilize
      • One-visit: not urgent, not severe, convenient care
      • Elective: scheduled precision procedure
      • Cure: iterative process towards a preferable end
      • Care: chronic or terminal
      • Project: very complex and costly

    • Time – perspective as a distinguishing variable
    • Operating modes and production systems
      • Single-function, integrated multi-function, modular, mode

    • DSO as a managerial platform with clinical apps (modules)
    • Industry comparisons
      • Prevention: finance and insurance
      • Emergency: news media, military
      • One-visit: fast food
      • Elective: auto assembly
      • Cure: R&D, marketing
      • Care: industrial maintenance, facilities management
      • Project: construction, shipbuilding, software development

    Chapter 5 The Business Model Canvas (BMC)

    • Value proposition
      • Output, outcome, benefit, value
      • Quality in healthcare

    • Customer segments
      • Clinical and demographic segments
      • The focused hospital

    • Customer channels
      • Facility- and field-based services
      • Regional service networks
      • The service distribution trilemma: time/location access, specialization, variety

    • Customer relations
      • Patient choice
      • Patient empowerment

    • Key activities
      • Tasks, workflows, processes
      • Process types: standard, routine, non-routine
      • Flow efficiency

    • Key resources
      • Capacity utilization and resource efficiency
      • Economies of scale in healthcare
      • The healing environment

    • Partners
      • Networks and ecosystems
      • Supply chains

    • Cost structure
      • Personnel, facilities, equipment, supplies

    • Revenue model
      • Global budget, capitation, fee-for-service, bundled payment
      • Incentive dilemmas

    Chapter 6 The DSOs as distinct business models

    • Each DSO has a basic BMC
    • DSO – specific general BMCs (table)

    Chapter 7 DSO ion practice

    • DSO and the patient journey: single- and multi-DSO journeys
      • Handovers between DSOs

    • Single- and multi-DSO – organizations
    • How clinical modules switch mode
    • Single-DSO innovations (cases)
    • The DSO-model in other industries: telecom, facilities management

    Chapter 8 Summary, conclusion and discussion

    • A clever model, but so what?
    • The healthcare crisis in a DSO-perspective
    • DSO and hospital design: the disintegration of the General Hospital
    • DSO and health policy
    • Known unknowns and future research


    Paul Lillrank has been Professor of Quality and Service Management at Aalto University since 1994. He has served as the Head of the Department of Industrial Engineering and management for eight years and been Academic Dean of the school’s MBA program. Aalto University was formed in 2010 through the merger of Helsinki University of Technology, Helsinki School of Economics, and Helsinki School of Art and Design.

    Paul Lillrank received a PhD in Social and Political Sciences at Helsinki University in 1988 after spending six years as a post-graduate student in Japan where he researched quality management in Japanese industry. After graduating he joined The Boston Consulting Group in Tokyo and later in Stockholm, returning to academia in 1992 as Affiliated Professor at the European Institute of Japanese Studies at the Stockholm School of Economics. He has been visiting professor at the University of Toyko, served as program director at College des Ingenieurs in Paris, and teaches regularly at the Indian Institute of Technology, Kharagpur.

    Professor Lillrank has conducted research in several service industries, such as software, telecom, airlines and retailing. During the recent past his focus has been in healthcare. He has been a pioneer in introducing industrial management methods to the study of healthcare service production. He has co-founded The Institute of Healthcare Engineering, Management and Architecture (HEMA), and the Nordic Healthcare Group (NHG), a consultancy. He has been a frequent speaker and advisor to several healthcare producers and government agencies. His research interests are in Healthcare Operations Management, particularly operating modes, process coordination, knowledge integration through mobile solutions, and regionally supply systems. A current topic is innovations in healthcare management, particularly frugal innovations in the Indian context.