Rationalization of Healthcare Administrators By Hayden LaRocque Green

Rationalization Introduction

This page explores the impact of rationalization on healthcare management. Traditionally, emotions and traditions guided healthcare. Now, reason and efficiency are emphasized. Sociologist George Ritzer described rationalization with four aspects: efficiency, calculability, predictability, and control. We see this in McDonaldization of the fast-food industry. Similarly, healthcare has become more streamlined and data-driven. However, this focus on cost-effectiveness has caused tension between administrators, doctors, and patients. This web page will examine how rationalization has transformed healthcare management since the mid-1900s.

Origins of Healthcare Administration

Early hospitals lacked dedicated managers due to limited resources and medical knowledge. Medical advancements led to a rise in hospitals and patients. X-ray technology and blood pressure measurement devices are examples of key inventions. The American Hospital Association (AHA) was formed in 1899 to promote efficient hospital management. Despite this progress, healthcare remained unregulated and lacked insurance. Growing demand for hospitals highlighted the need for proper management. The University of Chicago established the first healthcare administration program in 1934 to address the lack of business training among hospital leaders.

The Importance of Word War II on Healthcare Administrators

Prior to World War II, healthcare administration was still in its early stages. The influx of wounded soldiers after the war created a surge in demand, necessitating a more formalized approach to hospital management. Efficiency and predictability became paramount, leading to the development of stricter regulations. The American College of Surgeons introduced the Hospital Standardization Program in 1954, funded by a donation from John Bowman. This program aimed to establish uniformity in hospital practices and management through five key objectives: organizing medical staff, hiring qualified and licensed physicians, implementing regular staff and clinical performance reviews, maintaining detailed and organized medical records, and establishing essential facilities like labs and radiology departments. At its launch, only a small percentage of hospitals met these minimum standards. As healthcare advanced, the program grew, employing surveyors to evaluate medical staff, patient care, and overall hospital functioning. This initiative played a crucial role in enhancing both the predictability and quality of care provided in hospitals.

Development of Healthcare Administrator Occupation

The 20th century transformed hospitals. Public fear of death in hospitals waned as they became seen as places of healing, fueled by medical advancements. ICU creation in the 1950s exemplifies this shift. Increased hospital complexity, with specialized units like ICUs, demanded efficient management. Regulation and this growing complexity reshaped healthcare administration.

Healthcare Management in 1950-1960s

The 1950s and 1960s saw healthcare administration transformed by "rationalization," a focus on efficiency and control. Healthcare delivery changed significantly, with finance playing a bigger role. Health Maintenance Organizations (HMOs) like Kaiser Permanente emerged, combining finance and healthcare delivery. Kaiser's model emphasized cost control and preventative care, integrating services and encouraging prepayment plans. Healthcare administration shifted focus towards cost control and predictability. Standardized protocols, procedures, and documentation standards became commonplace. This included standard clinical pathways, ensuring consistent patient care, and documentation standards for medical records.

Federal regulations significantly impacted healthcare administration during this era. Medicare and Medicaid, established in 1965, were game-changers. Medicare provided health insurance for seniors and some disabled individuals. Administrators now juggled managing claims, reimbursements, and program rules, making their roles more calculable and financially focused. Medicaid offered coverage to low-income Americans. Both programs transformed healthcare payment models and care delivery. This, along with rising private insurance, marked a major shift in the American healthcare system.

Healthcare Administration in the 2000s

Since the 2000s, healthcare has become even more business-oriented. Hospitals compete fiercely, driving further rationalization. This competition fosters advancements in medical technology but threatens smaller institutions. While it can improve efficiency, the focus on beating competitors may shift administrators' priorities from quality care to financial performance. As this image shows, consolidation is on the rise, with independent hospitals declining compared to larger systems.

2000s Cost-Focused View from Administrators

Recent decades have seen a healthcare boom thanks to advancements like robotic surgery and genome sequencing. This translates to a more calculable system, with healthcare spending tripling since 2000. Medicine itself is more evidence-based, and administrators rely heavily on data analytics to manage hospitals effectively. Figure 3 highlights the booming healthcare analytics market, valued at $43.1 billion in 2023 and projected for an 18.9% annual growth rate in the US by 2030. Initially, descriptive analytics dominated due to their importance in understanding COVID-19 through historical data. However, predictive analytics are rapidly growing, using current and historical data to forecast patient outcomes, disease risks, and even prevent patient decline. This data helps administrators mitigate risks, manage patient information, and optimize billing. These evidence-based approaches prioritize efficiency (reducing waste) and predictability (preventing unforeseen events), reflecting the increasingly defined role of healthcare administration in the modern era.

How COVID-19 Changed Healthcare Administration

COVID-19 dramatically impacted healthcare administration. As hospitals faced resource shortages and surging caseloads, administrators scrambled to adapt capacity planning. Bed availability, staffing, and resources fluctuated wildly. Healthcare employment even dropped by 9.3% in the first month (Wilensky, 2022). These unprecedented challenges demanded a new approach. Administrators turned to data analytics and prioritizing community health. Data analysis will be covered later, but "community health" signifies a shift towards population health management. This pandemic highlighted the critical role of adaptable administrators who can efficiently utilize resources in unpredictable situations.

Present State of Healthcare Administration

Data analytics is transforming healthcare administration. While managers don't need to be analysts, understanding data-driven decisions is crucial. Collaboration with data analysts is key, and relevant degrees like Health Information Management can be helpful. Analytics optimizes costs, research, and early disease detection. This shift aligns with the changing job outlook - the number of administrators has grown significantly compared to physicians (3200% vs 150%). This can strain physician-administrator relations as a focus on efficiency can lead to burnout.

Efficiency in Healthcare Administration

Rationalization dominates healthcare management, focusing on efficiency to address staffing shortages. Automation of tasks and workflow streamlining are key examples ("Overcoming Staffing Challenges through Greater Efficiency, Modernized HR Policies," 2017). Technology integration helps utilize staff better, lowering turnover. Electronic health records (EHRs) exemplify this shift, improving information access for both patients and providers (Upadhyay, S., 2021). Scans like MRIs and PET scans further enhance efficiency with faster diagnoses. EHRs streamline billing and reimbursement, boosting financial aspects. Overall, these models improve efficiency, saving time, enhancing coordination, and leading to better patient outcomes.

Calculability in Healthcare Administration

Hospital management prioritizes calculability as financial returns take precedence. Data analytics guide decisions, reflecting a shift away from solely patient-centered care. This increased focus on metrics like patient satisfaction scores and cost per case quantifies healthcare. Programs like HCAHPS measure patient experience to improve quality and accountability (van der Voort, 2023). Patients, too, prioritize cost over length of stay (Dorsey, 2016). This trend alters the patient-caregiver relationship, raising concerns about prioritizing finances over care.

Predictability in Healthcare Administration

Analytics have transformed healthcare management, increasing predictability. Revenue tracking and data-driven decisions are now paramount. Predictive analytics use past and present data to assess patient risk scores. These scores help prevent complications and improve patient care. Analytics also optimize billing and resource allocation. This allows managers to be more proactive, intervene early, and improve efficiency. Previously, data played a smaller role in healthcare. Now, predictive analytics empower administrators with better patient insights, leading to faster and more cost-effective interventions.

Control in Healthcare Administration

Management Accounting and Control Systems (MACS) empower healthcare managers. Techniques like demand forecasting allow efficient resource allocation (Eldenburg, 2017). This image showcases a Hospital Management System, managing patient records, appointments, and services. These systems offer various modules for accounting, insurance, and lab management. Predictive analytics prepare for scenarios like flu outbreaks, optimizing ICU capacity. Control mechanisms also improve patient care by enforcing regulations and guidelines. Digital tools grant managers valuable insights to make informed decisions for hospital operations.

Control through AI Usage

AI is revolutionizing healthcare and management. AI modeling and big data accelerate drug development and improve cancer diagnoses, even surpassing doctors in some tasks (Cabral, 2024). This technology optimizes staff schedules, resource allocation, and market insights (Mangla, 2024). The AI market is booming in healthcare, and is expected to grow from $20.65 billion in 2023 to even greater heights by 2030. AI can address physician burnout caused by repetitive tasks due to rationalization. However, ethical considerations like patient data privacy and the balance between automation and human judgment require careful attention.

Irrationalities of Healthcare Administration


Increased focus on efficiency and cost control, while beneficial, can dehumanize healthcare. Transactional care replaces individualized attention, prioritizing quantity over quality. Managers emphasize targets and metrics, like wait times and cost, over patient connection. Overreliance on data and KPIs creates a metrics-driven approach, neglecting holistic well-being. While analytics improve efficiency, Schnoor (2017) argues they are "less motivating" and hinder teamwork. The focus on statistics can detract from the human touch patients value.

Loss of Autonomy

Healthcare rationalization reduces manager autonomy. Increased standardization dictates many decisions, hindering flexibility and innovation. This "industrial quality control" (Wears, 2019) limits solution options and creates ethical dilemmas for managers. Strict rules can conflict with their moral judgment, leading to job dissatisfaction. Less autonomy stifles creativity, hindering potential improvements. While some explore "creative performance measures" (Alsaqqa, 2019), tension remains between efficiency and innovative thinking.

Is Irrationality Preferred?

While rationalization may stifle creativity and dehumanize care, some patients prioritize affordability. Data analytics lower healthcare costs, benefiting those struggling financially (Figure 6). This "irrationality" is positive for certain demographics. Research helps managers understand hospitals better, improving management practices (Janati, 2017). Healthcare efficiency has greatly improved, making care faster and more accessible. Despite its drawbacks, rationalization offers benefits alongside its downsides.


In conclusion, rationalization has been in place since healthcare administration emerged as a career. Since that time, the occupation of healthcare managers has grown due to the extreme changes in healthcare. As processes are streamlined and focus more on quantitative analytics, managers are responsible for interpreting this information and optimizing its use within their hospitals. However, due to this increase, tensions have risen between workers within hospitals. A balance between qualitative and quantitative aspects of healthcare are needed to ensure hospitals can continue to run smoothly while progressing.