CSCIndex brings strong medicine to health center

Shannon Hahn

Editor’s Note:
The Academic Health Center, which includes seven health care schools and the University Hospital and Clinic, hired the CSC Index consulting firm last June. In an effort to make profound changes, the center is spending more than $2.6 million on the firm’s services.
Opinions on the restructuring of the health center are changing as a reorganization process moves forward. In the last few months, faculty have voiced concerns about the restructuring and the consulting firm. This two-part series represents a snapshot of recent views expressed by faculty and administrators.
This article, the first in the series, will look at Index, its influence and reactions to its presence.

The CSC Index management consulting firm will soon be finishing a year of service to the Academic Health Center that has cost more than $2.6 million. But many say Index’s restructuring methods are risky.
As the seven schools of the health center face a “financial crisis,” administrators say that outside consulting is temporarily needed to help reorganize the center. But some are critical of the firm and question whether consulting methods like Index’s fit into an academic culture.
Alex Wagenaar, a professor of epidemiology who is helping plan the restructuring, said many health sciences faculty have moved to get Index out of the center. The firm’s methods are the application of a corporate model, he said. “We have different objectives than just our ability to raise funds.”
Wagenaar added that he thinks the role of Index has been reduced since Dr. Frank Cerra was named the new health center provost in April. Wagenaar said Cerra recognizes that those in the health center need to take ownership of the process of reorganizing because they understand the University’s specific concerns and needs.
But, he said, “There’s still a lot of concern about CSC Index and the nature of the corporation.”
CSC Index is an international firm that has popularized a reorganizing strategy called “re-engineering.” Index has worked with corporations such as Taco Bell and Hallmark, government agencies, utilities and the Massachusetts Institute of Technology. The firm’s theories are outlined in four books written by Index leaders and consultants.
“Business re-engineering means starting all over, starting from scratch,” wrote Index chairman James Champy and former MIT computer science professor Michael Hammer. The line is from their first book on re-engineering, “Re-engineering the Corporation — A Manifesto for Business Revolution.”
Re-engineering means old job titles, departments, divisions, groups and other organizational structures no longer matter, the book states. Instead, what matters is how companies organize, given the demands of today’s market and the power of today’s technologies.
Dr. William Brody, who stepped down from the health center provost position in April, said faculty criticism of Index is a smoke screen for ignoring problems the University is facing.
“The real issue here is that the University needs to change and the issue is not CSC Index … or any of the tens of consulting firms that the University has used,” said Brody, who helped select Index.
The fact is, he said, the health center is threatened by a loss of patients. Also, a survey of health science students conducted last fall showed one in five students said they wouldn’t come back to the University if they had to make the choice again. The health center is also in the midst of major financial difficulties, Brody said.
There has to be dramatic change in how the health center operates and it needs outside expertise to face these issues, he added.
Many faculty say they understand changes need to be made. But they have reservations about Index and its reorganizing methods.
Wagenaar said, “I have very deep reservations about re-engineering efforts.” Re-engineering is risky, he said, and referred to a statistic from the first book Champy and Hammer wrote. The book states, “Our unscientific estimate is that as many as 50 to 70 percent of the organizations that undertake a re-engineering effort do not achieve the dramatic results they intend.”
Eileen Shapiro, who took a critical look at Champy and Hammer’s re-engineering in her book “Fad Surfing in the Boardroom,” said the University needs to be certain re-engineering is the right solution for the health center’s problems.
Higher education has problems that need to be resolved, said Shapiro, who is the president of Hillcrest Group, a Massachusetts management consulting firm. But re-engineering isn’t necessarily the way to solve them, she said.
Re-engineering is a powerful tool that can be compared to one of the treatments in a doctor’s medicine bag, Shapiro said. “It’s much more like chemotherapy than penicillin,” she said. “You want to make sure your treatment matches your problems.”
Why CSC Index?
Despite skepticism about Index’s re-engineering, restructuring planners say they saw using the firm’s services as the best way to make changes.
Last June, Brody asked seven administrators and faculty members to form a group to look at problems in the health center and make plans for solutions.
The goal of changes in the center is to make it more cost-efficient, productive and attractive to students and research sponsors.
The University’s center, like many health centers across the country, is facing financial troubles. State funding for medical education and research is dwindling, and competition for research grants is increasing. Also, health centers are trying to meet the demands of a rapidly changing health care market that is requiring more health care professionals to be able to work in teams and have a broad range of skills.
Of all the University’s health science schools, financial troubles are most apparent in the Medical School. Administrators predicted in March that the Medical School’s expenses would exceed its income by $6 million to $8 million. The school will make up for those losses with reserve funds, but administrators say they can’t continue to do that in the future.
A group selected by Brody decided to hire a consulting firm to help them sort through the health center’s problems.
At first the committee did not think they would need a consulting firm, said Ronald Franks, who was selected for the group and is dean of the Duluth campus medical school.
But none in the group were experienced in strategic planning, Franks said, “We were churning out the future of the academic health center. Rather than making a mistake, we decided to get a consulting firm.”
The group interviewed several consulting firms. Franks said that when Index explained re-engineering, “We realized that we hadn’t been as rigorous in planning our future and trying to maximize our strengths.”
Some in the health center have suggested Index was chosen because of ties between Brody and Champy, the chairman of Index. Both sit on the Board of Directors at MIT, which has 78 members and meets quarterly. But Brody said they don’t have any business or social relationships other than their work on the board and the health center’s contract with Index.
Brody said his role on the board only influenced his decisions in that he knew Index had done work at MIT and he wanted a consulting firm that had university experience.
“You pick a group that you have some confidence in,” Brody said. “Are they the best ones? I don’t know,” he said. Many other consulting groups tend to come in, do all the work, interview people and come back and give answers, Brody said.
One of ways in which Index is different is that they work very closely with those they are helping, he said. For example, a test of Index is that upon walking into a room where consulting is going on, it is difficult to tell who is an Index consultant and who is a University staff member, Brody said.
Index’s role in changes
Index’s involvement in the health center is leading many to wonder what the firm’s role is and how much influence it is having in decision making.
Carol Wells, a professor of laboratory medicine and pathology, said of the faculty, “None of us know what CSC Index’s role is. We can only surmise it’s great by the amount of money they are being paid.”
Terry Bock, assistant to the health center provost, said Index has provided services ranging from helping with data collection to giving advice based on the firms’s experience with other organizations. The four Index consultants at the University also taught project management skills and re-engineering techniques to health center planners.
Index spokesman Gilbert said the firm takes a different approach to each of the institutions it advises, though the process of re-engineering is applied to most of the organizations it serves.
Brody said Index isn’t approaching the health center with a set agenda.
“Re-engineering is not a magic formula,” he said. Re-engineering is only a discipline that promotes building a fact-based case for change, he added. Re-engineering means figuring out who the health center serves and surveying them to find out what is being done well and what needs changing. A group then needs to reach an agreement on the facts to create a different but appropriate structure, he added.
Leo Furcht, Vice Provost of the health center, said the business restructuring method that Index is applying isn’t unusual for consulting firms. That method is to have an evolving process where changes are analyzed, rather than making defined changes and looking at them later. “This is a cookbook business transformation,” he said.
Franks, who worked on the original restructuring team, said Index has influenced the team’s approach to the health center’s problems.
The group contacted 100 professionals across the country to find out what they do at their health centers, Franks said.
Initially, group members balked at the prospect of contacting so many other institutions, but Index urged them to continue, Franks said. “They said, ~`Listen, this is how businesses fail, because they don’t talk to the customer.'”
Now, restructuring is in a different phase. Nine teams, involving a total of 70 to 80 faculty and administrators, are assigned to examine different areas of the health center. They are researching areas of the health center ranging from its organizational design to its funding and budgeting. These teams will create proposals for changes.
But Provost Cerra will make the final decisions, said Furcht.
Professor Wagenaar has noticed changes in recent weeks in the way the re-engineering committees are run, he said. A couple of weeks ago he said he thought the Index representative that comes to his group informally influenced decisions because people listened to him and the team leaders worked closely with him.
But recently, under Cerra’s leadership, Index seems to be playing a smaller role in committee meetings, he said. “It’s a very fluid environment.”
But Hillcrest Group president Shapiro said re-engineering can be designed to look like stake-holders are included in decisions even when they aren’t. Often consultants will say they aren’t making decisions, they are just steering the process, she said. “But often he who controls the process controls the outcome.”
Many have questioned what Cerra’s plans for the health center will be and what they will look like in comparison to Brody’s.
Cerra said his plans for changing the health center, which he will unveil next week, will be influenced only in part by Index philosophies. “What I’ll present has a lot of different ideas,” he said. Most of Index’s involvement will decrease by the end of June, Cerra said, except in the organization of support services such as public relations.
Regent and legislative support
Despite some dissent from within the health center, Governor Arne Carlson and the University’s Board of Regents have supported the center’s efforts to re-engineer.
Regents approved a $1.7 million contract between the health center and Index in April. The firm is hired for $300,000 a month plus out-of-pocket expenses of between 15 and 20 percent of professional fees. The health center also hired Index from June to March for $890,000.
Karen Triplett, director of purchasing at the University, said usually consulting work is done on a school or departmental level. But Index was hired to consult for all seven schools of the health center.
“The CSC Index contract is atypical because it is a large amount,” Triplett said. “But the project is unusually large too.”
The more than $2.6 million being spent in fiscal 1996 on Index is equal to more than a quarter of the $9.8 million spent on consultants at the University in all of fiscal 1995. The $9.8 million excludes computer-science related contracts.
Regent Pat Spence sits on the financial and operations committee that approved health center spending on Index. “From everything I know, (re-engineering) is very important to the future of the Academic Health Center,” she said.
Spence said she thinks the support for re-engineering among the regents is strong. The votes approving the contracts for Index have always been unanimous, she said.
Gov. Carlson is encouraging regents to support the restructuring of the health center.
In a May 6 letter to Chairman of the Board of Regents Tom Reagan, the governor wrote that centers of academic and research excellence must be part of the University’s goals.
The governor chose to support the health center because it represents the future of the University, he wrote. “The Academic Health Center is prepared to create a new culture and demand results from itself. (Provost Brody) was not afraid of demonstrating leadership and accepting accountability. It is a model in which the regents must invest.”
The governor signed a bill this spring that designates $8.6 million to help make curriculum changes and technology updates in the health center. But legislators attached the condition that the University make changes to tenure and start a rural health school in Duluth before it gets the money.
But Bock, assistant to the health center provost, said that state government was not the primary force motivating the University to start re-engineering.
Students, faculty, health care business people and research sponsors, in addition to legislators, have been telling the health center that the world is changing and the center needs to keep up with that change, Bock said.
The risks of reorganizing
Many agree that re-engineering the health center poses some risks. But people often hold different ideas about what those risks may mean.
Jeffrey McCullough, a professor of laboratory medicine and pathology who is the head of a re-engineering committee, said the University is taking a risk. But he added, he thinks the risk is “absolutely proper and necessary.”
“The times are changing drastically in health care and we need to take an aggressive, open-minded look at what changes are being done and how to do them better in the future,” he said.
One thing McCullough thinks is coming out of this process is that people are more ready for change.
Brody said the problems of the health center require an “innovative and risky solution” because to do nothing or to make incremental changes isn’t going to work. “You can’t have $10 million to $20 million deficits in your budget and solve it by laying off people, which is what the University has been doing for the last eight years.”
If the solutions don’t work, then you fix them, he said. “Why is it so threatening to people to try something different?”
“Fad Surfing” author Shapiro said there’s a lot of risk involved in re-engineering. The biggest risk in an organization where people are the most important assets is they will go other places or lose enthusiasm and creativity for the work they’re doing, she said.
The institutions that solve problems best are those with leadership that works hard to ensure professionals clearly understand problems and involve faculty in designing solutions to those problems, Shapiro said.
“It’s really important for the University to do this well. You’re a great university, with great faculty and brilliant students. There are real problems in education,” Shapiro said. “You want to make sure solutions strengthen the University.”
Business in academia
Many see movements such as re-engineering at the University as attempts to make the University more like a business. But there is disagreement about whether that is good or bad.
Professor McCullough said he doesn’t think a corporation helping the University restructure is a bad thing.
“An organization like Red Cross or the University, while they don’t do corporate-like activities like … Honeywell or 3M, are organizations with a huge number of people, and amount of money, where output is education and research,” said McCullough, who used to work for Red Cross.
It’s necessary to operate these organizations in a business-like manner, he said. That doesn’t mean they have to do things like Honeywell or 3M do them, and that doesn’t mean a manger makes arbitrary decisions, he said. It means people need to be accountable for what they do. Faculty expertise can be used to establish realistic expectations of faculty performance, he added.
But Richard Poppele, a professor of physiology who is on the re-engineering tenure and governance committee, said he doesn’t think of the University as a business. Instead, it’s a service organization for students and the state. Making the University more business-like could compromise the basis of the institution, which is to seek new knowledge, he said. That isn’t always an efficient process because it involves creativity, he added. “I think we’ve got caught up in short-term returns,” Poppele said.
University President Nils Hasselmo said some University departments, such as public relations and computer services, should be run like a business. “We are an academic community and must function as an academic community, but we have support services that must function like an effective corporation.”
Franks, dean of the Duluth medical school, said he thinks the health center should learn from corporations and apply their best methods. One of the things they do better than the center does is strategic planning, he said. “Some things don’t transfer, but some things do. We’re trying to take the best of both worlds.”
Changes and concernscontinue
Many universities are making major changes in the administrative structure of some of their departments. According to a 1994 study by the American Council on Education, more than three-fourths of large Universities are reorganizing their administrative units, and more than half are reorganizing their academic units.
Many, including Bock, consider the University a pioneer for planning such broad changes.
But while other academic institutions look to the University to see what re-engineering may mean, University administrators and faculty are still trying to figure that out for themselves.”Some of them aren’t quite under the same pressure we’re under” because of intense competition in the Twin Cities health care market, Bock said. “They are looking at us and how we are trying to address these issues.”
Many faculty and administrators agree changes need to be made in the health center’s organization as state funds shrink and competition for research grants heightens.
But answers to questions about details of the restructuring plans and the impact of corporate philosophies at the health center remain to be seen. Knowing there are risks, some faculty and administrators continue to debate whether CSC Index’s reorganizing process is the right way to go about change.
Although Cerra plans to phase out Index, the firm has been here for a year and its philosophies of change have strongly influenced the health center.
Provost Cerra has yet to publicly announce his vision for change. But Under his leadership as provost, the fear some had of Index’s influence has been slightly eased. And as professor Wagenaar said, attitudes about restructuring the health center seem to be changing weekly.
Professor Wells said she remains critical of re-engineering. But added, “It is my hope that re-engineering is evolving into another process that the faculty can take ownership of, that we can take the good from re-engineering, and get rid of the things that we determined were not good.”