Managing Healthcare in the Public Sector


Healthcare is a complex sector to manage at the organizational level, and is even more complex at the systemic level. Healthcare functions in a professional bureaucracy (Mintzberg, 1983), where all professionals gain their authority to practice from their own licensing corporations and where the evaluation of their performance and discipline is done by bodies outside their own organization. This, combined with the added complexity of public-sector administration, turns healthcare management into a real challenge.

Everywhere in the world, healthcare is political: governments play a lesser or greater role in policy determination and system direction. When government invokes public management of healthcare, many new dimensions must be taken into account for managing both the offering of services and the functioning of the system.

Therefore, the purpose of this paper is to describe managing in the public sector and show some of the issues that managers need to be aware of to manage well in this more complex environment.

This paper will examine healthcare management in a universal-coverage, single-payer, public system. It will also examine how the different levels of management are affected by public administration. It will be organized in the following way.

The first section of the paper will consist of a brief historical overview of the Canadian healthcare system. Special attention will be give to the Quebec experience. The second section will concentrate on the theoretical underpinning of the analysis, notably Mintzberg’s (1983) professional bureaucracy theory as well as well as the theory of good governance. The third section will analyze the many issues surrounding the management of the Canadian and Quebec healthcare systems. Finally, the fourth section will present a strategy for regional management in a public healthcare system.

The Canadian Healthcare System

A History of the Canada Health Act

The British North America Act (BNA) (Canada, 1867) defined the role of the federal and provincial governments in healthcare and this division of powers gave the provinces jurisdiction over healthcare. In 1957, the Hospital Insurance and Diagnostic Act proposed shared hospital costs between the federal and provincial governments (Turner, 1958). By 1958, five provinces had joined the program, with Quebec joining in 1961.

In 1960, Justice Emmitt Hall was asked to look at the Canadian healthcare system and make recommendations for the development of healthcare in Canada (Canada, 2005). The levers of the Federal government were, at this point, mainly financial. The Medical act of 1966 offered the provinces to cover 50% of hospital expenditures and 50% of physician expenditures. The provinces, wanting to take advantage of these new funding opportunities, set up their own commissions to put into place the requirements of the law. Quebec set up the Castonguay-Nepveu Commission and, in 1969, the Régie de l’Assurance-maladie was created to pay physicians out of the public purse (Radio-Canada, 1989).

This redefining of the healthcare system in Canada met with a lot of opposition from physicians who were very reluctant to give up their entrepreneurial role in being able to charge their patients what the market and patients could bear. The notion that a more recognized physician could charge more than their colleagues was very symbolic of the independence both from a financial and clinical point of view, and the question of physician recognition was attached to this practice. After much public debate and a strike by physicians (Larmour, n.d.), agreements were reached in each province to a negotiated fee schedule. In return for this limit on entrepreneurial activity, full professional discretion was given to physicians both for clinical activity, control over clinical decisions, as well as overall decision-making for the location and organization of their practice.

This fundamental agreement has had two main structuring impacts:

  • First, it placed physicians, through their Syndicate at the heart of decision making at all levels in the healthcare system through the physicians negotiating body which became their Union in each province.

  • Second, it induced a system where the Physician Unions focused more on protecting the (financial) interests of their members, and not necessarily the most efficient healthcare system.

In 1983 the Minister of Health of Canada, Monique Bégin, proposed the Canada Health Act (Canada, 1985) that was passed into law in 1985. The Act brought forward the five principles that formed the basis of the present Canadian health system. It also contained two lesser requirements that are less well-known.

The first principle stated that health insurance plans must be administered and operated by a public authority, responsible to the government and accountable to the public. This requirement referred only to the administration of the health insurance system – indeed, the act did not refer to public management of the services being offered. Provincial governments also decided that, since the provincial public purse was paying 50% of the costs, management of health services should be done in the public sector. Over time the private provision of some health services, mainly radiology, has been allowed, although it was being entirely paid for by the public sector. As a result of this approach almost 100% of all services offered in healthcare are done through the public sector. Each province also determined that some health services are not insured by the public and therefore remain the responsibility of each citizen. In Canada this represents about 30% of all healthcare expenditure1.

The second principle of a comprehensive system states that all services offered in a hospital and all fees for physician services are covered. Universality is the third principle and ensures that all Canadians are covered. Portability, the fourth principle, means that services are covered across provinces.

Finally, the fifth principle of accessibility ensures that services are available without impediment: no user fees or extra billing for services can be charged in covered areas. However, in this regard, it is important to note that this only applies to the hospital curative system and only to the services of the physicians even if there are other professionals capable of offering the clinical services. An important consequence of this condition lead to physicians working outside the hospital not to be able to charge for the clinical work of their nurses, as payments are made only if the physician did the work or procedure, such as child immunization (12). As a consequence of this very strict interpretation of physician payment – and out of a fear that physicians would abuse the fee for service system by using other professionals to increase their revenue – physicians had to let go of their nursing support. A large part of the lack of accessibility to primary care services and to a multidisciplinary team approach to care is a result of this misguided public policy. Finally, another important consequence of the principle of accessibility is that it gives lots of leverage to the federal government in making sure that provincial healthcare systems do not gravitate toward a privatized or user-fee model. Indeed, federal funding is conditional to accessibility, thus limiting provincial leeway in making changes to the universal coverage model.

There are also two other little talked about conditions in the Canada Health Act. The first required the provinces to provide data to the federal Government on healthcare, as well as to give recognition for the federal funding. The first condition led to the creation of the Canadian Institute for Health Information (CIHI) an arm’s length agency funded by the federal Government and the provinces. The second conditions has been very poorly adhered to by the provinces.

The Quebec Healthcare System

In Quebec, healthcare is the responsibility of government and includes not only the curative components of primary and acute care hospital sectors but also the areas of public health, long term nursing care (especially for the elderly), rehab services, specialized services for the handicapped, long term psychiatric services, home care, palliative care, youth protection, school health, and a multitude of other services including community services supporting different health and social needs of the population. Managing the system is very different from managing the offering of services by a given institution – the integration of care into single organizations is fundamental in managing the system better.

Prelude to the Reform

Issues of accessibility to primary care services, specialty services, and medical technology were becoming a greater complaint of the population. Problems with continuity of care and the difficulty of moving from one level of care to another were causing delays in care leading to poorer outcomes. Managing chronic care and vulnerable patients is very complex since case managers did not have easy fluid access to the different services needed for their patients. The lack of an electronic medical record did not allow for coordinated care and lead to much duplication of diagnostic testing and many medical errors.

The integration of care through the nineties took on different forms and began with the merging of academic teaching hospitals into much larger, multi-site organizations to better coordinate teaching and to develop more integrated research. Governments then introduced \”restructuring” to cut cost by reducing the number of beds and the number of individual autonomous hospital sites across Canada.

Provinces started to look at the reorganization of care mainly through regionalization of services. Health services in a given geographic area were put under the jurisdiction of a single governance structure, with one CEO and board responsible for the delivery of services in their territory.

In the different Canadian provinces, regionalization took on different forms and has evolved over the past fifteen years. British Colombia regrouped all hospitals into five regions, with a sixth region being created for certain province wide services. Alberta started out with a large number of regions for their population and, over time, in different stages, has reduced to one the number of regions. It created the Alberta Health Authority, where a single board and a single CEO are responsible for the delivery of care and the management of the healthcare system. Manitoba, Saskatchewan, New Brunswick, PEI, and Newfoundland followed the trend to regionalization, while Quebec and Ontario developed other regional models for managing the health system. Ontario created fourteen local integrated health networks (LINS) that are not responsible for the delivery of services (Ontario, n.d.). The healthcare institutions in a given region each have their own board and CEO and the role and mandate of the LINS is evolving with time.

Quebec has had a regional model since 1975 and the number of regions – seventeen – has remained stable. Nevertheless, there were attempts to reduce the number to increase efficiencies and provide the regions with the critical mass needed to better manage the system. These regrouping efforts have not succeeded, as each region\’s politicians wanted to keep their own regional structure. Multiple reforms in Quebec have changed the governance structure of health institutions and the powers of the regional authority. Quebec today is considered one of the best-integrated systems due a reform that was introduced in 2004.

The Quebec Reform of 2004

As in the rest of Canada, Quebec was facing the same problems with its healthcare system. Institutions were functioning in silos; there was poor accessibility to care, problems of continuity of care, repetition of services and difficulties in moving from one level to another. There were also excessive wait times for surgery and diagnostic testing, along with overcrowded and improperly used emergency rooms. To respond to these issues, a reorganization of care was introduced with the objective of improving the health of the population by setting specific goals, focusing on prevention and promotion and bringing services closer to the population by developing local networks of care (Observatoire de l’administration publique, 2012). The development of primary care services, where the general practitioner would manage patients care with a multidisciplinary team, was undertaken. The implementation of an interoperable electronic health record to was also done. It enabled the system to better manage patient care and chronic care, and ensure the coordination of care for vulnerable patients.

Two guiding principles helped to design and implement the reform. The first was to introduce a population-based approach, with a responsibility for health improvement given to a specific organization. It ensured access to basic services at the local level, with corridors of service for the more complex and specialized needs of the population. The second principle referred to the hierarchical provision of services. This principle defined primary care responsibility, secondary and tertiary roles and implied the transfer of resources from a hospital-centered, acute care system to a community based comprehensive healthcare system.

To realize these objectives, Quebec was divided into 95 Centre de santé et de services sociaux (CSSS), Health and Social Service Networks. These networks were formed by the merger into a single institution of an acute care hospital, existing primary care services in the CLSC network, long term care centers, rehabilitation centers, home care services, and mental health services. The result was the merger of over 300 independent organizations into 95 and on the island of Montreal 65 into 12. The uniqueness of the Quebec population-based model was that each CSSS covered a geographic area with a population for which it was responsible. Services over different sectors of healthcare, including social services, were integrated into one center to better ensure the continuity of care.

1.1 Mandate and Responsibilities of Health and Social Service Networks After the 2004 Quebec Healthcare Reform


Improve the health and well being of their population

Manage the population\’s needs and use of services within and outside their network.

Manage the services offered by their network in the most efficient and efficacious way possible.


Define their organizational structure and the clinical services offered taking in accordance with the needs of their population.

Mobilize and ensure the collaboration of the professionals, institutions, community organizations and other partners involved in the healthcare of their population.

Organize and coordinate all services offered at the local level.

Manage the human, material, financial, informational and technological resources made available.

Offer a portfolio of general and specialized services to their local population (coordination by service contracts)

Receive, evaluate and direct the population on their territory towards the services they require.

Take charge, accompany, and help vulnerable and chronically I\’ll patients to manage their healthcare needs.

Inform the population of their state of health and the services and programs available.

Ensure the participation of the population in the management of their own health and well being and measure the population\’s satisfaction of the care they receive.

L \’Agence de Santé et Service Sociaux de Montréal

The law (Québec, 2005) introducing the reform also defined the role and powers of regional health authorities in Quebec, called Agences de la santé et des service sociaux (ASSS).

For example, the Montreal region presents particularities that can illustrate the various managerial issues surrounding integrated healthcare. The Montreal region serves a population of 1.9M people and administers a budget of 6.3G dollars, not including physician remuneration. There are 43 public institutions comprising twelve integrated health networks, eight teaching hospitals and institutes, three psychiatric hospitals and the remaining institutions providing specialty services. There are 90,000 employees providing services to the population. Montreal has four Universities with two faculties of medicine and provides most of Quebec\’s teaching in the health sciences.

The role of the Montreal Regional Health Authority (l\’Agence) is different than other regional authorities across Canada in that it is part of a three-tier governance model. Under this model, the ministry of health of the province provides the funding, leadership, vision and strategy for a province wide health system, the agency adapts the provincial strategy to regional needs and then coordinates services among different institutions responsible for the production and delivery of care. L\’Agence does not deliver services nor directly manages the delivery of care to the population.

Table 1.2 The role of l‘Agence

Coordinate services in their region to ensure access, quality and the continuum of care required by their population.

Provide funding to the institutions on their territory a well as to the community groups that have been accredited to provide services.

Sign a management contract with the ministry of health, which defines the funding available, the objectives to be achieved, volume targets, population health objectives and a strategic plan that is to be implemented over the year.

Sign a management contract with each institution in its region containing the same elements as the contract signed with the ministry but now adapted to each institution.

Administer an accreditation process for private long-term residencies.

Evaluate and recommend to Government clinical development relating to new services, new equipment, new construction, new technology (I.T. services)

Evaluate the performance of the institutions in the region relating to financial performance, quality of care, accessibility to care (wait times), client satisfaction, and security and safety of care.

Planning disaster and emergency services for the region in partnership with local authorities.

Evaluate the state of health of the population and determine the health needs of their population.

Implement a strategy of public health, health promotion and prevention.

Ensure the optimization of services through regional efforts that use economies of scale and implement an optimization strategy to ensure the best care at the best price.

Develop and implement a manpower strategy.

Different jurisdictions combine clinical and system management in different ways. Both components need to be well-developed for an efficient and effective health system to emerge. Furthermore, the level of private- and public-sector engagement and the level of decentralization vary considerably from jurisdiction to jurisdiction. Whether the governance model is two tiered as in Alberta or three tiered as in Quebec, or whether more services are provided by the private sector, certain theoretical considerations need to be taken into account. The next sections explore the consequences of managing in the public sector and the importance of strategic management

Managing in the Public Sector – Theoretical Concerns

Managing healthcare publicly or privately has many similarities, but also some important differences. To understand healthcare management, two different areas of management need to be examined. One is the management of the offering of services in the most efficient, effective and pertinent way for the benefit of the patient. In theoretical terms, this is generally defined as value-for-money (VFM). The other is the managing and coordination of care in the system. Managing the continuum of care – the transfer of patients from one level of care to another – and determining the quantity of care needed by the population and the wait times that are acceptable are all part of the coordination of the health system. Three theoretical concepts are of particular importance: the principal-agent problem arising in a professional-bureaucracy context, the strategic management issues linked to interprofessional relationships and the good governance constraints of public-sector management.

The Professional Bureaucracy and Principal-Agent Problems

In his book \”Structuring in Fives\”, Mintzberg (1983) used the category \”Professional Bureaucracy” to describe the management of a hospital or healthcare offering of services, where the professionals offering the services have their license to practice from a granting body of peers and are subject to their discipline. In the case of all professionals excluding physicians, the organization can remove a professional clinician for cause. In the case of a physicians who are not paid by the organization – but rather by the provincial government – it is almost impossible to remove them once they have been given privileges in the institution. This gives the physicians’ council in hospitals and other healthcare institutions a great deal of influence in the clinical organization of the hospital, the implementation of new programs, the acquisition of equipment and new facilities.

A professional bureaucracy within a hospital is typically divided into many zones of power and influence both internal and external to the organization (Mintzberg, 1983). The physician group is by far the most powerful, followed by the nurses and other professional groups. The unions, management, the charity foundation, the women\’s auxiliary, the users committee, and the board are some of the other internal zones of influence. The minister, the ministry, the regional authority, the mayor, the community, represented mainly by community groups, other sister organizations, the university, suppliers and especially the media are examples of external zone of power.

Running a hospital requires the classic components of managing any organization: purchasing, recruitment (HR), finance, infrastructure, etc. The difference, however, is that a hospital receives global funding in the Canadian universal system and, by law, must not overspend its budget. Physicians in the hospital, being autonomous, can – and do – demand different material from supplies, determine the length of stay of a patient and use new often-experimental medicines without asking permission. Physicians work on fee for service and have an interest in increased volume. The administrator has to ensure that the institution remains within budget while being able to satisfy the clinical demands of the physicians who are responsible by law for the patients they admit. This last characteristic of the healthcare institution in the public sector is the real challenge for the CEO.

Agency theory (Eisenhardt, 1989; Jensen & Meckling, 1976) is a conceptual tool particularly suitable for understanding the contractual relations between the parties. Indeed, agency theory focuses specifically on how relations between the two parties in a situation of imperfect information should be governed, as well as on the control mechanisms and incentives that can be used

That literature focuses almost exclusively on the normative aspects of the agency relationship; that is, how to structure the contractual relation (including compensation incentives) between the principal and agent to provide appropriate incentives for the agent to make choices which will maximize the principal’s welfare, given that uncertainty and imperfect monitoring exist. (Jensen & Meckling, 1976, p. 7)

Thus, the fundamental question of agency theory is the following: how, in a contractual relationship with no hierarchical link, is it possible to ensure that the agent work in the interest of the principal? Agency theory implicitly assumes that each party, when willing to enter into a contractual relationship, is motivated by the maximization of its individual utility. Under these conditions, only relationships that provide the right incentives will be effective.

The Professional Bureaucracy and Interpersonal Management

There are, according to Mintzberg (1983), three things a CEO of a professional bureaucracy must do well if they are to succeed and establish the credibility they need to run the organization. First, the CEO must be able to manage conflict between professionals (of the same or different groups), between departments, services, and even within the management team. The ability to negotiate and to seek out compromise is essential to obtaining the respect of the leadership in each zone of influence.

The second skill is the ability to obtain resources for the organization, to develop new projects, new equipment, and new buildings. The recruitment of physicians, researchers, professors, nurses and other staff are examples of the ability to obtain resources.

The third component of a successful CEO is the ability to function well at the interface between the organization and the outside world. To be able to represent the institution well and defend its interests, to be able to communicate such that people are willing to listen and donate funds to the organization. To be able to gain the respect of the media so that the organization is invited to comment on issues of healthcare. The recognition of excellence of the organization and its staff through awards, praise from other associations and peer institutions, and recognition in the literature for an academic health science center are other factors that influence the CEO\’s credibility. In a professional bureaucracy the authority of the CEO does not come from the board but from the credibility and respect that he or she can win from the professionals of the organization.

The Idiosyncrasies of Public-Sector Management

Finally, the specific constraints of public-sector management also come into. Often criticized for being too slow, un-innovative and ridden with red tape (especially when compared to private-sector management), public administration evolves in a very different environment. Indeed, the good governance imperatives, which include concerns such as transparency, accountability and equity, are, by definition, resource-intensive. This generates an image of inefficiency that is hard to. Furthermore, the highly-political environment in which public management operates tends to highlight problems rather than successes:

Public administration operates in a political environment that is always on the lookout for “errors” and that exhibits an extremely low tolerance for mistakes. The attention of the national media, Question Period and the auditor general’s annual report are sufficient to explain why public servants are cautious and why they strive to operate in an error-free environment. […] The point is that in business it does not much matter if you get it wrong 10 per cent of the time as long as you turn a profit at the end of the year. In government, it does not much matter if you get it right 90 per cent of the time because the focus will be on the 10 per cent of the time you get it wrong. (Savoie, 1995, p. 115)

When taken together, the two concerns – the unavoidability of slow-but-democratic processes as well as the politicization of all decisions – generate a very peculiar environment in which public healthcare management must evolve. When contrasted with private-sector management, these concers appear to be even more important and can serve, at the very least, as a basis for identifying contemporary issues in managing in the public sector.

The next section examines the main issues with regards health administration in Quebec and Canada, in light of the theoretical concerns exposed previously, but also in light on the particular history of the Canadian healthcare system.

Managerial Issues in Canadian and Quebec Health Administration

As stated previously, it is important to distinguish between private and public when referring to healthcare. The distinction is in the nature of payment of services, and whether care is universal (with the entire population being insured for the majority of their health needs by the state, or whether each individual is responsible to obtain their own health insurance).

Three categories of managerial issues can be identified: the concerns surrounding strategic management and institutional design; agency and incentives problems in public management, and the political nature of public sector management.

Strategic Management Concerns and Institutional Design

The first set of managerial issues concerns strategic management issues (such as the mission of the organization) and institutional design (structures).

Public Boards

One of the differences of managing healthcare in the public sector is the governing structure of our public institutions. Government defines board composition (composed of volunteers) and each provincial jurisdiction decides its board composition. The management of the organization is very much influenced by these boards. In Quebec, for example, the Government decided to have on the board representatives elected by the population. Elections are held every three years for two members of the 15 to 17 members and the last elections saw only a small fraction of one percent of the population participating (30). There are numerous cases where the unions have organized busloads of elderly people to vote at specific institutions to ensure that their candidate would be elected. The law also has representatives of the hospital\’s staff on the board. In certain situations, the public nature of the board causes multiple problems such as information leaks to the media by board members who are in conflict with the administration.

Board education becomes a very important factor as many newly elected or appointed members are not aware of the board’s role or responsibility. Public boards are often in conflict between the demands they are presented with by staff for their patients and the resources that they have available. This is one of the reasons that there are cycles of deficits, even though the law prohibits such deficits. Board accountability in the public sector is hard to define – and harder to implement – and a lot of training, support and education are needed. Many boards are made up of highly committed people from the private and public sector that give up their time and take great pleasure in helping to manage our public institutions.

Physician Remuneration and Placement

In the Canadian system, physicians are paid directly by provincial governments as required by the Canada Health Act. All fee schedules are negotiated between the provincial government and the unions that represent the physicians in each province. This negotiation influences the direction of the health system and the degree of participation or lack of it that the medical profession is prepared to invest in system development. The most important consequence is the relation between the board, the CEO and the medical staff of the organization as a result of physicians not being employees of their institution. Management in this environment requires special skills because most situations that arise are not specific clinical issues where the physician has full authority, but more organizational and behavioral issues that affect the smooth running of the institution.

Government also determines the placement of physicians, which is a major constraint on the development of organizations. It is especially problematic in academic health science centers, as the staffing needs of those organizations are not necessarily linked to patient demand, but rather to the volume of research being conducted. These regional quotas, often determined on a yearly base, make long-term planning more complicated. Yet, they are necessary to ensure appropriate distribution of physicians to bring care as close to the patient as possible. In the public sector, the government determines the number of residency places available and hence the number of new physicians produced each year. As a strategy to control cost in the public fee for service system government has reduced at times the number of places available. This strategy has led to major errors in manpower planning and has led to physician shortages that lasted many years, given the time it takes to train new physicians (36).

Defining the Mission

In the Quebec system, the government defines the mission of each organization. This constraint of mission exclusivity does not permit certain institutions to offer services that would be more effectively provided within their organization (for example, certain rehab or home care services provided by an acute hospital). The ministry of health defines program areas and funding is provided by program. This has produced silos of care in an environment where the continuity of care is sometimes more difficult to achieve. The transition has been difficult and has led to the most recent reform in Quebec, where healthcare networks were created combining different health missions into a single organization. And although structural integration has been achieved, clinical integration is still a challenge given the historical silos of care.

Public Management, Incentives and Agency Problems

The second set of issues is related to the performance (VFM) issues in healthcare management. In line with the tenants of agency theory, the issues of effectiveness (meeting public policy objectives) and efficiency (through proper incentives) will be studied.

As most big structures, public administration does not deal well with individual initiatives, creativity, entrepreneurship or original thinking. It does not, either, adjust rapidly to new situations. This makes it more difficult to adjust quickly to regional differences in policy application. An example of this situation was the introduction of family practice groups in Quebec. In 2000, the government decided on a strategy to develop family practice groups by offering physicians funding if they grouped together and accept to roster their patients (Québec, n.d.). They would be paid a fee annually for each roistered patient and would, in turn, have to ensure access for extended hours during weeknights and on weekends. Also, they would be provided funds for an information system as well as the service of two nurses.

In Montreal the GPs were less interested in roistering their patients, as they already see many patients in their walk-in clinics. This availability of care is also an important factor in reducing the utilization of emergency room services, which is a very expensive way to see a family physician and creates long wait times. Facing this situation in Montreal, a new model was worked out with the physicians and presented to the ministry. This model was called \”network clinics\”: physicians would accept to provide extended hours, 12 hours weekdays and 8 hours both Saturday and Sunday and would stay open 365 days a year. They would accept as many patients with appointment as walk-ins so to ensure continuity of care. They would also accept new vulnerable patients with no family physician. There would be no roistering so that the walk-in would be open to the entire population. The ministry refused to pay for this model, as it did not follow the defined program, but the Montreal Agence chose to go ahead with the project anyway. It became so successful that the ministry accepted the new model provincially and provided some funding. This highlights the problems – and solutions – that may arise from decentralized management.

Time-Consuming Processes

The public sector tends to be very short-sighted in its investment decisions, thus favoring short-term solutions over longer-term changes. Making decisions in the public sector is a political exercise and takes time to ensure that all the players are on board and that the appropriate compromises have been made to allow moving forward. Managing in the public sector is managing the time and the process to get things done. There are many more stages of approval, more players to involve, more lobbying to be done, and for the manger in the public sector a more complex strategy is required to move organizational projects forward.

Public Tenders

The public sector uses public funds: as such, there is consensus that those funds must be used in a fair and open competition. To ensure efficiency and economy, two contractual tools can be used: public tendering or ad hoc negotiations (Bajari, McMillan, & Tadelis, 2008; Miller, 1975). The public tender has been developed as the tool to ensure that the awarding of public contracts is done in a fair and equitable manner. As the lack of trust grows between the population and their elected officials, the scrutiny over public contracts by the media grows as well. Although empirical evidence shows that ad hoc negotiation often yields better results (Bajari et al., 2008), it is discouraged and sometimes disallowed. This highlights the tensions that exist in public management between efficiency and due process.

For example, at the beginning of 2000, the two major teaching hospitals in Montreal merged their IT efforts under one director for both hospitals and decided to go to public tender for a new IT system. The regional authority had to approve the IT plan and then seek government approval. It was decided at the regional level to add a clause to the tender that stated that, if other institutions on the island of Montreal wanted to use the same system, they could do so as an extension of the contract the companies were bidding on. It was also included in the tender that the Montreal Agence could act as a broker to other Regions if they were interested in piggybacking on the original contract. Many firms bided on the contract and it was awarded according to public tender rules. Close to two years later, the Agence was able to convince the other CEOs in Montreal to join together and accept to implement the same system that the two teaching hospitals had adopted. There was an agreement to pay collectively and it was clear that there would be some economies of scale even though the two university hospitals managed close to 35% of all the acute care beds. The Agence began negotiations for the licenses, implementation, and the ongoing maintenance costs of the city wide project and through negotiations were able to reduce the overall cost almost 50% compared to the cost of the two university hospitals. The company saw much larger organizational benefits from a citywide implementation, never before done in any other jurisdiction, that they were open to some very aggressive negotiation on the part of the agency. This example simply shows that when there is a possibility of negotiations. beneficial agreements can be reached for both sides. Public tenders would gain from being more flexible, although due process needs to remain a concern.

Public Sector Management Is Risk Adverse

The public sector being continually scrutinized by the media and very easily criticized by the public or the opposition in parliament is very reluctant to take risks. When an error is made a scapegoat must be found and this attitude leads to a very conservative, rule-abiding civil service that values accountability more than efficiency. As a result risk, innovation and creativity needs to be encouraged and supported.

The following example illustrates this situation very well. A long-term care institution decided to change its food production method by deciding to prepare all food centrally and distribute the food to each floor. This optimized food production and generated cost savings and more uniform quality. However, the elderly had been used to having their toast in the morning prepared on the unit and the odor of the toast and it fresh crispness was missed. A family member complained to the media and the headlines of an article in the paper clearly criticized the management of the organization for not respecting the elderly. The criticism was also clearly aimed at the minister of health responsible for elderly care in the province, as a political tool of the media to gain attention for their headlines. In this context, it is difficult for managers to initiate new ways of operating even if the benefits clearly out way certain inconveniences. Managers need to feel they are being supported in the public sector to allow them to take certain risks needed to improve care and the operation of the system. This is coherent with Savoie’s statement regarding managerial flexibility (Savoie, 1995).

Lack of Incentives

Management in the public sector is viewed differently in different provinces and attitudes toward senior management are also very different. Management texts talk at great length about the importance of incentives as a driver in striving for excellence. Most organizations use some form of incentives, such as performance bonuses, to encourage staff to meet targets and achieve goals. In Quebec, an attempt was made to provide bonuses: CEOs, by decree, were allowed to earn up to 10% of their salary if their performance was judged appropriate according to certain criteria, for example a balanced budget. The boards in Quebec almost always awarded the 10% to their CEOs because salaries in Quebec were considered both by their board and the CEOs to be very low for their level of responsibility. The media then decided to look at bonuses in the civil service not only healthcare and to publish in the media both salaries and bonuses (TVA Nouvelles, 2010). Public criticism was so strong at the idea that civil servants, who were already overpaid in the publics opinion, should receive bonuses when the government was indicating a deficit that the government decided to remove all bonuses. This highlights the tensions between the public and political nature of public administration and the search of efficiency using incentives-based management.

The Political Nature of Public Sector Management

The fact that the public sector is under the jurisdiction of elected officials defines the nature of its management. Since government are elected for relatively short periods of time, obtaining power and maintaining it becomes the driving force of most political parties. The decisions taken by the party in power always take into account their influence on the next election. Responding to the wishes of major party donors is also a factor in decisions taken by government.

An example of the influence of politics in the implementation of public policy is the Government of Quebec’s decision to pay for in vitro fertilization out of the public purse (Lacoursière, 2010). After having a successful in vitro fertilization procedure (which was paid privately as the procedure had never been covered in the public sector), a television personality, married to a very well-known entrepreneur, decided to begin a campaign to have the procedure paid for by the government. In vitro fertilization has allowed many women having difficulty to have children and give birth to a healthy child. Financing the healthcare system is an ongoing struggle and there are many unmet needs of the population. However, in vitro fertilization also yields much higher rates of low weight babies, multiple births, and other health problems. The question of priorities therefore arises: there was a lot of controversy on the issue and many healthcare providers and managers felt that this should not have been the priority areas of investment if new funds became available. Yet, for political reasons, this program was introduced introduced and some have estimated at a potential cost of $100 million to the healthcare system.

It is the role and responsibility of government to determine policy and the programs it wants to implement. There are many different reasons for certain government decisions and the role of the administrator is to put these decisions into action. Managing in the public sector in healthcare puts a much closer and more direct relation between policy and its execution. It is the direct involvement in the execution of policy of the democratically elected (and thus legitimate) government that distinguishes the public sector management of healthcare from private sector management. Nevertheless, this ability for politics to influence public policy (even in ways that can seem undesirable from a technical point of view) should be interpreted as the necessary consequence of democratic decision-making and accountability.

Many actors play a role in the governance of healthcare. The interaction between these actors needs to be understood clearly by healthcare managers.

Impact of the Media

Since healthcare is a major concern of the population, any issue brought forward by the media will gain attention. The media’s power and influence, the competition for readership and the ability to influence public opinion are all drivers that make healthcare an easy target for media criticism. The headlines in the morning paper fuel the questions of the Opposition during the question period in parliament. Administrators in the healthcare system receive calls early in the morning to provide briefings to the minister’s cabinet on the issues the media has presented. For example, at the Agence in Montreal, there is a team whose role is to monitor the media every morning and prepare briefings for cabinet if need be.

In particular, information regarding manager salaries, expense accounts, bonuses, and travel agendas is closely monitored by media. Requests for information are continually submitted and it is not rare for this data to be published. Public sector scrutiny by the media is a constant concern for managers in healthcare. This (often critical) monitoring of the system influences greatly the perception of the population. For example, recently, the care given to the elderly was criticized heavily by the media and has led many elderly to worry whether they will receive the care they need in the future (Blanchet, 2012). The population sees and hears only negative images of the health care system and its management while in fact the care received,once in the system, is considered by all as excellent.

Impact of Local, Provincial and Federal Members of Parliament

In the Canadian system, local members of parliament represent their ridings; they also support and lobby for those issues beneficial to their riding. Since healthcare is an issue that touches everybody, all healthcare organizations in a riding seek the support of their local deputies to obtain resources, new facilities, new programs, or simply additional funding. Depending whether the local representative has greater or lesser influence within the party, the local institutions will succeed in their requests. This dynamic is thus important for healthcare managers to understand, as influential representatives can help them have access to resources.

Most provinces are divided into regions, and Ministers with specific portfolios are also named responsible for their region’s development. These ministers are very important in influencing the decisions of the minister of health and work hard to obtain resources for their region. Once again the CEO, the board, and the foundation must be involved in the political activity of their riding.

Impact of Elections and Their Timing

Another example of the influence of politics on public sector management is the timing of elections. At the beginning of a mandate, a newly elected government is ready to introduce new reforms, programs, and policy; at the end of a mandate – before an election – the dynamic changes.

For example, the Parti Québécois had been working on a healthcare reform to better integrate healthcare and develop a stronger primary care system. The merging of several institutions into a population-based healthcare center was the core of the reform. The community care and primary care organizations were opposed to the reform, as they were afraid that merging with hospitals would reduce their influence and authority. They were also worried that they might end up coming under the domination of the acute care sector. As the Parti Québécois drew support from community-based organization and since an election was coming up, a decision was made not to introduce the reform. The PQ lost the following election and the newly elected party decided in the first year of its mandate to bring in the reform to integrate healthcare organization into population-based healthcare centers. The reform has since been recognized as one of the most advanced in Canada for supporting an integrated healthcare system and moving to a population-based model of care.

Impact of the Minister of Health\’s Personal Vision and of the Management of the Ministry

Managing in the public sector is also greatly influenced by the minister in charge. Depending on the personality, style, level of knowledge of the sector, personnel interest in the particular ministry and ambition, the impact of the minister will be different on those managing the system. A minister most often manages through his or her ministry, which then manages the system through a deputy minister and his assistant deputy ministers. Healthcare managers are more or less autonomous in managing their institutions or regions depending on the degree of intervention the minister or deputy minister exercises. Given the constraints of managing in the public sector, the level of trust is low and hence the degree of autonomy. A minister or deputy minister who chooses to try and manage the system him/herself risks short circuiting traditional lines of authority, thus making it more difficult for administrators to manage the system.

Impact of the Provincial Medical Associations, Unions and Professional Corporations

In a public healthcare system, the influence of the medical associations, unions, and professional corporations is very important and must be continually taken into consideration by managers. Close relationships should be developed between the leadership of these organizations, the major teaching hospitals and the larger, more influential regions. Not only do these organizations have a strong influence on government, they have influence and often intervene at the local and regional level when their members a not satisfied with a particular direction take. The public nature of healthcare increases greatly the influence, media presence and political impact of these organizations. Often, they even have regional chapters that also must be of concern for the managers.

Discussion and Conclusion: A Strategy for Regional Management in a Public Healthcare System

Regional management of healthcare can be understood in two ways: 1) the management of the offering of services and the coordination and management of the system, or 2), as is the case of the Montreal Agency, only the management and coordination of the system (the actual services being provided by other institutions). Population responsibility is part of regional management and is different from institutional management, where the responsibility is for patients treated within the organization. Developing a strategy for a two-tiered or a three-tiered governance structure has to separate the role of the different levels. The Agence’s strategy focused on the following: defining a clear common vision, developing a strong leadership team, ensuring innovation and creativity, ensuring the transfer of knowledge, and using and supporting all actions with data. These objectives are detailed here.

Defining a Clear Vision

Defining a clear vision is the first priority for any organization. In the public sector the strategic plan of the ministry outlines the direction in which the healthcare system should be moving. However, each region can define its vision, as long as it follows government orientation. To define Montreal\’s vision, it was important that all the CEOs were involved and made a strong commitment to the vision’s realization. Montreal was in a very fortunate situation, as new integrated health and social service centers were being created. This meant that a new board and a new CEO were being chosen by the board and the agency. Once the new centers were in place and the new CEOs chosen, it was very important to create a common healthcare vision that would guide each organization\’s development and become part of each organization’s strategic plan.

A series of trips to study existing healthcare systems were organized with all the CEOs to look at population-based hierarchical systems of care. A one-week study session was designed with the Kaiser Foundation to better understand a managed care model based on primary care. A visit was also organized with the London Strategic Health Authority to study the reform being introduced in Britain. Barcelona, in the Catalan region of Spain, was also looked at, as it had a population-based model of primary care that had been established for more than 20 years. Traveling together also allowed the CEOs to develop a close relationship early on, at a time when no one had experience managing an integrated network. This exchange among the newly appointed CEOs and the discussions around a common vision for the health system in Montreal allowed each CEO not to feel so alone at the beginning of his or her new mandate. A vision for the healthcare system in Montreal emerged and was presented to all the institutions (and their boards) for approval. The vision focused on the following:

  • Developing a strong primary care system through primary care clinics, using a multidisciplinary team to provide managed care;

  • Introducing a chronic care model to manage chronically ill and vulnerable patients;

  • Supporting the empowerment and self-management of patients and their families;

  • Developing the electronic medical record and support the information technology needed to collect, store and distribute the patients’ medical information to all health professionals involved in the patients care, as well as to the patient themselves;

  • Evaluating performance through a set of accepted indicators that demonstrate high quality care at the best-cost possible.

  • Create Trust and Develop Relationships

It was clear from the beginning that the agency was caught between individual organizations (wanting to develop their own organizations) and the government (wanting to control cost, implements policy, and respond to the media and the demands of the population). To be able to execute the regional mandate, it was essential to develop a very close relationship with the CEOs of each of the institutions in the region. The introduction of the reform provided the opportunity to create the Montreal Regional Management Committee (MRMC). This committee was initially composed of the twelve newly appointed CEOs of the health centers and met once every two weeks for a half day to discuss the management of the Region, the development of the organizations it comprised and the implementation of the vision. Eventually the other CEOs joined the committee, which had formed many subcommittees to look at specific issues of care. The same form of management committee was established with the CEOs of other Quebec regions and the deputy and assistant deputy ministers. Another key concern was that the regional strategy must ensure the involvement of the key decision makers. Creating trust, building a strong team of regional leaders, taking into account the local community organizations, professional corporations, unions and the media, and managing the region should be seen as a key success factors.

Ensuring Creativity and Innovation

It was very important from the beginning of the reform to position the Agency as a leader in innovation. This was done to gain attention from the CEOs and their boards so they can present and support new initiatives, but also to demonstrate that the Agence was an important partner with the institutions. Initiatives such as \”Network Clinics\”, chronic care programs, city wide information systems, study programs outside Quebec and performance evaluation models were undertaken. From a regional perspective the Agency must be an added value to the institutions and not seen as only a control mechanism executing the ministry’s instructions. The authority of the Agency comes from the same abilities that Mintzberg (1983) described for CEOs. The ability to manage conflict, to obtain resources and to work on the interface between the region, the government, the media, and the population give the agency the credibility needed to manage the region effectively.

Ensuring the Transfer of Knowledge

The agency is in the ideal position to be the broker of information and the clearing house of knowledge for the institutions in the region, as well as for the government and the other regions of Quebec. This transfer of knowledge allows pilot projects to be distributed to other organizations, ensures that the best practices are in place, compares performance among institutions, and recommends and supports new programs. The role of knowledge broker falls clearly in the mandate of the Agence, the extent to which it succeeds in this role will greatly influence its ability to manage the region.

Using and Supporting Data and Data Collection

A strategy that was adopted by the Agence from the beginning was the need to use data to support best practices. To this end, it was important to support the Montreal institutions in developing a fully integrated information system for the Montreal region. Once the two major teaching hospitals had chosen their system, the Agence was able to convince all the other institutions to accept the same model. Then the Agence, in collaboration with the institutions, accepted to use regional funds to support the project. The agency then negotiated the best deal for the region. Other regions of Quebec are now following suit and many are adopting the same strategy.

The use of data in infection control has played a major role in reducing the infection rates, by allowing the concentration of resources and by convincing the professionals of the changes that were required. Health professionals respond well to data and, when confronted with comparisons that demonstrate best practices, are quite willing to change.

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It is the hope of the author that some of the issues of managing in the public sector have been presented so that managers working or interested in working in healthcare in Canada will better understand them. Canada has universal healthcare system of which we can all be very proud. Nevertheless, some improvements need to be made to offer the kind of care that the population wants today: better access to primary care, better managed care, more information, better access to medical technology, better access to specialists, and appropriate social services, home care and long term care for the elderly. Understanding management in the public sector will allow healthcare administrators to work towards these objectives.


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1 Today Canada has about 70% funding of all health care services by the public sector while 30% of funding is done privately through private insurance, direct payment for service by individuals, and certain other Government agencies such as the automobile insurance agency and workman compensation. This figure is higher than many European countries mainly due to government\’s decision not to publicly fund certain services such as optometry and dentistry. Canada is ranked as a high per capita spender on healthcare, with some of the lowest performance results as measured by the commonly used indicators of health and compared to all OCDE countries (Canadian Institute for Health Information, 2011).