Challenges of the new public management in a public hospital

In recent years the Portuguese national healthcare service (NHS) underwent a large reform, with the corporatization of 34 public hospitals in 2002 as a milestone in this process. The main goal of reform was to fight wastefulness and to encourage the best use of resources. The traditional retrospective model of financing hospitals was replaced in the same way by a prospective payment system based on contractualization of healthcare services. There was also the implementation of Activity-Based Costing (ABC) in a few hospitals, as a management accounting system to provide accurate data. The implementation of these New Public Management (NPM) policies, of which the enterprise model and ABC are manifestations, opened the way for research into the impact of NPM policies on a public hospital, based on the result of an in-depth, intensive and longitudinal case study conducted between 2007 and 2012. This chapter shows the impact of those changes on the management of one Hospital-Enterprise Public Entity (EPE), considering the institutional environment in which it operates and in which changes occurred. The findings of the research highlighted the influence of existing institutional logics (namely, the logic of bureaucratic public administration and professional logic) in change processes in the public sector. The logic of bureaucratic public administration, still predominant in the management of public hospitals, hindered development of management according to the principles of logic in business management.