Managing Health Services Organizations & Systems Fourth Edition By Beaufort B. Longest, Jr., Ph.D., Jonathon S. Rakich, Ph.D., & Kurt Darr, J.D., Sc.D.

Excerpted from Chapter 1 from Managing Health Services Organizations and Systems, Fourth Edition, by Beaufort B. Longest, Jr., Jonathon S. Rakich, and Kurt Darr.

Copyright © 2000 by Beaufort B. Longest, Jr., Jonathon S. Rakich, and Kurt J. Darr. All rights reserved. No part of this excerpt may be reproduced or reprinted without permission in writing from the publisher.

Health Services Organizations

Health services are provided through a variety of organizational arrangements. HSOs are entities that provide the organizational structure within which the delivery of health services is made directly to consumers, whether the purpose of the services is preventive, acute, chronic, restorative, or palliative. Historically, HSOs were predominantly independent, freestanding organizations. In a movement beginning in the 1970s and gaining momentum through the 1980s and 1990s, however, many HSOs have joined together to form systems of organizations.

One way to envision the diversity of HSOs is to consider a continuum of clinical health services that people might use during the course of their lives and to think of the organizational settings that provide them. Prebirth, the continuum could begin with HSOs that minimize negative environmental impact on human fetuses or that provide genetic counseling, family planning services, prenatal counseling, prenatal ambulatory care services, and birthing services. This would be followed early in life by pediatric ambulatory services; pediatric inpatient hospital services, including neonatal intensive care units (NICUs) and pediatric intensive care units (PICUs); and both ambulatory and inpatient psychiatric services for children.

For adults, the most relevant HSOs are those providing adult ambulatory services, including ambulatory surgery centers and emergency and trauma services; adult inpatient hospital services, including routine medical, surgical, and obstetrical services, as well as specialized cardiac care units (CCUs), medical intensive care units (MICUs), surgical intensive care units (SICUs), and monitored units; stand-alone cancer units, with radiotherapy capability and short-stay recovery beds; ambulatory and inpatient rehabilitation services, including specific subprograms for orthopedic, neurological, cardiac, arthritis, speech, otological, and other services; ambulatory and inpatient psychiatric services, including specific subprograms for people with psychosis, day programs, counseling services, and detoxification; and home health care services.

In their later years, people might add to the list of relevant HSOs those providing skilled and intermediate nursing services; adult day services; respite services for caregivers of homebound patients, including services such as meal provision, visiting nurses and home health aides, electronic emergency call capability, cleaning, and simple home maintenance; and hospice care and associated family services, including bereavement, legal, and financial counseling.

Health Systems

The continuum of health services outlined previously has been provided traditionally by autonomous or independent HSOs, often in an uncoordinated and disjointed manner. However, many HSOs have significantly changed how they relate to one another. Mergers, consolidations, acquisitions, and affiliations between and among previously independent HSOs are pervasive. At the extreme end of this activity is vertical integration, in which HSOs join into unified organizational arrangements or systems of organizations. This phenomenon of integration is likely to continue into the foreseeable future. In fact, among the most important contemporary developments in the infrastructure of health care is the integration of HSOs into HSs. HSs are formally linked HSOs, possibly including financing arrangements, joined together to provide more coordinated and comprehensive health services.

The development of vertically integrated HSs capable of providing a largely “seamless” continuum of health services, including primary, acute, rehabilitation, long-term, and hospice care, increasingly characterizes the organizational context of health care. Many HSOs participate in a variety of forms of organizational integration, a phenomenon that began in the 1970s and is intensifying.

The most extensively integrated situations arise in the formation of integrated delivery systems, or IDSs (synonymous with organized delivery systems or integrated delivery networks). Whatever the name, these highly integrated systems or networks of HSOs are distinguished by the fact that each “provides or arranges to provide a coordinated continuum of services to a defined population and is willing to be held clinically and fiscally accountable for the outcomes and the health status of the population served.”

Of course not all HSOs are part of HSs. Futhermore, a number of people question the rationale for vertical integration among HSOs and its potential growth. As has been pointed out, if integration among HSOs is to achieve its promise,

there would first have to be a major restructuring of both markets and systems (which, admittedly, is already under way), a removal of barriers that have historically separated providers at the local level, and a significant investment in the components of system building (e.g., integrated information systems) that are essential for ensuring the coordination of care across the full spectrum of healthcare providers and services. And if integrated systems are to achieve the mythical end stage in system evolution — reaching out to communities to serve the needs of defined populations — they will need to evolve competencies heretofore untested and undemonstrated in establishing delivery system modalities. All of this a very tall order, indeed.

Although the question of how far HSOs will integrate remains unanswered, it is a reality that more integration will characterize health services in the future. The implications of HSOs integrating into HSs are considered throughout this book. Whether autonomous or integrated, however, all HSOs and HSs must be managed. Thus definitions of managers and of management are important; they form the substance and focus of this book.

Managers

HSO/HS managers are people formally appointed to positions of authority in organizations or systems who enable others to do their direct or support work effectively, who have responsibility for resource utilization, and who are accountable for work results. In HSOs/HSs this broad definition includes people with titles such as nurse team manager; maintenance director; dietary, surgery, or medical records director or supervisor; director of pharmacy, laboratory, outpatient clinic, social services, or business office; medical director; or president or vice president. The variety of managers in HSOs/HSs can be identified, in part, by the level of the organization at which they work.

Classification schemes typically identify managers as top or senior management, middle-level management, and supervisory or first-level management. Sometimes the classifications are policy level, administrative or coordinative level, and operations level. Griffith distinguishes between decision-oriented and implementation-oriented managers. The former typically are positioned higher in the HSO/HS and help it establish its objectives and address its most sensitive and difficult decisions: “weighing the importance and permanence of environmental changes, recommending budget guidelines, and resolving serious disputes.” Implementation-oriented managers focus more on getting things done, often through direct supervision of others or through leading teams. Regardless of title, level, or orientation, managers have several common attributes: 1) they are formally appointed to positions of authority, 2) they are charged with directing and enabling others to do their work effectively, 3) they are responsible for utilizing resources, and 4) they are accountable to superiors for results.

The primary differences between levels of managers are the degree of authority and the scope of responsibility at each level. For example, senior managers, presidents, or chief executive officers (CEOs) and vice presidents in HSOs have authority over and are responsible for entire organizations — all staff, resources, and individual and organizational results. CEOs are accountable to the governing body. Increasingly, with the rapid movement to more integration, some senior managers are responsible for systems (HSs) with many organizations (HSOs).

Reporting to senior managers are numerous middle-level managers, each of whom is responsible for smaller segments of the organization. Middle-level managers, such as department heads and heads of services, have authority over and are responsible for a specific segment, in contrast to the organization or system as a whole. Finally, first-level managers, who generally report to middle-level managers, have authority over and are responsible for overseeing specific work and a particular group of workers.

Senior-, middle-, and first-level managers are responsible for very different types of activities. But all of these activities are important and no organization can be successful unless the management work at each level is done well and unless the work at each level is carefully integrated with that done at the other levels.

Management

No matter what their level, all managers in HSOs/HSs perform management work. That is, they engage in the process of management. Management is defined as the process, composed of interrelated social and technical functions and activities, occurring in a formal organizational setting for the purpose of accomplishing predetermined objectives through the use of human and other resources. Management at all levels has four main elements:

• It is a process — a set of interactive and interrelated ongoing functions and activities.
• It involves accomplishing organizational objectives.
• It involves achieving these objectives through people and the use of other resources.
• It occurs in a formal organizational setting, whether a single, independent organization or a system of organizations; organizations invariably exist in the context of larger external environments.

By definition, managers in HSOs/HSs focus on establishing and achieving organizational objectives. The scope of managerial work includes providing the organizational context within which direct and support work can be performed effectively. Managerial work also includes preparing an organization or system to deal with both the threats and opportunities in its external environment. Managers influence all work in HSOs/HSs because they influence premises of decisions about work and conditions under which it is done. In effect, managers help shape the culture and philosophy of the organizations or systems that they manage in important ways; more than anyone, they determine the overall performance that is achieved by their organizations or systems.

Structure of the Book

This chapter and the next form Part I, Managing in the Health Services Environment. Chapter 2, “The Health Care System,” is an overview of the system of financing and delivering health services in the United States , including the remarkable impact of managed care and integration on this system. Chapter 3, “Concepts of Organization Design,” provides conceptual background for understanding HSO/HS organizational structures. It contains information on general organization theory, including classical principles as well as contemporary concepts as they relate to organizations and to systems and networks of organizations. Chapter 4, “How Health Services Organizations Are Organized,” details the backgrounds, structures, and functions of various HSOs, including acute care hospitals, nursing facilities, managed care organizations, ambulatory care organizations, hospice, birth centers, and home health agencies. Chapter 5, “How Health Systems Are Organized,” details HS organizational forms and relationships arising as HSOs increasingly join integrated delivery systems and networks. Chapter 6, “Health Care Technology,” provides an understanding of technology in the provision of health services, including its effects, assessment, and management.

Part II, Managerial Tools and Techniques, contains six chapters that detail methods for effectively managing in the HSO/HS environment. In Chapter 7, “Managerial Problem Solving and Decision Making,” the pervasive decision-making function is examined, particularly as it relates to the challenge of solving problems. A problem-solving model is used to structure the chapter. Chapter 8, “Strategic Planning and Marketing,” details how HSO/HS managers establish appropriate organizational objectives and formulate, implement, and control strategies to accomplish them. Chapter 9, “Quality and Competitive Position,” focuses on CQI and productivity improvement. The relationship of CQI to process improvement, as well as methods such as reengineering to improve productivity through better work methods, flows, job design, facilities layout, and scheduling, are discussed. Chapter 10, “Control and Resource Allocation,” presents a general model of control and focuses on controlling individual and organizational work results through techniques such as management information systems, management and operations auditing, and budgeting. Control of medical care quality through risk management and quality assessment and improvement is discussed. The chapter concludes with applications of quantitative techniques that are useful in resource allocation, such as volume analysis, capital budgeting, cost-benefit analysis, and simulation. Chapter 11, “Human Resources and Labor Relations,” addresses human resource acquisition, maintenance, and retention, including recruitment, selection, training, and development. Compensation and benefits administration in HSOs/HSs, including performance appraisal, are described, and a brief discussion of labor relations is presented. Chapter 12, “Organizational Change,” completes this part on managerial tools and techniques by examining the process of change in HSOs/HSs. Because they work in such dynamic organizations, managers in HSOs/HSs must possess knowledge of tools and techniques to make them effective change agents.

Part III, Managing Relationships, contains five chapters that address how managers seek to manage the complex human relationships that exist within HSOs/HSs and among HSOs/HSs and external stakeholders. Chapter 13, “Ethics,” provides a framework that managers can use to understand, analyze, and solve ethical problems that arise. Specific administrative and biomedical ethical issues are included. An introduction to the law and the legal aspects of managing HSOs/HSs is provided in Chapter 14, “Legal Considerations.” Especially useful material on how managers can interact effectively with the legal system and legal counsel. Chapter 15, “Leadership,” differentiates transactional and transformational leadership and models and defines leadership. The extensive literature on leader behavior and situational theories of leadership is reviewed. The final section integrates the theories of leadership. Chapter 16, “Motivation,” presents the concept of motivation, models and defines it, and reviews the literature on content and process theories of motivation. The final section in this chapter integrates the theories of leadership. Chapter 17, “Communication,” concludes this part on managing relationships by examining communication for HSO/HS managers. A communication process model is presented, and its application to communicating within HSOs/HSs and between them and their external stakeholders is discussed.