HMGT 320 WEEK 3
BYSTANDER
PeterOlden_2019_Chapter5OrganizingOrg_ManagementOfHealthcar.pdf
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L e a r n i n g O b j e c t i v e s
C H A P T E R 5
O R G A N I Z I N G : O R G A N I Z AT I O N S
Form follows function.
Louis Sullivan, architect
Studying this chapter will help you to
➤ organize positions and departments into complete organizations;
➤ describe, compare, and contrast five different organization structures;
➤ examine the governing body atop the organization;
➤ coordinate work internally throughout an organization;
➤ coordinate the organization with external organizations; and
➤ explain medical staff organization in hospitals.
C o p y r i g h t 2 0 1 9 . H e a l t h A d m i n i s t r a t i o n P r e s s .
A l l r i g h t s r e s e r v e d . M a y n o t b e r e p r o d u c e d i n a n y f o r m w i t h o u t p e r m i s s i o n f r o m t h e p u b l i s h e r , e x c e p t f a i r u s e s p e r m i t t e d u n d e r U . S . o r a p p l i c a b l e c o p y r i g h t l a w .
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M a n a g e m e n t o f H e a l t h c a r e O r g a n i z a t i o n s1 0 4
Here’s WHat HaPPeneD Partners HealthCare is a large, complex organization governed by a board of directors. The corporate-level senior management includes the president/CEO, executive vice president (EVP) of administration and finance, VP of graduate medical education, VP of population health management, VP of human resources, VP of communications, chief clinical officer, chief strategy officer, chief information officer, chief quality and safety officer, senior medical director, and others. Below them are middle managers and lower-level managers responsible for an array of departments. Each department has employees; larger departments also have levels of management. Partners owns and operates academic medical centers, hospitals, physician practices, managed care plans, community health centers, rehabilitation facilities, clinics, hospices, research institutes, and other healthcare organizations (HCOs). Each has an organization structure of managers, departments, and positions. Dozens of committees, teams, and groups—such as transitions teams and a strategy implementation group—help coordinate the many parts into a whole. In addition to this internal organization structure, Partners organizes itself to connect and coordinate with its external envi- ronment. Partners forms interorganizational relationships to link with colleges and universities, insurance companies, suppliers, city government, grant funders, and others in its environment. Managers decide how to organize to fulfill their HCOs’ mission and goals.
A s we continue to study the real-world example of Partners HealthCare, we learn that it created organization structures to achieve its goals and mission. Many managers organize work tasks into positions and departments. Higher-level managers orga-
nize departments into an entire organization. They must then coordinate the departments throughout the organization. Managers apply the principles of hierarchy, span of control, delegation of authority, centralization, line and staff positions, and departmentalization to create the whole organization. Managers also decide how to organize work and positions to connect with the external environment. Newer and lower-level managers must understand this structure to know how their own work unit or department fits into the bigger picture and interacts with other parts of the organization. No department exists independently!
This chapter first provides background information about forming entire organiza- tions and the relevant factors managers should consider. Five forms of organization structure for HCOs are presented, along with their advantages and disadvantages. The chapter then explains methods for coordinating departments within an HCO and for coordinating an HCO with external organizations. Finally, the chapter describes complications that might arise in an HCO and affect how the organization is designed. One complication is the organized medical staff—a unique organization structure found in hospitals.
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C h a p t e r 5 : O r g a n i z i n g : O r g a n i z a t i o n s 1 0 5
or g a n I z at I o n st r u c t u r e s Much of an organization’s structure is reflected in its organization chart. This chapter explains (and illustrates with organization charts) five different forms of organization structure that are used by HCOs:
1. Functional structure
2. Divisional structure
3. Matrix structure
4. Horizontal structure
5. Network structure
Each of these general models has pros and cons. Many HCOs mix elements of these struc- tural forms to create their own hybrid form.
Which structural form is best? It depends, as you might have guessed. This chapter’s opening quote suggests that an organization’s form depends on its function or purpose. Just as the form of a building depends on the building’s purpose, the form of an organization depends on the organization’s purpose. That is why managers must first plan the mission, goals, and purpose of the organization. The structural form of a university organization is different from that of a health insurance organization partly because the organizations have different purposes. What else determines the appropriate structural form? Recall from chapter 4 that an organization may be organic, mechanistic, or a mixture of both types, depending on its external environment, mission, goals, size, work technology, and culture (Daft 2016).
When determining organization structure, managers must consider differentiation among departments and work units. Each department is specialized to perform work that differs from other departments’ work. The emergency, housekeeping, and administration departments do different work, and each department interacts with different parts of the external environment, pursues different goals, and uses different resources and produc- tion methods. Thus, the departments are organized differently. Further, employees in each department have different knowledge, skills, attitudes, behaviors, values, and ways of thinking. Differentiation—the differences in departments’ structures and how their workers think and feel—helps to achieve specialized types of work (Daft 2016). However, differentiated departments eventually must be integrated (coordinated) to work together toward the organization’s overall purpose. Without integration, differentiated workers and departments will work only toward their own department goals and not toward overall organization goals. Integrating departments is explained further in this chapter’s section on coordination.
differentiation
Differences in
departments’
structures and how
their workers think and
feel.
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M a n a g e m e n t o f H e a l t h c a r e O r g a n i z a t i o n s1 0 6
The five organization charts shown in this chapter show five different approaches to organizing departments into a formal organization. Boxes, circles, and other shapes represent positions, departments, and other organization components. Vertical lines between boxes in a chart show the vertical hierarchy (chain of command), reporting relationships, flow of authority, and communication up and down the hierarchy. Boxes also may be connected with horizontal lines to show horizontal relationships. Higher boxes in a chart represent positions with more authority and responsibility. Of course, just drawing boxes and lines does not make an organization. The charts simply represent managers’ ideas about how they want the organization to be structured. To create the desired organization in real life, managers must implement their ideas. Managers create the structure by organizing, staffing, leading, controlling, and doing other work explained throughout this book. When managers create and maintain accurate charts, employees can use the charts to understand how their organization works and how they fit into it (Dunn 2016).
Planning and organizing are closely connected. Chapter 3 taught us that manag- ers must first assess changes, opportunities, and threats in the environment and adapt the HCO to those changes. Adaptation often requires a change in organization structure, such as from a functional to a divisional form. Second, in the planning process, managers assess the HCO’s strengths and weaknesses, which may reveal that the HCO is not working well because it is not organized well. Perhaps middle managers do not have enough authority to act quickly, or perhaps departments are isolated rather than coordinated. If so, then managers will have to redesign the organization. Third, as chapter 3 explained, managers establish goals and then develop plans to implement them. Implementation often includes redesigning the organization structure so that the HCO can achieve the goals. In chapter 3, we read that Partners HealthCare set a goal to reduce the number of readmitted patients. To achieve that goal, managers had to apply organizing principles to redesign tasks, posi- tions, departments, and the organization structure. The Using Chapter 5 in the Real World sidebar gives another example of redesign to achieve goals.
f u n c t I o n a L s t r u c t u r e
The functional structure organizes departments and positions according to the functions workers perform and the workers’ abilities (Daft 2016). In exhibit 5.1, the finance func- tions are organized under a VP of finance, health services functions are organized under a VP of health services, and so on. The vertical hierarchy and chain of command is clear, allowing for much control. This approach consolidates each kind of expertise into one part of the organization. Specialization is strong, so knowledge and skill are strength- ened for finance, for marketing, and for human resources. However, specialization limits
functional structure
An organization
structure that
organizes departments
and positions
according to the
functions workers
perform and the
workers’ abilities.
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C h a p t e r 5 : O r g a n i z i n g : O r g a n i z a t i o n s 1 0 7
exHIbIt 5.1 Functional Organization Chart
VP Finance
President
Board of Directors
VP MarketingVP Human ResourcesVP Health Services
Accounting
Payroll
Budget
Hospital
Clinics
Long-Term Care
Recruiting
Training
Compensation
Sales
Advertising
USING CHAPTER 5 IN THE REAL WORLD
At rural Western Maryland Health System (WMHS), chronic disease care had been pro-
vided through separate, disease-specifi c clinics—a diabetes clinic, a heart disease
clinic, and so forth. This organization structure caused duplication of costly staff, such
as nurse practitioners, dietitians, and pharmacists. Patients with multiple chronic dis-
eases had to schedule multiple appointments and go to different clinics. Then external
changes in insurance payments and incentives drove WMHS to reduce duplication while
achieving quality standards. To do this, managers redesigned their organization struc-
ture. They formed a Center for Clinical Resources that organized care for all common
chronic diseases in one place (physically and organizationally). This change simplifi ed
how patients accessed care for multiple chronic conditions. It increased sharing of staff
and effi ciency. The new organization structure enabled staff to coordinate their care for
patients with several chronic diseases. Staff could now better help patients understand
how to manage all their medications, perform all their self-care, and follow all their
dietary requirements. These improvements reduced expensive emergency department
visits, reduced hospital admissions, and reduced total costs by almost $15 million. Man-
agers changed the organization structure to achieve cost and quality goals and thereby
adapt to change in the external environment (Van Dyke 2016).
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M a n a g e m e n t o f H e a l t h c a r e O r g a n i z a t i o n s1 0 8
employees’ understanding of the whole organization and requires much coordination. Horizontal coordination methods (discussed later in this chapter) are needed to improve collaboration between workers under different functional VPs. For example, liaisons could be assigned to coordinate the finance and health services functions to help manage the costs of health services.
Many HCOs use the functional structure. It is common in smaller, newer orga- nizations. This form is not effective for larger, diversified HCOs in rapidly changing environments because decision making is too centralized (at the top) and becomes too slow. The advantages and disadvantages of the functional form are as follows (Daft 2016; Dunn 2016):
Advantages
◆ Specialized positions grouped in departments
◆ Efficiency, economies of scale, and cost control
◆ Development of in-depth knowledge and abilities
◆ Most effective with only a few products and low complexity
Disadvantages
◆ Slow decision making and innovation
◆ Slow adaptation to changing environment
◆ Functional “silos” focus on their own functional work
◆ Inadequate horizontal department coordination
D I v I s I o n a L s t r u c t u r e
The divisional structure organizes departments and positions to focus on groups of cus- tomers, products, or services rather than on (functional) types of workers (Daft 2016). For example, when an HCO in Towson grows and broadens its range of services, it may change from a functional to a divisional form. Compare and contrast these two forms in exhibit 5.2. What changes do you see?
Positions and departments are reorganized into a hospital division, a clinics division, and a long-term care division. Each division is designed to focus on one type of customer, such as customers who need hospital services. Each division is headed by a separate VP
divisional structure
An organization
structure that
organizes departments
and positions to focus
on particular groups of
customers or services.
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C h a p t e r 5 : O r g a n i z i n g : O r g a n i z a t i o n s 1 0 9
who has appropriate stature and authority. What else do you see? Each division now has its own finance director (and staff), health services director (and staff), human resources director (and staff), and marketing director (and staff). The finance experts are no longer all grouped together as they were in the functional form. Each division now has its own finance knowledge, abilities, and expertise to quickly respond to its own financial affairs and those of its customers. Changes in the environment do not affect hospital, clinic, and long-term care services the same way. The divisional structure recognizes this and gives each division the staff, resources, and decentralized authority to monitor its environment and adjust itself as needed. Doing so may increase the total expense of staff and other resources.
exHIbIt 5.2 Change from Functional to Divisional Structure
VP Hospital VP Long-Term CareVP Clinics
Finance Director
Hospital Services Director
HR Director
Marketing Director
Finance Director
Clinic Services Director
HR Director
Marketing Director
Finance Director
LTC Services Director
HR Director
Marketing Director
VP Finance
President
Board of Directors
VP MarketingVP Human ResourcesVP Health Services
Accounting
Payroll
Budget
Hospital
Clinics
Long-Term Care
Recruiting
Training
Compensation
Sales
Advertising
President
Board of Directors
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M a n a g e m e n t o f H e a l t h c a r e O r g a n i z a t i o n s1 1 0
The HCO must evaluate the increased cost compared to improved sales, revenue, patient experience, and market share. The advantages and disadvantages of the divisional form are the following (Daft 2016; Dunn 2016):
Advantages
◆ Ability to adapt to changing environment
◆ Better patient experience and customer satisfaction
◆ Decentralized, faster decisions
◆ Coordination of functions within each product/service division
◆ Good for larger organizations with several main products/services
Disadvantages
◆ Less efficiency and economies of scale
◆ Product/service “silos” that focus on their own product/service
◆ Less coordination and synergy among all products/services
◆ Less development of in-depth functional expertise
◆ Potential duplication of resources
m at r I x s t r u c t u r e
The matrix structure combines the functional and divisional forms by superimposing horizontal coordination structure on top of vertical hierarchy structure (Dunn 2016). This structure can help an organization achieve efficiency (using vertical lines of authority) while also achieving quality and satisfaction for specific groups of customers, products, and services (using horizontal lines of authority). A matrix organization has advantages of both the functional and divisional forms. This approach is useful when an HCO must simultaneously
◆ efficiently share costly staff and resources among multiple products, services, and customers, and
◆ coordinate staff and resources to create quality products/services and improve customer satisfaction (Daft 2016; Walston 2017).
matrix structure
An organization
structure that
organizes work by
combining functional
and divisional
structures; uses
vertical and horizontal
authority to manage
workers.
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C h a p t e r 5 : O r g a n i z i n g : O r g a n i z a t i o n s 1 1 1
Examine carefully exhibit 5.3. What’s going on in this organization? Functional management positions exist for functions such as human resources, marketing, and finance. The functional managers report up the functional vertical hierarchy to the president. These managers have authority over the lower-level employees who are permanently assigned to them, such as the marketing employees who work under the VP of marketing. These employees all have functional expertise, such as marketing expertise or nursing expertise. On the left side of the organization chart are several divisional managers, who commonly are called product/service line managers. Each of these managers is responsible for a specific product/service (e.g., cardiology, neurology) or group of customers. To meet goals set for a service line (e.g., surgery), the service line manager uses horizontal authority to manage the workers assigned to her service by the functional managers. Imagine Diana is the surgery service line manager at a hospital in San Diego. She must manage employees assigned to surgery by functional managers. That can be challenging.
The matrix structure offers no unity of command for the functional workers. For example, the VP of marketing assigns Sara (a marketing employee) to work on cardiology services. Sara works for—and is accountable to—the cardiology manager and the VP of marketing. Some employees may even report to more than one divisional manager. The VP of marketing might assign Sara to work part-time for the cardiology manager and part-time for the neurology manager. Sara then would have three bosses.
exHIbIt 5.3 Matrix Structure
Executive VP of
Operations
Cardiology Manager
Primary Care Manager
Surgery Manager
Neurology Manager
VP of General Services
VP of
Finance
VP of
Marketing
VP of
Nursing
VP of Human
Resources
President
Governing Body
Source: Adapted from Daft (2016).
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M a n a g e m e n t o f H e a l t h c a r e O r g a n i z a t i o n s1 1 2
Often, HCOs that adopt product/service line management organize into a matrix form. For each clinical service, a service line manager has the authority to adapt that service to unique changes in technology, customer preferences, and other factors affecting that service. The service line manager horizontally coordinates the marketing, finance, service production, and other functions across the service line to achieve goals for that service line. The functional and divisional managers often share authority to lead the same workers, which requires effective interpersonal, conflict resolution, and communication skills.
Some large, complex healthcare systems operate multiple smaller HCOs at different sites that cover much or all of the continuum of care. These systems increasingly are adopt- ing variations of the matrix form in which service line managers coordinate care across all facilities at all locations involved in a specific type of care (Buell 2016). For example, an orthopedic service line integrates all orthopedic care (e.g., diagnostic, surgical, rehabilitative, chronic) delivered to orthopedic patients in dispersed facilities, settings, and locations of the large healthcare system. Each service line may be led by a service line manager or by a dyad (physician and administrator). Allina Health, a large health system based in Minneapolis that has 13 hospitals, uses clinical service lines as its main organization structure to provide care at multiple sites throughout the continuum (Van Dyke 2016). Matrix structures are likely to be used by accountable care organizations to integrate various HCOs and services across the continuum of care (Walston 2017).
Managers use a variation of the matrix design for project management in HCOs (Dunn 2016). Senior managers assign a project manager to each project. The project man- agers replace the service line managers in the matrix chart. Each project manager forms a project team using permanent functional employees from finance, marketing, and other areas to provide skills needed for the project. Employees work their “regular” job while also serving on one or more project teams led by project managers. Outside stakeholders, such as an architect or supply vendor, might also be on project teams.
HCOs can and do create structural variations to fit their unique organization needs. Thus, managers might blend a mostly functional form with the matrix form for just a few medical service lines. The advantages and disadvantages of the matrix form are as follows (Daft 2016; Dunn 2016):
Advantages
◆ Development of both functional and product/service expertise
◆ Efficient, shared use of staff while improving customer satisfaction
◆ Ability to adapt to external changes affecting individual products/services
◆ Coordination and communication across the organization
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C h a p t e r 5 : O r g a n i z i n g : O r g a n i z a t i o n s 1 1 3
Disadvantages
◆ No unity of command; more than one boss for each worker
◆ Potential for confusion, stress, and conflict among workers
◆ Well-developed skills required for communication and conflict resolution
◆ Time and expense required to train staff to work in a matrix
◆ Frequent conflict, requiring time and meetings to resolve
H o r I z o n ta L s t r u c t u r e
The horizontal structure organizes work into several horizontal core processes that are performed by self-managed, multidisciplinary teams of workers. “A process refers to an organized group of related tasks and activities that work together to transform inputs into outputs that create value for customers” (Daft 2016, 116). Examples of core processes are supply chain logistics, new product development, customer acquisition, and order fulfillment. Healthways, a company that improves health and well-being for employers, health plans, and health systems, is organized around five core processes: (1) understand the market, (2) build value solutions and products, (3) acquire and retain customers, (4) deliver solutions and add value, and (5) manage the business (Cummings and Worley 2015).
In the horizontal structure, core processes are performed by self-managed teams of empowered workers who have the necessary functional skills (Cummings and Worley 2015; Daft 2016). Teams have authority to make most decisions without vertical chain- of-command supervision. A process owner is accountable to senior management for the process team’s overall performance, but this position does not use vertical chain-of-com- mand supervision. Instead, the process owner focuses on facilitating the work process and coordinating workers. Team members are trained to perform multiple process activities so they can help throughout the process. This training also prepares workers to use data, resources, policies, and management methods to manage their process. Workers have the authority to use their judgment and make decisions to create value for customers. The process team’s performance is measured according to how well it creates value and increases customer satisfaction.
This structure eliminates traditional department boundaries and vertical hierarchy that may hamper coordination, flexibility, and decision making. As shown in exhibit 5.4, teams, not positions and departments, are the basic component of organizing the horizontal form (Cummings and Worley 2015; Daft 2016). Each team thoroughly understands its customers and their expectations. The team designs its process to create value and ensure customer satisfaction. A team’s workers have varied functional expertise yet continually interact, coordinate, and communicate with each other to perform the team’s process. Thus,
horizontal structure
An organization
structure that
organizes work
into core processes
that are performed
by self-managed,
multidisciplinary teams
of workers.
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M a n a g e m e n t o f H e a l t h c a r e O r g a n i z a t i o n s1 1 4
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C h a p t e r 5 : O r g a n i z i n g : O r g a n i z a t i o n s 1 1 5
workflow and coordination are faster, more agile, and better able to adapt to changes in the external environment, including customers’ needs.
Organizations with highly interdependent activities and a strong customer focus should consider this form; so, too, should organizations in uncertain and changing exter- nal environments. This newer horizontal structure—also called process, boundaryless, and team-based structure—has become more common in recent years (Cummings and Worley 2015). The advantages and disadvantages of the horizontal form are as follows (Cummings and Worley 2015; Daft 2016; Dunn 2016):
Advantages
◆ Intense focus on creating value for customers
◆ Flexibility, efficiency, speed, responsiveness to customers
◆ Focus on the organization rather than own department
◆ Much teamwork and coordination
◆ Integration of varied tasks, activities, and expertise
◆ Fewer layers of management
◆ More responsibility and growth for employees
Disadvantages
◆ Risk of worse performance if organized around wrong core processes
◆ Extensive change of organization structure and management
◆ Resistance by managers and staff specialists
◆ Significant training requirements for new skills, culture, and knowledge
◆ Limited development of in-depth functional expertise
n e t W o r k s t r u c t u r e
Managers of organizations that use the network structure (also called modular structure) outsource tasks, jobs, functions, and departments to other organizations (Daft 2016). The organizations all connect via interpersonal relationships, trust, contracts, information systems, and telecommunications (Cummings and Worley 2015). The top manager is similar to a general contractor who subcontracts (outsources) most work to other organi- zations. The organization might do only what it specializes in and outsource everything
network structure
An organization
structure that
organizes work by
outsourcing much
of it to a network of
other organizations
connected by
interpersonal
relationships,
contracts, and
information systems.
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M a n a g e m e n t o f H e a l t h c a r e O r g a n i z a t i o n s1 1 6
else. For example, a urology group practice focuses on doing urology. The urologists could outsource financial management, information technology, legal services, human resources tasks, marketing, and administration to other organizations. As shown in exhibit 5.5, the network form does not have a vertical hierarchy.
The network structure is a matter of degree; most HCOs contract out at least some work. For a new ambulatory surgical center, this approach enables a fast start, flexibility, and quick growth through partner organizations such as a law firm, an accounting firm, and an advertising firm. Years later, when it is much bigger, the HCO probably will still outsource some work (e.g., legal work) rather than hire its own staff (e.g., an attorney). Even large HCOs contract out some work. For example, many contract with language interpretation companies to communicate with patients who do not know the local prevailing language.
The network structure is used by all sizes of organizations. In large ones, such as global pharmaceutical firms, the network becomes very complex, dynamic, and dispersed. Managers spend much of their time managing the network. They may add new partner organizations, change the amount of work sent to others, renegotiate agreements, strengthen
Outsourced marketing services
Outsourced legal
services
Outsourced production
services
Outsourced accounting
services
College student in
dorm room starts graphic art business
exHIbIt 5.5 Network Structure
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C h a p t e r 5 : O r g a n i z i n g : O r g a n i z a t i o n s 1 1 7
coordination among partners, monitor performance, and make other adjustments to the network. Many HCOs outsource work using a network approach that is so seamless that patients and others do not realize it exists. A manager should always remember that the network approach creates dependencies and risk. Success depends on organizations in the network. Lousy performance by any of them weakens the network. The advantages and disadvantages of the network form are listed here (Cummings and Worley 2015; Daft 2016; Dunn 2016).
Advantages
◆ Quick access to expertise, systems, facilities, and equipment with minimal investment
◆ Flexibility to grow, shrink, and adjust to rapidly changing external environments
◆ Useful for organization specialization and innovation
◆ Less time spent on managing a large, complex organization hierarchy
Disadvantages
◆ Dependence on other organizations for critical services
◆ Risk of failure if outsource partner performs poorly
◆ Time and expense to choose partners, negotiate contracts, and manage relationships
◆ Potentially weaker employee loyalty and commitment
H y b r I D s t r u c t u r e s
The five organization structures explained in this chapter are just a starting point. Manag- ers often create custom structures by combining elements of more than one organization structure. They might start with functional and then add matrix structure for the ob-gyn service line and for the outpatient surgery service line. Or, top managers might create a divisional structure in which each division has its own finance staff and marketing staff, but then take a functional approach in centralizing human resources to ensure consistency of employment practices. The possibilities and variations are endless. If you’ve seen one HCO organization chart, you surely haven’t seen them all!
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go v e r n I n g bo D y Most HCOs (except for small ones) have a govern- ing body at the top of the organization structure. It may be called the board of trustees, board of directors, board of governors, or something simi- lar. The board acts on behalf of the organization’s owners to do what is best for the owners. The owners may be investors, shareholders, citizens, a city, a church, or others. They elect or appoint a board to act on their behalf and to ensure the organization fulfills the owners’ responsibilities. Board members are entrusted with the following responsibilities to govern the HCO for the owners (White and Griffith 2019):
1. The board ensures management capability by hiring and monitoring the performance of the president/CEO, establishing policies for hiring and developing other managers, and maintaining a succession plan.
2. The board establishes the HCO’s mission, goals, vision, values, and strategy each year. It then approves necessary budgets and implementation plans, including major policies.
3. The board monitors the HCO’s performance compared to preset plans, budgets, and targets and ensures implementation of plans to achieve goals. When target performance levels are not met, the board requires explanation and corrective action.
4. If an HCO has a medical staff, the board approves medical staff bylaws, appoints physicians, and monitors their performance.
5. The board reviews its own performance and that of individual members. It ensures that board governance is effective.
Most boards have some members from outside the HCO, such as a realtor or banker, and some from inside the HCO, such as the CEO (and chief of staff if there is a medi- cal staff). The board chooses and appoints its own members. A board might seek people who can bring a certain perspective to the board, such as a physician or a patient. Boards also seek people who can contribute particular expertise, such as in strategic planning or
CHECK IT OUT ONLINE
Search for healthcare organization charts online and see the
wide variety of charts for HCOs. They come in many sizes, struc-
tures, designs, and shapes—including circular and triangular!
You’ll find charts for specific types of HCOs such as health insur-
ance companies, medical groups, home care businesses, con-
sulting firms, hospitals, nursing homes, and others. Some are
the actual organization charts of real HCOs. Check it out online
and see what you discover.
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C h a p t e r 5 : O r g a n i z i n g : O r g a n i z a t i o n s 1 1 9
fund raising. To fulfill its responsibilities, the board appoints members to committees, such as for finance, strategic planning, and quality.
coorDInatIon WItHIn anD beyonD a HeaLtHcare organIzatIon Recall from chapter 2 that coordination is connecting individual tasks, activities, jobs, depart- ments, and people to work together toward a common purpose. We learned how Partners HealthCare does this in the opening Here’s What Happened. Coordination is essential because organizations have become more complex and work has become more specialized and divided up. As mentioned in chapter 1, healthcare stakeholders are demanding better clinical integration of patient care, as well as better patient experience for the nonclinical aspects of healthcare. All of that requires better coordination. Yet, changes in jobs and staff- ing—such as telecommuting, job sharing, flexible work schedules, and a growing number of workers in organizations—create challenges for coordination (Dunn 2016).
Coordination is needed because individual departments affect other departments. For example, the human resources department of an assisted living facility in Orlando must coordinate with all other departments to ensure the right kinds of workers are hired when needed. When departments must share resources (e.g., staff, equipment, office space, information), coordination is essential. Think back to the matrix organization structure, in which staff members are shared among parts of the organization. The departments must coordinate carefully to share workers.
Because HCOs are open systems, they must also coordinate their work with other organizations in the external environment. An HCO in Fayetteville must acquire labor, supplies, information, and perhaps government approvals from other organizations. And, it must have customers, clients, and others who use its products and services. The HCO must organize jobs and departments to connect and coordinate with parts of the environ- ment such as schools, the state department of health, office supply companies, banks, health insurance companies, and others.
Coordination occurs in four directions. An organization needs vertical, horizontal, and diagonal internal coordination (i.e., within the organization). It also needs external coordination (i.e., with other organizations).
◆ Vertical coordination connects work up and down the vertical hierarchy in an organization.
◆ Horizontal coordination connects work sideways across an organization.
◆ Diagonal coordination simultaneously connects work vertically and horizontally in an organization.
◆ External coordination connects work with other organizations.
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c o o r D I n at I o n s t r u c t u r e s a n D P r o c e s s e s
How can healthcare managers strengthen coordination for their HCOs? They can create structures and processes that enable employees to exchange information! Coordination depends on people sharing information, and specific organization structures and processes enable such sharing. The chapter’s opening Here’s What Happened and the Using Chapter 5 in the Real World sidebar gave examples of coordination processes, and examples for an academic medical center are in the following list. Managers must understand all these methods and decide which ones will work best for the kind of coordination required. Many HCOs have been redesigning their organizations to strengthen horizontal coordination by including interdisciplinary teams and project teams. The team approach fits well with millennials, who may like to work in teams.
◆ Hierarchical referral. This is the chain of command used by supervisors and subordinates to exchange information up and down a vertical hierarchy (Daft 2016). The chemotherapy cancer treatment supervisor tells a subordinate nurse which patients she will serve today. During the day, that nurse informs the supervisor of progress on the patient schedule and about an equipment problem in Room 4.
◆ Mutual adjustment. Workers who do not have a supervisor–subordinate relationship informally exchange information to coordinate their work (Mintzberg 1983). They adjust their work and themselves to each other. A maintenance worker and a nurse confer to decide when to replace a light bulb in the ceiling above a patient’s bed.
◆ Rules, plans, and protocols. These coordinate workers for recurring situations or problems. They tell what should be done so workers do not have to ask the supervisor (and perhaps wait for a reply). Work is often coordinated by rules, plans, protocols, and procedures (Daft 2016), which may create standardized outputs and standardized processes. For example, a protocol tells the primary care team which specialists should be consulted for a new diabetic patient.
◆ Information systems. Electronic information systems are used to gather, analyze, arrange, and report information throughout an organization and to other organizations. Each person can decide which information to send to whom to coordinate vertically, horizontally, diagonally, or externally. Wikis, electronic whiteboards, collaborative document-editing tools, meeting management groupware, and project management software may be useful. At the end of each week, the director of medical education uses the management information system to report key performance indicators to selected physicians, department staff, and other stakeholders.
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C h a p t e r 5 : O r g a n i z i n g : O r g a n i z a t i o n s 1 2 1
◆ Liaison. A liaison is an employee of one department whose job includes coordinating that department’s work with another department (Daft 2016). This liaison may have a particular type of expertise to share with the other department that helps coordinate the departments. For example, a purchasing specialist from the supply chain department serves as a part-time liaison to the emergency department to coordinate purchasing and inventory of costly supplies.
◆ Full-time integrator. This job devotes all of its time to coordinating multiple departments or other organization units. The integrator does not directly supervise these departments, nor is the integrator an employee of any of the departments (Daft 2016). The product/service line managers shown in matrix organizations in this chapter are full-time integrators. So, too, are the project managers described in chapter 3 and earlier in this chapter. For example, a project manager integrates employees from six departments to jointly implement the expansion and relocation of the data analytics department. Note that although a job whose title includes the word coordinator might seem to be a full-time integrator job, in some cases the job does not really include much coordination work (Dunn 2016).
◆ Task forces, teams, committees, councils, and other groups. These groups bring together representatives of multiple departments (and other parts of an organization) to directly coordinate the departments’ work (Daft 2016). Members exchange information, plan activities, and make joint decisions to coordinate their activities. Groups can be expanded to include people from outside the organization. Task forces are temporary; teams, committees, and councils tend to do longer-term work (Daft 2016). For example, the faculty diversity committee coordinates the work of academic departments and professional staff to increase diversity of the faculty.
◆ Relational coordination. When organizations use relational coordination, “people share information freely across departmental boundaries, and people interact on a continuous basis to share knowledge and solve problems” (Daft 2016, 100). A culture of openness, trust, teamwork, and flexibility, along with an extensive web of cooperative working relationships among employees, creates the coordination. Much time and effort are needed to gradually develop such coordination. For example, senior clinical managers established shared performance goals and shared performance rewards to develop more relational coordination among the clinical services.
◆ Boundary spanners. These employees coordinate their organization with organizations in the external environment. They do so by working across the
integrator
A person who works
full-time coordinating
the work of multiple
departments toward a
common purpose.
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M a n a g e m e n t o f H e a l t h c a r e O r g a n i z a t i o n s1 2 2
boundary of their own organization. They might send information from their organization into the external environment and other organizations. Or, they might gather information from external organizations and bring it into their own organization (Daft 2016). Recall from chapter 1 that the environment may be divided conceptually into sectors for human resources, supplies, funds, customers, and so forth. Specific jobs can coordinate an organization with specific sectors of the environment. For example, a talent recruiter from the medical center met with staff at several local colleges (in the human resources sector) to discuss job opportunities for graduates.
◆ Contracts and other agreements. Organizations commit to contracts to coordinate their work with that of other organizations. Two people representing two organizations may reach a simple agreement with a brief meeting and handshake. Managers and attorneys negotiate complex contracts that require several meetings and many pages of terms and conditions. For example, the contract between the medical center and construction company coordinated ten months of work to build a genetics research laboratory.
Managers also formally connect their HCO with other organizations by using interorganizational structures such as alliances, mergers, joint ventures, accountable care organizations, hospital systems, supply chains, networks, and independent practice associa- tions. An HCO uses these interorganizational structures to link with one or more other organizations in its environment to achieve its goals. These structures may connect two or more organizations . . . sometimes hundreds!
As we read in chapter 1, many HCOs are joining with others, and this trend will continue. For example, in this chapter we saw that Partners HealthCare is made up of numerous HCOs that together form an integrated health system. Blue Cross health insur- ance companies throughout the country are members of the national Blue Cross Blue Shield Association. Many independent physician practices in western New York State have joined the Greater Rochester Independent Practice Association (2017) to gain access to customizable care management services and tools. In these interorganizational arrangements, independent HCOs give some of their power and resources to the alliance, joint venture, or network. In return, they expect to gain benefits such as cheaper prices for equipment, access to innovations, or better reimbursement payments. HCOs use legal documents, bylaws, contracts, and other mechanisms to structure these new organizations and coordinate work among the member HCOs.
Recalling a trend reported in chapter 1, HCOs are implementing coordination methods to integrate clinical care throughout the continuum (Hegwer 2016). Care histori- cally has been fragmented, but now managers are strengthening coordination because of payment changes that reward coordinated care. Managers and clinicians use standardized care plans that specify how care is to be coordinated with other members of the healthcare
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C h a p t e r 5 : O r g a n i z i n g : O r g a n i z a t i o n s 1 2 3
team. Electronic medical records and other information technologies communicate informa- tion to staff to help them coordinate care. Liaisons and integrators—such as transition care specialists, practice facilitators, and service line managers—coordinate care across multiple departments, facilities, and locations. Interdisciplinary teams and other groups coordinate care among multiple departments and professions. Alliances and joint ventures connect HCOs with other organizations (both HCOs and non-HCOs) in their communities to coordinate care throughout the continuum. Managers use these methods to better coordinate transitions of care, in which a patient moves from one facility (e.g., primary care office) to another (e.g., hospital) and then another (e.g., rehabilitation center) and then home. Gaps in transition coordination were common in the past and resulted in higher costs and poorer health (Bosko and Gulotta 2016). Now managers use coordinating structures and processes described in this chapter to avoid gaps during transitions and thereby improve population health.
co m P L I c at I o n s Managers can use the models and principles explained earlier in this chapter to organize HCOs. When doing so, they should consider two complications that occur in some HCOs.
c o n t r a c t D e Pa r t m e n t s
Do you remember learning in chapter 4 about contract workers who fill positions in HCOs? In some cases, these contract workers are not limited to just a few temps from a nursing agency. An even more interesting—and potentially complicated—situation is when an HCO
TRY IT, APPLY IT
Your college or university is an organization with many units, such as departments,
centers, offices, and so forth. Which parts have to coordinate with others? Which coor-
dination methods are used? Think about how your college or university would use the
coordination methods discussed in this chapter. Describe a situation in which hierarchi-
cal referral would be used to coordinate work. Then describe a situation in which mutual
adjustment would be used. Try to do the same for rules, information systems, liaisons,
full-time integrators, committees, relational coordination, boundary spanners, and con-
tracts. Then discuss your ideas with other students.
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contracts with an outside company to operate an entire department, such as food service or housekeeping. This type of contracting is similar to the network outsourcing approach except that the external company puts its own employee in the HCO’s department manager position (e.g., food service manager). In some arrangements, the outside company installs its own workers in other positions (e.g., dietitian, lead cook). People in these positions work inside the HCO with HCO workers but work for (and are paid by) the outside company. Here, too, the unity of command can be violated. The HCO’s top managers must decide how much authority to delegate to the food service manager if the position is held by an outside person who is not on the HCO payroll. Coordination with other parts of the HCO may be awkward if other employees question the food service manager’s loyalties. These arrangements work fine in many HCOs, but they can cause problems and confusion if not organized well. Top managers must devote care and attention to formally stating how the contract workers (and department) fit in the organization structure.
P H y s I c I a n s a n D t H e o r g a n I z e D m e D I c a L s ta f f I n a H o s P I ta L
As we learned in chapter 4, medical positions and physicians can complicate how manag- ers organize HCOs. In this chapter, we study another aspect of physicians in HCOs: the organized medical staff of a hospital. Although hospitals are not all alike, the following discussion offers a general explanation of the medical staff structure. However, keep in mind that because of external forces, hospitals are trying new approaches to integrate the medical staff with their management hierarchy. The separation of the clinical structure and administrative structure has been disappearing. There is much variety, and if you’ve seen one hospital organization chart . . . you’ve seen one hospital organization chart.
A hospital has a bureaucratic structure designed by managers using the organizing principles explained in this chapter. It also has a medical staff structure comprising physi- cians (and, if hospital bylaws allow, dentists and other clinical professionals). Together, these structures are sometimes referred to as a dual structure. The medical staff is organized into departments and divisions for medical specialties (e.g., oncology) and subspecialties (e.g., dermatologic oncology). The hospital board of directors delegates to the medical staff the authority and responsibility for medical care in the hospital. The board of directors also dictates that physicians and the medical staff must comply with hospital bylaws, policies, and standards. These are generally based on laws, regulations, accreditation requirements, national or state guidelines, professional norms, and other external criteria. Physicians design their medical staff structure and expect some degree of autonomy.
The organized medical staff is essential to fulfill the hospital’s goals and mission. Yet, the medical staff structure may or may not be shown in detail on a hospital organiza- tion chart. The structure might be depicted by a medical staff box connected to a board of director’s box or a CEO box at the top. In a large academic medical center, the medical
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C h a p t e r 5 : O r g a n i z i n g : O r g a n i z a t i o n s 1 2 5
staff often consists of the medical school faculty organized as a separate entity that contracts with the hospital—shown on the main organization chart as a box connected to the top of the administrative structure. Sometimes the two structures are separate and appear this way on the organization chart. In other hospitals, the two structures are partly or almost completely blended together into one structure. For example, physicians and the medical staff hierarchy and committees may be shown reporting to a VP of medical affairs, who reports to the hospital CEO. Another approach is to appoint both a physician (as a clinical comanager) and a nonphysician (as an administrative comanager) for each medical depart- ment or service line (e.g., neurology, cardiology, pediatrics). Many structural variations exist.
In recent years, the trend has been to combine the clinical and management structures more tightly for better interaction and accountability. This combination enables physicians and hospitals to improve patient care, strengthen finances, manage population health, and adapt to the external environment and demands of stakeholders. The medical staff and the management team appoint liaisons to each other’s committees, councils, and departments to help coordinate their work. The chief of the medical staff and a few other physicians may serve on the board of directors. Administrative representatives attend meetings of the medical staff and its departments and committees. In the administrative structure, some departments or service lines have a nonphysician administrative manager and a physician as codirectors (in a dyad model). A hospital might assign codirectors to specific problems that involve both medicine and administration, such as patient safety or patient care qual- ity. Disagreements are inevitable, so leaders of the medical staff and management team (sometimes with the board of directors) must be ready to resolve conflicts. These two structures—the traditional organization hierarchy and the medical staff hierarchy—coexist and together form the total hospital organization.
Within the medical staff are physicians with different relationships to the hospital, as mentioned in chapter 4. Some physicians are based in the hospital, such as radiologists, emergency physicians, and hospitalists. Others are based in the community in their physi- cian office practices. They all must obtain hospital privileges to perform medical work in the hospital. Some physicians work in the hospital’s administrative structure—such as a VP of medical affairs—and are employed and paid by the hospital.
Confused? If so, you are not alone. Even experienced hospital managers sometimes feel a bit confused, because there are
◆ different types of hospitals,
◆ different types of jobs and positions filled by physicians in hospitals,
◆ different types of relationships between hospitals and physicians, and
◆ both administrative and medical staff structures that are interrelated in varying ways.
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To make things even more interesting, these relationships are continually evolving to adapt to the trends and developments in healthcare discussed in chapter 1.
This discussion of physicians and the medical staff in an HCO has revealed several general points. First, physicians may fit into a hospital organization structure in a variety of ways. Managers should not assume all physician–hospital relationships are alike. They must examine and understand each one individually.
Second, physicians have authority and responsibility for medical care, whereas man- agers have authority and responsibility for administrative matters. However, the boundary between medicine and administration is blurred, which creates conflicts between managers and physicians. Hospital patient care employees may be directed by both physicians and managers, so unity of command can be violated.
Third, hospitals have an administrative hierarchy (shown in the hospital organization chart) and a medical staff hierarchy (not always shown in the hospital organization chart). These hierarchies have been merging in recent years. Several organization structures are used to coordinate the medical staff and administration, including medical–management committees, physician–administrator dyads, appointment of managers to medical staff committees, and liaisons between the medical staff and administration. Medical staff repre- sentation on the hospital board of directors is an organization structure that provides direct input from the medical staff to the board for policies that affect the practice of medicine.
Also recall from chapter 4 that physicians have power and influence based on their medical expertise, which confers high status and affects their relationships with others. Managers, of course, have their own expertise—management—and the authority of their positions. Yet, they should be careful about when and how they assert their managerial authority while working with physicians, who expect autonomy based on professional expertise. Ongoing collegial discussion can resolve problems, though managers must some- times assert authority—for example, to obtain physicians’ compliance with accreditation standards and licensure requirements.
Managers must decide how to organize and coordinate work to accomplish goals and adapt to the external environment. Thus, organizing is closely tied to planning. Lower-level managers organize tasks into positions and departments; higher-level managers organize departments into an entire organization. They decide which departments to group with others for close interaction, and they arrange coordination of departments throughout the organization. Because it is an open system, the organization must be linked to other organi- zations and people in its environment. Managers use hierarchy, span of control, delegation
o n e m o r e t I m e
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C h a p t e r 5 : O r g a n i z i n g : O r g a n i z a t i o n s 1 2 7
of authority, centralization, line and staff positions, and departmentalization to create the whole organization.
Managers organize HCOs to generally follow one of five structures:
1. Functional structure organizes departments and positions according to the func- tions workers perform and the abilities they use.
2. Divisional structure organizes departments and positions to focus on particular groups of customers or services.
3. Matrix structure organizes work by combining functional and divisional forms; it uses vertical and horizontal authority to manage workers.
4. Horizontal structure organizes work into core processes that are performed by workers in self-managed teams.
5. Network structure organizes work by outsourcing much of it to a network of other organizations connected by interpersonal relationships, contracts, and informa- tion systems.
Each of these five structural forms has pros and cons. Managers often combine ele- ments of more than one organization form to create a mixed hybrid structure. Thus, much variation exists as HCOs organize based on their unique combination of environment, mis- sion, goals, size, work, technology, and culture.
HCO managers coordinate departments vertically, horizontally, diagonally, and with external organizations using various structures and processes. These include hierarchical referral; mutual adjustment; rules, plans, and protocols; information systems; liaison roles; full-time integrators; task forces, teams, committees, councils, and other groups; relational coordination; boundary spanners; and contracts and other agreements. Most HCOs have a governing body (or board) at the top of the organization structure to act on behalf of the own- ers and take ultimate responsibility for the organization. Contract departments in HCOs and the medical staff structure in hospitals complicate how these organizations are managed.
FOR YOUR TOOLBOX
• Functional structure
• Divisional structure
• Matrix structure
• Horizontal structure
• Network structure
• Coordination structures and processes
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M a n a g e m e n t o f H e a l t h c a r e O r g a n i z a t i o n s1 2 8
1. Discuss the pros and cons of the functional structure versus the divisional structure.
2. Explain the matrix structure. What are its pros and cons?
3. Discuss what you believe are the most important responsibilities of a governing board.
4. Describe at least four ways managers can coordinate work among departments within an HCO.
5. Some HCOs do not design their organization structure using just one of the five structures discussed in this chapter. Instead, they begin with one structure and then modify it—sometimes creating a unique organization structure. Why might that be a good idea?
6. In a hospital, how does the medical staff complicate the traditional management organization hierarchy? What challenges does the medical staff create for administrative managers?
These questions refer to the Integrative Case Studies at the back of this book.
1. “I Can’t Do It All!” case: Based on the information in this case, draw a functional organization chart for Healthdyne. Assume Healthdyne grows and Mr. Brice wants to reorganize Healthdyne with a West Region and an East Region. Draw a new organization chart for Healthdyne.
2. Managing the Patient Experience case: Explain how various coordination methods from this chapter could be used to coordinate patient experience work at Academic Medical Center.
3. The Rocky Road to Patient Satisfaction at Leonard-Griggs case: Based on the information in this case, draw an organization chart for Leonard-Griggs. Use one of the five organization structures presented in chapter 5, or a variation of one. Explain the rationale for your chart.
f o r D I s c u s s I o n
c a s e s t u D y Q u e s t I o n s
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C h a p t e r 5 : O r g a n i z i n g : O r g a n i z a t i o n s 1 2 9
Bosko, T., and B. Gulotta. 2016. “Improving Care Across the Continuum.” Journal of Health-
care Management 61 (2): 90–93.
Buell, J. M. 2016. “Clinical Integration: The Future Is Here.” Healthcare Executive 31 (1):
10–16.
RIVERBEND ORTHOPEDICS MINI CASE STUDY
Riverbend Orthopedics is a busy group practice with expanded services for orthopedic
care. It has seven physicians and a podiatrist, plus about 70 other employees. At its big,
new clinic building, Riverbend provides extensive orthopedic care. Several technicians
provide diagnostic medical imaging, from basic X-rays to magnetic resonance images.
The physicians perform surgery in their own outpatient surgery center with Riverbend’s
own operating nurses and technicians. Therapy is provided by three physical thera-
pists and one part-time contracted occupational therapist. In addition to staff provid-
ing actual patient care, the clinic has staff for fi nancial management, medical records,
human resources, information systems/technology, building maintenance, and other
administrative matters. Occasional marketing work is done by an advertising company.
Legal work is outsourced to a law fi rm. Riverbend is managed by a new president, Ms.
Garcia. She and Riverbend have set a goal of achieving “Excellent” ratings for patient
experience from at least 90 percent of Riverbend’s patients this year.
During a conversation at lunch, Dr. Chen tells you he thinks more coordination is
needed to reach the patient experience goal. He asks you about tools and methods to
consider for improving coordination at Riverbend Orthopedics.
mInI case stuDy QuestIons
1. Using information from the case and chapter, draw an organization chart for River-
bend Orthopedics. Explain your organization structure. You may make reasonable
assumptions and inferences.
2. What would you tell Dr. Chen for improving coordination?
r e f e r e n c e s
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L e a r n i n g O b j e c t i v e s
M a n a g e m e n t o f H e a l t h c a r e O r g a n i z a t i o n s1 3 0
Cummings, T. G., and C. G. Worley. 2015. Organization Development and Change, 10th ed.
Stamford, CT: Cengage Learning.
Daft, R. L. 2016. Organization Theory and Design, 12th ed. Mason, OH: South-Western
Cengage.
Dunn, R. T. 2016. Dunn and Haimann’s Healthcare Management, 10th ed. Chicago: Health
Administration Press.
Greater Rochester Independent Practice Association. 2017. “About Greater Rochester Inde-
pendent Practice Association.” Accessed November 26. www.gripa.org/About/Our-Story.
Hegwer, L. R. 2016. “5 Ways to Support Clinical Integration.” Healthcare Executive 31 (1):
18–25.
Mintzberg, H. 1983. Structure in Fives: Designing Effective Organizations. Englewood Cliffs,
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