for DR.SAMUELSON ONLY!!!!!

MHCM 6330 CAPSTONE: BUSINESS STRATEGIES

Week 1 Chapter 1 Lecture Material

The Changing Scene

The attention of this chapter is on the health care environment from the 1960s. This background considers the impact of technology, evaluates the

implications of mega-trends, and considers survival strategies and their relationship to professional management.

Major Events

It is noteworthy that the origin of what caused too many hospital beds to be constructed in the nation is found at a time that most are not aware of.

The Hospital Survey and Construction Act (or the Hill–Burton Act) is a U.S.

federal law passed in 1946, during the 79th United States Congress. The Act responded to the first of President Truman's proposals and was designed to

provide federal grants and guaranteed loans to improve the physical plant of the nation’s hospital system. Money was designated to the states to

achieve 4.5 beds per 1,000 people.

Thus, over time this legislation built a hospital in every city, small town, and hamlet in the United States.

Also, it is noteworthy that while the establishment of Medicare and Medicaid

in the mid 1960s did not find its origin in managed care, its economic, delivery systems, and regulatory impact should not be underrated.

An Unprecedented Role for Managed Care

In the 70s MCOs (managed care organizations) made its principle task to

mandate cost reduction which had never occurred in a significant way before in the private sector. The MCO attempted to accommodate pressure for

controlling rising health care cost for corporate America. Ergo, it restricted the use of services and created the utilization of gatekeeper physicians. As

well as, required reduced length of stay for inpatients and shifted focus of care to the outpatient mode of care. Last, and key to today's environment

the MCOs mandated that hospitals and physicians payment contracts be negotiated at deep discounts.

Cause and Effect of the Changing Environment

Survival became the new business strategy. All providers such as hospitals

restructured the organization by closure of services, shuttering entire facilities, downsizing most inpatient facilities, and created regional systems.

It became painfully apparent to the providers and patients of that era that

healthcare in the US would never be organized nor provided the same way

again. It took the birth of a new generation to see the opportunities of the new system.

Survival

So fundamental is the new goal of organizational survival that in today's market it underpins all other goals. The strategies for survival such as

Bureaucratic Imperialism, Co-optation, Hibernation and Adaptation, Goal Succession, Goal Multiplication, and Goal Expansion should be studied in

detail. "No margin, no mission" became the mantra.

From a macro view point, there are many issues that threaten an organization's survival. However, there are two key linchpins that affect all

the issues (1) lack of strong formal leadership (2) and competition from other organizations. These drain energy and resources that should be

goal and mission directed. How you overcome these two threats to organizational survival is the key.

Organizational Life Cycle

This is not the "business life cycle". The organizational life cycle must be

viewed in terms of "growth and development". The analogy of gestation, youth, middle age, and old age is not a good metaphor. The true

organizational life cycle is NOT chronological. It is diagnostic not a sequence of a lineal process. Your organizational may jump from Youth Indicators to

Old Age Indicators based on the product and the market place. The value to you is by assessing which indicators your organization or even you

department exhibits will provide you an indication of where it is in the organizational life cycle. For example, do you have a future with an

organization that has the following indicators: sedate, resistance to change,

energy directed toward survival, managers are in a caretaker role, and last it cannot attract new clients or keep existing clients (Old Age Cycle).