Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Chapter 1 The Management Challenge of Delivering Value in Health Care: Global and U.S. Perspectives

Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Objectives After completing this chapter, you will be able to: –Understand the challenge of delivering value in health care –Identify the major forces affecting the delivery of health services –Distinguish the similarities and differences in the forces shaping health services globally –Understand why it is difficult to change the health care industry

Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Objectives –Develop a system view of health care delivery –Understand the different types of firms operating in a health care system –Identify, understand, and apply the major perspectives and theories on organizations to real problems facing health care organizations –Develop mental agility in analyzing problems from multiple theoretical lenses

Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Purpose Value: quality provided at same or lower cost relative to other producers Increasing value in health care requires: –Assembling and clarifying alliances –Developing local health care infrastructure –Balancing global and local commitments –Managerial skills

Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. The Challenge: Deliver Value Challenge of value proposed to providers, suppliers and insurers Deliver health care value via: –Improving quality –Improving access –Reducing costs of care “Iron triangle” of health care

Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Challenge of Rising Health Costs: Supply and Demand Side Drivers Health costs: rising steadily over time without restraint Rising costs: consequence of technology and insurance Supply side: costs driven by imperfect information markets Providers’ side: costs due to defensive and acute care and poor coordination

Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved.

Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Other Challenges Exacerbating the Value Challenge Health care firms must deal with: –Meeting demands with finite resources –Addressing chronic care with acute resources –Fostering population-based models –Sharing information while respecting privacy –Incorporating technological advances while restraining rate of growth in cost –Promoting wellness behaviors

Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. The Challenges are Global

Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. The Challenges are Global (cont’d.)

Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Complexity of the U.S. Health Care System At present, U.S. lacks single national health insurance program U.S. system has fully-developed “value chain” Health care industry contains: –Many stakeholders –Divergent interests and perspectives –Entrenched positions

Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved.

Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Why Changing the Health Care System is So Difficult Health care system slow to change due to: –Heavy regulation –Consumerism is newcomer to health care –Influence by medical profession –Reduced competition –Hospital care via nonprofit institutions –Health care delivery largely local –Lack of valid data about quality and cost –Outside business practices have failed

Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved.

Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Systemic Views of U.S. Health Care System’s view important because: –Health outcomes determined by factors outside national infrastructure –Many interdependent players require organization –Value requires effective partnerships –Innovation requires concomitant changes –Organizations consolidate into systems with objective of efficiency

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Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Organization and Management Theory Schools of management thought –Provide conceptual maps of how to deal with internal and external challenges Early writings on bureaucracy and organization –Form of administrative organization operated under legal authority –Weber: capable of highest level of efficiency

Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Organization and Management Theory (cont’d.) Frederick Taylor and scientific management –Emphasized “control” element of bureaucracy Classical school of administration –Unity of command and direction –Subordination of individual to general interest –Centralization and authority –Span of control and departmentalization

Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Organization and Management Theory (cont’d.) Human relations school –Primacy of group structures individual behavior Contingency theory of leadership –Effectiveness of specific management approaches depends on key situational factors Decision-making school –Focus on large cadre of middle managers

Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Institutional Theory Organizations are organisms that adapt to pressures from without and within Firms: –Are limited in degree of rationality by both environment and internal members –Develop distinctive character through a process of institutionalization

Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Open Systems and Resource Dependence Theories Effectiveness of specific management and structural approaches –Depended on firm’s environment, technology, and critical tasks Emphasis on importance of ambidexterity in organizational performance

Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Strategic Management Perspective Three main schools of thought –Industry structure and competitive forces –Emphasis on firm’s distinctive capabilities and resources –Emphasis on firm’s relational capabilities and collaboration with upstream suppliers and downstream distributors and customers

Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Organizational Ecology Environment selects out and retains most appropriate organizational form from existing population of various forms Emphasis on: –Population of firms –Changes in organizational populations due to variation, selection, retention, and competitive forces

Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Social Network Perspective Social networks: formal and informal work groups shape and constrain individual behavior Interaction approach: consequences of interaction and ability to control interactions Structural approach: groups actors by similarities in relations with others

Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. System Perspectives Conceptual model of system integration –Based on functional, physician-system, and clinical integration Embeddedness of patients and clinical micro-systems –Within a larger network of mesosystems and larger macrosystem

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Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Summative Views of Organizational Theory Complementary rather than competing approaches –Distinct levels of analysis –Different strategies for changing organizations –Various suggestions for competencies that managers need to develop Can apply to hospital-physician relationships

Copyright 2012 Delmar, a part of Cengage Learning. All Rights Reserved. Organization Theory and Behavior: A Guide to this Text