Management Principles for Health Professionals

Seventh Edition

Joan Gratto Liebler, MA, MPA, RHIA Professor Emerita

Health Information Management Temple University

Philadelphia, Pennsylvania

Charles R. McConnell, MBA, CM Consultant

Human Resources and Health Care Management Ontario, New York

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Library of Congress Cataloging-in-Publication Data

Names: Liebler, Joan Gratto, author. | McConnell, Charles R., author. Title: Management principles for health professionals / Joan Gratto Liebler, Charles R. McConnell. Description: Seventh edition. | Burlington, MA : Jones & Bartlett Learning, [2017] | Includes bibliographical references and index. Identifiers: LCCN 2015048788 | ISBN 9781284088007 (pbk. : alk. paper) Subjects: | MESH: Health Services Administration | Health Facility Administration | Health Personnel—organization & administration | United States Classification: LCC RA393 | NLM W 84 AA1 | DDC 362.1068—dc23 LC record available at http://lccn.loc.gov/2015048788

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Contents

Preface About the Authors What’s New in the Seventh Edition

Chapter 1 The Dynamic Environment of Health Care The Dynamic Environment of Health Care Client/Patient Characteristics Trends Relating to Practitioners and Caregivers The Healthcare Setting: Formal Organizational Patterns and Levels

of Care Laws, Regulations, and Accrediting Standards The Impact of Technology Reimbursement and Patterns of Payment The Managed Care Era Who is Really Paying the Bills? Reimbursement System Weaknesses Social and Ethical Factors The Role Set of the Healthcare Practitioner as Manager Management as an Art and a Science Exercise: Becoming a Split-Department Manager Notes

Chapter 2 The Challenge of Change The Impact of Change The Manager as Change Agent Review of Successful Change Change and Resistance to Change One More Challenge: The Patient Protection and Affordable Care

Act of 2010 Case: In Need of Improvement?

Chapter 3 Organizational Adaptation and Survival The Organization as a Total System The History of Management

The Systems Approach Formal Versus Informal Organizations Classification of Organizations Classification of Healthcare Organizations Classic Bureaucracy Consequences of Organizational Form The Clientele Network Clients Suppliers Advisers Controllers Adversaries Coalitions for Building Community and Client Involvement Example of Clientele Network for a Physical Therapy Unit Introducing Organizational Survival Strategies Bureaucratic Imperialism Co-Optation Hibernation and Adaptation Goal Succession, Multiplication, and Expansion Organizational Life Cycle Notes

Chapter 4 Leadership and the Manager Change and the Manager Why Follow the Manager? The Concept of Power The Concept of Influence The Concept of Formal Authority The Importance of Authority Sources of Power, Influence, and Authority Restrictions on the Use of Authority Importance of Delegation Leadership Some Final Thoughts about Authentic Personal Leadership Case: Authority and Leadership: Rising from the Ranks Case: Discipline and Documentation—Here She Goes Again Notes

Chapter 5 Planning and Decision Making Characteristics of Planning Participants in Planning The Planning Process Planning Constraints or Boundaries Characteristics of Effective Plans Core Values, Philosophy, Heritage Statement, and Mission Overall Goals Objectives Functional Objectives Policies Procedures Methods Rules Project Planning Elements and Examples of Major Projects The Plan and the Process Decision Making Decision-Making Tools and Techniques Exercise: From Intent to Action: The Planning Path Exercise: Plans Are What? Exercise: Goals, Objectives, and Procedures Case: Paid to Make Decisions? Notes

Chapter 6 Organizing and Staffing The Process of Organizing Fundamental Concepts and Principles The Span of Management Line and Staff Relationships The Dual Pyramid form of Organization in Health Care Basic Departmentation Specific Scheduling Flexibility in Organizational Structure The Organizational Chart The Job Description The Management Inventory The Credentialed Practitioner as Consultant

The Independent Contractor Guidelines for Contracts and Reports Exercise: Creating Organizational Charts Exercise: Developing a Job Description Appendix 6–A: Sample Contract for a Health Information

Consultant Appendix 6–B: Sample Cover Letter and Report

Chapter 7 Committees and Teams The Nature of Committees The Purposes and Uses of Committees Limitations and Disadvantages of Committees Enhancement of Committee Effectiveness The Committee Chairperson Committee Member Orientation Minutes and Proceedings Where Do Teams Fit In? As Employee Involvement Increases Employee Teams and Their Future Exercise: Committee Structures Case: The Employee Retention Committee Meeting

Chapter 8 Budget Planning and Implementation The Revenue Cycle The Budget Uses of the Budget Budget Periods Types of Budgets Approaches to Budgeting The Budgetary Process Capital Expenses Supplies and Other Expenses The Personnel Budget Direct and Indirect Expenses Budget Justification Budget Variances The General Audit Sample Budget: Health Information Service

Exercise: Adjusting the Budget

Chapter 9 Training and Development: The Backbone of Motivation and Retention

Employee Development Orientation Training Mentoring Clinical Affiliation/Clinical Practice Program and Contract Exercise: What to Do When Budget Cutting Threatens Training? Case: The Department’s “Know-It-All” Appendix 9–A: Training Design: Release of Information

Chapter 10 Adaptation, Motivation, and Conflict Management Adaptation and Motivation Theories of Motivation Practical Strategies for Employee Motivation Appreciative Inquiry Motivation and Downsizing Conflict Organizational Conflict Discipline The Labor Union and the Collective Bargaining Agreement Labor Unions in Health Care: Trends and Indicators Case: A Matter of Motivation: The Delayed Promotion Case: Charting a Course for Conflict Resolution—“It’s a Policy” Notes Appendix 10–A: Sample Collective Bargaining Agreement

Chapter 11 Communication: The Glue That Binds Us Together A Complex Process Communication and the Individual Manager Verbal (Oral) Communication Written Communication Communication in Organizations Orders and Directives Case: The Long, Loud Silence Case: Your Word Against His

Notes

Chapter 12 The Middle Manager and Documentation of Critical Management Processes

The Strategic Plan The Annual Report The Executive Summary Major Project Proposal Business Planning for Independent Practice The Due Diligence Review Exercise: Preparing Your Business Plan Appendix 12–A: Newman Eldercare Services, Inc.: Strategic Plan Appendix 12–B: Annual Report of the Health Information Services Appendix 12–C: Executive Summary: Annual Report of the Health

Information Services Appendix 12–D: Sample Project Proposal for Funding

Chapter 13 Improving Performance and Controlling the Critical Cycle Quality, Excellence, and Continuous Performance Improvement The Search for Excellence: A Long and Varied History The Management Function of Controlling Benchmarking Tools of Control The Critical Cycle Exercise: Choosing an Adequate Control Mechanism—What Fits

Best? Exercise: Promoting Total Quality Management Note

Chapter 14 Human Resources Management: A Line Manager’s Perspective “Personnel” Equals People A Vital Staff Function A Service of Increasing Value Increase in Employee-Related Tasks Learning about Your Human Resources Department Putting the Human Resources Department to Work Some Specific Action Steps Further Use of Human Resources

Wanted: Well-Considered Input Understanding Why as Well as What Legal Guides for Managerial Behavior An Increasingly Legalistic Environment Emphasis on Service Case: With Friends Like This … Case: The Managerial “Hot Seat” Note

Chapter 15 Day-to-Day Management for the Health Professional-as- Manager

A Second and Parallel Career Two Hats: Specialist and Manager A Constant Balancing Act The Ego Barrier The Professional Managing the Professional Leadership and the Professional Some Assumptions about People Style and Circumstances The Professional and Change Methods Improvement Employee Problems Communication and the Language of the Professional An Open-Ended Task The Next Step? Case: Professional Behavior—The Bumping Game Case: Delegation Difficulties—The Ineffective Subordinate Notes

Index

Preface

This book is intended for healthcare professionals who regularly perform the classic functions of a manager as part of their job duties—planning, organizing, decision making, staffing, leading or directing, communicating, and motivating—yet have not had extensive management training. Healthcare practitioners may exercise these functions on a continuing basis in their roles as department directors or unit supervisors, or they may participate in only a few of these traditional functions, such as training and development of unit staff. In any case, knowledge of management theory is an essential element in professional training, because no single function is ever addressed independently of all others.

In this book, emphasis is placed on definitions of terms, clarification of concepts, and, in some cases, highly detailed explanations of processes and concepts. The examples reflect typical practices in the healthcare setting. However, all examples are fictitious and none are intended as legal, financial, or accreditation advice.

Every author must decide what material to include and what level of detail to provide. The philosopher and pundit Samuel Johnson observed, “A man will turn over half a library to make one book.” We have been guided by experience gained in the classroom, as well as in many training and development workshops for healthcare practitioners. Three basic objectives determined the final selection and development of material:

1. Acquaint the healthcare practitioner with management concepts essential to the understanding of the organizational environment within which the functions of the manager are performed. Some material challenges assumptions about such concepts as power, authority, influence, and leadership. Some of the discussions focus on relatively new concepts such as appreciative inquiry approaches to motivation and conflict management, cultural proficiency and diversity training, changes in credentialing, and job duties of technical support personnel. Practitioners must keep abreast of developing trends in management, guarding against being “the last to know.”

2. Provide a base for further study of management concepts. Therefore, the classic literature in the field is cited, major theorists are noted, and terms are defined, especially where there is a divergence of opinion in management literature. We all stand on the shoulders of the management “giants” who paved the way in the field; a return to original sources is encouraged.

3. Provide sufficient detail in selected areas to enable the practitioner to apply

the concepts in day-to-day situations. Several tools of planning and control, such as budget preparation and justification, training design, project management, special reports (e.g., the annual report, a strategic plan, a due diligence assessment, a consultant’s report), and labor union contracts, are explained in detail.

We have attempted to provide enough information to make it possible for the reader to use these tools with ease at their basic level. It is the authors’ hope that the readers will contribute to the literature and practice of healthcare management as they grow in their professional practice and management roles. We are grateful to our many colleagues who have journeyed with us over the years and shared their ideas with us.

Joan Gratto Liebler Charles R. McConnell

About the Authors

Joan Gratto Liebler, MA, MPA, RHIA, is Professor Emerita, Health Information Management, at Temple University, Philadelphia, Pennsylvania. She has more than 36 years of professional experience in teaching and research in healthcare settings. In addition to teaching, her work and consulting experience include engagement with community health centers, behavioral health settings, schools, industrial clinics, prisons, and long-term care, acute care, and hospice facilities. She has also been an active participant in area-wide healthcare planning, end-of-life care coalitions, and area-wide emergency and disaster planning.

Ms. Liebler is also the author of Medical Records: Policies and Guidelines and has authored numerous journal articles and contributed chapters relating to health information management.

Ms. Liebler holds the degrees of Master of Arts (concentration in Medical Ethics), St. Charles Borromeo Seminary, Philadelphia, Pennsylvania, and Master of Public Administration, Temple University, Philadelphia, Pennsylvania. She is a credentialed Registered Health Information Administrator.

Charles R. McConnell, MBA, CM, is an independent healthcare management and human resources consultant and freelance writer specializing in business, management, and human resources topics. For 11 years he was active as a management engineering consultant with the Management and Planning Services (MAPS) division of the Hospital Association of New York State (HANYS), and he later spent 18 years as a hospital human resources manager. As author, coauthor, and anthology editor, he has published more than 30 books and has contributed several hundred articles to various publications. He is in his 35th year as editor of the quarterly professional journal The Health Care Manager.

Mr. McConnell received a Master of Business Administration and a Bachelor of Science degree in Engineering from the State University of New York at Buffalo.

What’s New in the Seventh Edition

Management Principles for Health Professionals, Seventh Edition continues to present foundational principles of management in the context of contemporary health care. The Seventh Edition reflects current issues by linking them to basic principles. Newly added examples include corporate compliance, standards of conduct and mandatory reporting, eHealth (its expansion, plus issues relating to reimbursement), revenue cycle considerations, cultural competency and diversity training, and comparative effectiveness reviews. There is continuing expansion of material relating to the Health Insurance Portability and Accountability Act (HIPAA), electronic health records/personal health records, due diligence reviews, and healthcare reform legislation.

Examples and exhibits have been updated throughout. Examples reflect a wide variety of settings, including acute care, observation units, urgent care, rural critical access care facilities, neighborhood health centers, secure personal care units, continuing care facilities, and rapid treatment centers. These examples feature various patient groups, including the frail elderly, at-risk youth, and homeless youths and adults. A full-scale plan, with 500-day implementation schedule, is included to illustrate project management. Newly emerging jobs/positions are included, such as compliance officer, privacy specialist, data quality and analysis specialist, and contractual management teams.

SPECIFIC CHAPTER UPDATES Chapter 1, “The Dynamic Environment of Health Care,” presents a template for analyzing megatrends in health care with attention to clients, families as caregivers, professional practitioners, the healthcare marketplace and settings, the impact of technology (including eHealth and virtual health), data mining, the health information exchange, and social/cultural factors. An expanded section on financing and reimbursement is included. The characteristics of the effective manager are delineated.

Chapter 2, “The Challenge of Change,” includes detailed examples relating to the continued implementation of the electronic health record (including outreach campaigns and meaningful use initiatives), the organizational restructuring resulting from marketplace forces, and continuing impact of healthcare reform legislation.

Chapter 3, “Organizational Adaptation and Survival,” includes expanded

discussion of competition and adversarial relationships. Extensive analysis of the effects of mergers, partial or full closure of a facility, and the final stages in the organizational life cycle is made. The main features of the manager’s concerns and activities during this phase are amplified.

Chapter 4, “Leadership and the Manager,” was formerly Chapter 12, “Authority, Leadership, and Supervision.” The material concerned with knowing one’s own leadership style has been expanded. Information presented on orders and directives has been moved to Chapter 11, “Communication,” and the discussion of supervision and discipline has been moved to Chapter 10, “Adaptation, Motivation, and Conflict Management.”

Chapter 5, “Planning and Decision Making,” adds material relating to the consequences of delaying decision making or not making decisions at all, along with the second- and third-order impact of decisions. More examples of the after-action report are included. Under the topic of planning, project management is presented, including the role of the project manager along with project evaluation through process and outcome reviews. A complete project, coupled with a 500-day implementation plan, is provided to illustrate the extensive nature of project delineation, activity description, and evaluation cycles.

Chapter 6, “Organizing,” provides additional discussion of the job analysis, classification, and job description interrelationship. New/emerging/changing job titles and responsibilities are included (e.g., corporate compliance officer, data quality specialist, privacy officer). Standards of conduct and mandatory reporting are added to the orientation module. The role and function of the external, contract management team is delineated. The changing characteristics of the work force are highlighted. The management inventory to forecast staffing needs is developed. The consultant report reflects current issues relating to transition from hard copy to electronic health records, and the resulting legacy systems, changes in data entries, studies relating to shorter stay admissions compared to balance-of-life admissions in skilled care, the necessity of studies relating to patterns of readmission to acute care, and studies about secure personal care units (including suspected elder abuse because of involuntary seclusion).

Chapter 7, “Committees and Teams,” offers refined and expanded information concerning employee teams and their legality and advice and guidance for building and maintaining a departmental team.

Chapter 8, “Budget Planning and Implementation,” is essentially the same as the former Chapter 7, “Budgeting: Controlling the Ultimate Resource.”

Chapter 9, “Training and Development: The Backbone of Motivation and Retention,” includes new material that reflects diversity and cultural competence. New material has also been added to address the mutual responsibilities, and the elements of an affiliation agreement/contract between the healthcare organization

and external academic programs for clinical practice rotations. Additional aspects of the training design are included to reflect the needs assessment for training, aspects of interpersonal skills, and challenges associated with difficult client interaction.

Chapter 10, “Adaptation, Motivation, and Conflict Management,” includes an explanation of motivational strategies for dealing with crisis incidents. The impact of downsizing is explained in detail, including the environment created when layoffs occur, the effects on employees who must be released, and the reactions of “survivors” who are expected to do more with less at a time when morale and motivation have been adversely affected. Labor union trends and issues are highlighted, and the sample labor contract has been updated.

Chapter 11, “Communication: The Glue That Binds Us Together,” formerly Chapter 14, stresses plans and preparations for addressing communication during a crisis via the need for disaster planning. Material concerning “the grapevine” and the manager’s role in rumor control is presented, and information concerning orders and directives has been moved here from an earlier chapter.

Chapter 12, “The Middle Manager and Documentation of Critical Management Processes,” includes full-scale examples of reports, strategic plans, and due diligence reviews. Current points of emphasis, including regional health information exchanges, telecommuting issues, upgrading job titles and content (including certifications and qualifications), participation in clinical practice programs, and achievements related to external rating reviews (e.g., Medicare Five-Star rating) are described.

Chapter 13, “Improving Performance and Controlling the Critical Cycle,” discusses ideas for topics for studies that reflect current issues such as comparative effectiveness evaluation, outcome measurement, Recovery Audit Contractor audits and payment error reviews, American Health Information Management Association (AHIMA) governance principles, issues specific to critical access/rural facilities (e.g., use of and reimbursement for telehealth, swing bed usage, pattern of transfer to regional tertiary centers), no-show and cancelled appointment patterns, and cultural and linguistic services. Seven categories of performance improvement studies are also described. In addition, selected strategies of improvement processes are noted, including rapid cycle improvement, waterfall/cascading impact reviews, and root cause analysis. An application of dashboard reporting is given, reflecting its use in a disaster situation. Three examples are given to reflect the unanticipated consequence of planning: when an improvement fails and negative outcomes occur.

Chapter 14, “Human Resources Management: A Line Manager’s Perspective,” formerly Chapter 13, is essentially unchanged from the previous edition, although laws applicable to employment are reviewed for updates.

Chapter 15, “Day-to-Day Management for the Health Professional-as-Manager,” has been slightly expanded to address the development and management of one’s

own career.

CHAPTER 1 The Dynamic Environment of

Health Care

CHAPTER OBJECTIVES • Describe the healthcare environment as it has evolved since the middle to

late 1960s with attention to the dynamic interplay of key factors. • Examine megatrends in the healthcare environment with attention to:

○ Client characteristics ○ Professional practitioners and caregivers ○ Healthcare marketplace and settings ○ Applicable laws, regulations, and standards ○ Impact of technology ○ Privacy and security considerations ○ Financing of health care ○ Social and cultural factors

• Identify the role set of the healthcare practitioner as manager. • Review the classic functions of the manager. • Define and differentiate between management as an art and a science. • Conceptualize the characteristics of an effective manager.

THE DYNAMIC ENVIRONMENT OF HEALTH CARE The contemporary healthcare environment is a dynamic one, combining enduring patterns of practice with evolving ones to meet challenges and opportunities of changing times. The healthcare organization is a highly visible one in most

communities. It is a fixture with deep roots in the social, religious, fraternal, and civic fabric of the society. It is a major economic force, accounting for approximately one-sixth of the national economy. In some local settings, the healthcare organization is one of the major employers, with the local economy tied to this sector. The image of the hospital is anchored in personal lives: it is the place of major life events, including birth and death, and episodes of care throughout one’s life. Families recount the stories of “remember the time when we all rushed to the hospital …” and similar recollections. The hospital is anchored in the popular culture as a common frame of reference. People express, in ordinary terms, their stereotypic reference to the healthcare setting: “He works up at the hospital,” “Oh yes, we made another trip to the emergency room,” or “I have a doctor’s appointment.” Popular media also uses similar references; television shows regularly feature dramatic scenes in the acute care hospital, with the physician as an almost universally visible presence. Care is often depicted as happening in the emergency department.

On closer examination, one recognizes that, in fact, many changes have occurred in the healthcare environment. The traditional hospital remains an important hub of care but with many levels of care and physical locations. The physician continues to hold a major place on the healthcare team, but there has been a steady increase in the development and use of other practitioners (e.g., nurse midwife, physical therapist as independent agent, physician assistant) to complement and augment the physician’s role. A casual conversation reflects such change; a person is just as likely to go to the mall to get a brief physical examination at a walk-in, franchised clinic as he or she would be to go to the traditional physician’s office. One might get an annual “flu” shot at the grocery store or smoking cessation counseling from the pharmacist at a commercial drug store. One might have an appointment for care with a nurse practitioner instead of a physician. Instead of using an emergency service at a hospital, one might receive health care at an urgent care service or clinic.

Although the setting and practitioners have developed and changed, the underlying theme remains: how to provide health care that is the best, most effective, accessible, and affordable, in a stable yet flexible delivery system. This is the enduring goal.

Those who manage healthcare organizations monitor trends and issues associated with the healthcare delivery system in order to reach this goal. Thus, a manager seeks to have thorough awareness and knowledge of the interplay of the dynamic forces. It is useful, therefore, to follow a systematic approach to identify, monitor, and respond to changes in the healthcare environment. The following template provides such a systematic approach. The starting point is the client/patient/recipient of care. This is followed in turn by considerations of the professional practitioners and caregivers; healthcare market place and settings; applicable laws, regulations, and standards; impact of technology; privacy and security considerations; financing;

and social-cultural factors.

CLIENT/PATIENT CHARACTERISTICS The demographic patterns of the overall population have a direct impact on the healthcare organization. For example, the increase in the number of older people requires more facilities and personnel specializing in care of this group, such as continuing care, skilled nursing care, and home care. Clinical conditions associated with aging also lead to the development of specialty programs such as Alzheimer’s disease and memory care, cardiac and stroke rehabilitation, and wellness programs to promote healthy aging. At the other end of the age spectrum, attention to neonatal care, healthy growth and development, and preventive care are points of focus. Particular attention is given to adolescents and young adults who engage in contact sports, where concussion, permanent brain injury, fractures, and sprains are common. In all age groups, there is a rising rate of obesity; type 2 diabetes; and addictions to substances, such as heroin, opioids, methadone, and assorted “street drugs.”

Diseases and illnesses are, of course, an ever-present consideration. Some diseases seem to have been conquered and eliminated through timely intervention. Some recur after long periods of absence. Tuberculosis, polio, smallpox, and pertussis are examples of successes in disease management and prevention. Sometimes, however, new strains may develop or compliance with immunization mandates may decrease so that these types of communicable diseases reappear.

Decades of use of antibacterial medicines has given rise to superbugs, resistant to the usual treatment. Another element of concern is the appearance of an almost unknown disease entity (e.g., Ebola or a pandemic agent). New clinical conditions may also arise within certain age groups, necessitating fresh approaches to their care. By way of example, consider the rise in autism and childhood obesity.

Other characteristics of the client/patient population reflect patterns of usage and the associated costs of care. The identification of superusers—patients who have high readmission rates and/or longer than average lengths of stay or more complications—gives providers an insight into practices needing improvement (e.g., better discharge planning or increased patient education). The geographic region that constitutes the general catchment area of the facility should be analyzed to identify health conditions common to the area. Examples include rural farm regions, with associated injuries and illnesses; heavy industry, with work-related injuries; and winter resort areas, with injuries resulting from strenuous outdoor activity (e.g., fractures from skiing injuries).

TRENDS RELATING TO PRACTITIONERS AND CAREGIVERS The trends and issues relating to practitioners and caregivers cluster around the continuing expansion of scope of practice, with the related increase in education and credentialing. The traditional attending physician role has given way to the inpatient physician, the hospitalist. The one-to-one physician–patient role set continues to shift from solo practice to group practice and team coverage. Licensed, credentialed nonphysician practitioners continue to augment the care provided by the physician. These physician-extenders often specialize—for example, the physical therapist in sports-related care, the occupational therapist in autism programs, the nurse practitioner in wellness care for the frail elderly, the nurse midwife, the nurse case manager in transition care, and the physician assistant in emergency care. Educational requirements include advanced degrees in the designated field.

There is a related shift in the practice settings for these various practitioners. The move away from inpatient-based care leads to an increase in independent practice. Sometimes the franchise model is favored over self-employment. Regional and national franchises provide a turnkey practice environment with the additional benefits of a management support division.

The Family as Caregiver Although the provision of care by family members is a practice that long predates formal healthcare models, these caregivers are the focus of renewed attention. As shorter stays for inpatient care, or subacute care to reduce inpatient care, become the norm, the role of the family caretaker intensifies. The patient care plan, with emphasis on the discharge plan, necessarily includes instruction to family members about such elements as medication regimen, wound care, infection prevention, and injection processes. If the patient does not have a family member who is able to assist in these ways, or if the patient (often a frail, elderly person) lives alone, coordination of services with a community agency or commercial company is needed. This gives rise to related issues. Can family members be reimbursed by insurance providers? If so, what is needed by way of documentation and billing? And there is yet another related issue: how can employers assist workers to meet the demands of work as well as help the family member? Practices such as flexible work hours and unpaid leave become both desirable and necessary elements.

Changes in Management Support Services Behind the scenes, there is the wide network of management support services within

the healthcare organization. The trend toward specialization increases within these ranks, with new job categories being developed in response to related trends. With regard to finances and reimbursement, chief financial officers (or similar administrators) augment their teams with clinical reimbursement auditors, coding and billing compliance officers, physician coder-educators, and certified medical coders. The regulatory standards manager specializes in coordinating the many compliance factors flowing from laws, regulations, and standards. The chief information officer augments that role with specialized teams, including nurse informaticians, clinical information specialists, and information technology experts.

Patterns of Care Improvements in patient care services, the utilization of advanced technologies such as telemedicine, and the financial pressures to reduce the length of stay for inpatient care have resulted in shorter stays, more transitional care, and (possibly) a higher readmission rate. To offset a high readmission rate, additional attention is given to the discharge plan. The increased use of the observation unit in the emergency department also helps reduce admission and readmission rate. These issues and trends lead to a discussion of the healthcare setting.

THE HEALTHCARE SETTING: FORMAL ORGANIZATIONAL PATTERNS AND LEVELS OF CARE Each healthcare setting has a distinct pattern of organization and offers specific levels of care. Characteristics include ownership and sponsorship, nonprofit or for- profit corporate status, and distinct levels of care. These elements are specified in the license to operate as well as in the corporate charter. Ownership and sponsorship often reflect deep ties to the immediate community. A sector of the community, such as a fraternal organization, a religious association, or an academic institution, developed and funded the original hospital or clinic, almost always as nonprofit because of their own nonprofit status. These organizations purchased the land, had the buildings erected and equipped, and provided continued supplemental funding for the enterprise. Federal, state, city, and county units of government also own and sponsor certain facilities (e.g., facilities for veterans, state behavioral care facilities, county residential programs for the intellectually disabled). For-profit ownership and sponsorship include owner-investor hospital and clinic chains; long-term care facilities; franchise operations for specialty care (e.g., eye care, rehabilitation centers, retail clinics in drugstores and big-box retailer stores). Over the past several

decades, sponsorship by religious or fraternal organizations has diminished, with the resulting sale of these healthcare facilities to other entities. The original name is often retained because it is a familiar and respected designation in the community.

Provider Growth: Mergers, Joint Ventures, and Collaborative Partnerships Healthcare organizations periodically change or augment their service offerings, with a resulting change in corporate structure. This restructuring may take the form of a merger, a joint venture, or a collaborative partnership. Why do healthcare organizations seek restructuring? The reasons are several:

• The desire to express an overall value of promoting comprehensive, readily accessible care by shoring up smaller community-based facilities, keeping them from closure

• The need for improved efficiencies resulting from centralized administrative practices such as financial and health information resource streamlining or public relations and marketing intensification

• The desire and/or need to penetrate new markets to attract additional clients • The desire and/or need to increase size so as to have greater clout in

negotiations with managed care providers who tend to bypass smaller entities

As cost-containment pressure began to grow, providers—primarily hospitals— initially moved into mergers mostly to secure economies of scale and other operating efficiencies and sometimes for reasons as basic as survival. The growth and expansion of managed care plans provided further incentive to merge among hospitals, which seems to have inspired health plan mergers in return. Each time a significant merger occurs, one side gains more leverage in negotiating contracts. The larger the managed care plan, the greater the clout in negotiating with hospitals and physicians and vice versa.

Clarification of Terms The term merger is used to describe the blending of two or more corporate entities to create one new organization with one licensure and one provider number for reimbursement purposes. One central board of trustees or directors is created, usually with representation from each of the merged facilities. Debts and assets are combined. For example, suppose a university medical center buys a smaller community-based hospital. Ownership and control is now shifted to the new organization. Sometimes the names of the original facilities are retained as part of

public relations and marketing, as when a community group or religious-affiliated group has great loyalty and ties to the organization. Alternatively, a combined name is used, such as Mayfair Hospital of the University Medical System.

The joint venture differs from a merger in that each organization retains its own standing as a specific legal/corporate entity. A joint venture or affiliation is a formal agreement between or among member facilities to officially coordinate and share one or more activities. Ownership and control of each party remains distinct, but binding agreements, beneficial to all parties, are developed. Shared activities typically include managed care negotiations, group purchasing discounts, staff development and education offerings, and shared management services. Each organization keeps its own name with the addition of some reference to its affiliated status, as in the title: Port Martin Hospital, an affiliate of Vincent Medical Center.

A collaborative partnership is another interorganizational arrangement. As with the joint venture, each organization retains its own standing as a specific legal– corporate entity. The purpose of the collaborative partnership is to draw on the mutually beneficial resources of each party for a specific time period associated with the completion of agreed-on projects. An example from research illustrates this point: a university’s neuroscience and psychology departments and a hospital pediatric service combine research efforts in the area of autism. A formal letter of agreement or mutual understanding is exchanged, outlining the essential aspects of the cooperative arrangement.

Such restructuring efforts, especially the formal merger, are preceded by mutual due diligence reviews in which operational, financial, and legal issues are assessed. Federal regulations and state licensing requirements must be followed. Details of the impact of the restructuring on operational levels are considered, with each manager providing reports; statistics; contractual information, leases (as of equipment); and staffing arrangements, including independent contractors and outsourced work.

In the instance of a full merger, practical considerations constitute major points of focus. Examples include redesigning forms, merging the master patient index and record system into one new system, merging finance and billing processes, and officially discharging and readmitting patients when the legally binding merger has taken place.

Present-day mergers and joint ventures can have a pronounced effect on the health professional entering a management position. Consider the example of a laboratory manager who must now oversee a geographically divided service because a two-hospital merger results in this person’s having responsibility in two sites that are miles apart. There is far more to consider in managing a split department than in managing a single-site operation. The manager’s job is made all the more difficult. Overall, however, mergers, joint ventures, and collaborative partnerships are an opportunity for the professional-as-manager with greatly increased responsibility

and accountability and a role of increasing complexity.

Range of Service and Levels of Care One of the most distinguishing features of a specific healthcare organization is the range of service, along with levels of care. This feature identifies the organization as a particular kind of organization, explicitly defined in its license to operate (e.g., an acute care hospital, an adult day care center, a hospice). An organization may offer many different services, both inpatient and outpatient. The range of service and levels of care are part of the overall definition of the organization; the specific types of care are delineated. Groups such as the American Hospital Association (AHA), The Joint Commission (TJC) and similar associations, and various designated federal and/or state agencies, define types and levels of care. Thus, a hospital might develop its range of services at an advanced level, with a variety of specialty services, to meet the definition of tertiary care. A small, rural hospital might seek to meet the basic standards for a critical access facility, capitalizing on the flexibility such designation permits.

Clinics vary in their range of service from the relatively small, walk-in clinic, to more complex services such as an urgent care clinic or specialty clinic associated with a hospital. In this latter arrangement, the inpatient service coordinates care with its companion outpatient clinic. Examples include surgery, cardiac care, and prenatal and postnatal care.

Another way of noting the variety of care services is to group organizations by client characteristics and treatment needs: geriatric behavioral care, rapid treatment for drug-dependent clients, women’s health, comprehensive cancer care, sports medicine, hospice care, and intensive day treatment for at-risk youth. Care of frail, elderly people has been and is a growth industry because of the simple fact of demographics—the increasing numbers of older individuals. The variety of levels of care include independent living units; personal care assistance, including secured units for dementia care; skilled nursing care; and comprehensive continuing care facilities. Adult day care programs augment residential care.

Further details about the range of care can be found by identifying the organization’s place in the overall continuum of care. For the purposes of this discussion, the acute care, inpatient facility will be placed at the center, with the continuum of care segmented as subacute and postacute, although it should be noted that not all care involves inpatient admission. Thus, an organization might tailor its services to support transitional care, either temporary or permanent care, with a postacute rehabilitation center, a long-term nursing care center, and assisted living and secured personal care for frail elderly people. The current emphasis on reducing readmission rates for inpatient care gives new impetus to the development and/or expansion of these types of services. A traditional nursing home, specializing in

“balance of life” care of frail, elderly people, might restructure its programs to add posthospitalization care, with the expectation that the length of stay will be weeks or (a few) months—not indeterminate and permanent. Home care programs have increased in prominence because of their place in the sequence of care. Shortened inpatient stays, outpatient same-day surgery, transitional care from hospital to nursing home to the patient’s personal residence intensify the need for home care by nurses, along with a variety of other caregivers (e.g., health aides, homemaker aides).

Hospice care represents a model of service that utilizes several levels of care. Care of the terminally ill (regardless of age) is rendered in the home, in the hospital when needed, and in a nursing care facility. A hospice might be owned and sponsored by an inpatient facility or operate as a stand-alone organization. One way to describe hospice care is this: the hospice program follows the patient and family as they move through the various changes in location.

In the continuing search for the best care, with flexibility and affordability, there has been renewed interest in domiciliary care for the elderly or developmentally disabled. The underlying idea is a return to home-like, individual care provided by paid caregivers, often in a patient’s own homes. Some states have active programs to increase the number and quality of such arrangements, along with active plans to decrease the number of nursing home beds.

The group home for adolescents or developmentally disabled people continues to be an area of change. The movement is away from large, institutional-based care to very small units (e.g., four to six clients in a family-like group home).

LAWS, REGULATIONS, AND ACCREDITING STANDARDS Laws, regulations, and accrediting standards are a major consideration in the delivery of health care. They affect every aspect of the healthcare system. The sheer volume of such requirements, some of which are in contradiction to others, has increased to the point that most organizations have a formally designated compliance officer. This high-level manager, assigned to the chief executive division, has the responsibility of assessing compliance with current requirements, monitoring proposed changes, and helping departments and services prepare for upcoming changes. Other responsibilities of this officer include the preparation of required reports and studies, the coordination of site visits, and the preparation of any follow-up action or plan of correction. In addition, this officer provides liaison with the Board of Trustee’s corporate compliance committee. Managers at the operational level work closely with this office in order to comply—indeed excel—at

meeting all requirements. The operational level managers, while assisted by the compliance office, must

take the initiative on their own to ensure that day-to-day practices and systems are in order. A systematic review of laws, regulations, and standards facilitates this practice. A manager can sort through the thicket of requirements by analyzing them in terms of several features:

• Setting. Licensure laws at the state level authorize the owner/sponsors to offer specific types of care (e.g., acute care hospital, behavioral care facility, rehabilitation center). The definitions and requirements in this fundamental law are the starting point, for without meeting this set of binding elements, the organization would not be permitted to function. Changes in program offerings, including expansion, termination, or sale, trigger an update in licensure status.

• Patient/client group. Certain issues concerning definition of the patient/client must be considered: when does the relationship begin; who is eligible for certain programs of care; what aspects of reimbursement for care apply; who may consent for care; and what, if any, special provisions attach to certain patient groups (e.g., any patients needing protective care).

• Professional practitioners and the support staff. Professional practitioners are required to have a license to practice. Both the individual and the organization’s officials must be mindful of the necessity of meeting this set of rules. In addition to this requirement, there are many laws and regulations governing working conditions, hours and rates of pay, and nondiscrimination.

• Systems requirements. Specific aspects of the administrative and support systems are often laid out in detail, including time frames; requirements for record development and retention; and review processes relating to patient care, safety, and privacy. Required documentation of care is delineated in terms of content and time (e.g., development of plan of care, discharge plan, medication profile, restraint usage).

The sources of law are both state and federal governments. In addition to these, local units of government, such as counties and cities, have laws that apply to most or all formal organizations in their geographic jurisdiction. The usual ones are fire and safety codes, zoning regulations, environmental requirements, and traffic controls.

Regulations Stemming from Laws The usual practice in lawmaking is this: the basic law is developed and passed, with the lawmakers recognizing that further details will be needed. The specific law usually indicates which government department or agency is invested with this rule

making power. Healthcare providers are most familiar with the Department of Health and Human Services (DHHS) and its Centers for Medicare and Medicaid Services (CMS—formerly the Health Care Financing Administration) division that has the authority to develop Medicare rules and regulations. Other current “headliner” laws and companion regulations include the Health Information Technology for Economic and Clinical Health Act (HITECH), the Health Insurance Portability and Accountability Act (HIPAA) of 1996, and the Patient Protection and Affordable Care Act (PPACA) of 2010.

Accrediting Standards Although these standards or elements of performance are not required as such, most healthcare facilities seek to meet them and have official recognition by an appropriate accrediting agency. Some of the usual nationwide accrediting bodies are TJC, Continuing Care Accreditation Commission, and the Accrediting Commission for Health Care.

Within the accrediting process for the overall facility, there are additional criteria for certain programs, with the resulting assurance of quality care. By way of example, TJC has a gold seal of approval rating for rehabilitation services. It also has disease-specific care certification.

Professional Association Standards and Guidelines Professional associations develop standards of practice and related guidelines in their area of expertise. These guidelines reflect best practices and provide practical methods of developing and implementing operational level systems. In addition to the practical aspect of meeting such optional standards, there is prestige value associated with gaining recognition by outside groups. Receiving magnet designation from the American Nurses’ Credentialing Center illustrates this dual benefit.

Sources of Information about Requirements Managers face a challenge in trying to keep up to date regarding the many requirements. They must take a proactive stand, especially for those aspects relating to their department or service.

One’s professional association is a reliable source of timely and thorough information. The umbrella organizations such as the AHA monitor current and prospective issues and make the information readily available. A useful practice for managers to adopt is the regular monitoring of the Federal Register for federal regulations, and the companion publication at state level. These agencies publish

agenda listings on a periodic basis (e.g., annually, semiannually) to alert the public about probable new regulations. This is augmented by an official Notice of Proposed Rulemaking about a specific topic.

Government agencies, public and private “think tanks,” and other associations prepare position papers; national, state, or regional health initiatives proposals; and similar plans. Healthy People 2020 or the DHHS’s national health goals or a state governor’s long-range plan are examples of readily available documents to alert managers of trends and issues.

THE IMPACT OF TECHNOLOGY A survey of any health discipline would readily provide examples of the impact of technology. New treatment modalities emerge. For example, specialty care is taken to the patient (e.g., bedside anesthesia, mobile vans with chemotherapy, portable diagnostic equipment). There is rapid and constant adoption of computerized devices. Several areas of interest are highlighted here to illustrate the trends and issues of a high-tech world and its implications for healthcare delivery.

eHealth and Virtual Health This segment of health care has several names: eHealth, Virtual Health, and Digital Connectivity. The eVisit, wherein patient and provider communicate by means of technological interaction instead of face-to-face, in an office, has become commonplace. Telemedicine or telehealth is a broader and slightly older term, reflecting the same kind of interaction. Both methods utilize video conferencing, telephone systems, and computers. The eVisit by the patient with the clinician is a particularly good method for patients who are in rural areas without easy access to their primary care provider; it is useful in the same way for the homebound patient without transportation or whose chronic illness is exacerbated by going outside the home. Virtual counseling is another example of this kind of care; the sufferer of posttraumatic stress disorder or depression might find easier access to interventions and care because it is readily available through technology. Also, the eVisit is a useful alternative when inclement weather makes travel to on-site care unwise or impossible. In addition, remote monitoring provides real-time feedback to providers and patients, allowing them to make more timely interventions when indicated. Common applications include monitoring heart-related conditions, diabetes, and pulmonary hypertension.

Teleconferencing provides clinicians with ready access to specialists in another setting, thus providing the patient and care team with expert advice and avoiding the transfer of the patient. The telestroke program exemplifies this type of interaction

where time is of the essence. The popular use of apps for self-monitoring, both for a clinical condition as well as wellness, provides clients and caregivers with some baseline information about a client’s ongoing condition. The user can set up reminders about medication use, blood sugar levels, or blood pressure monitoring. Diet and exercise information can be tracked. Coupled with popular web searches for health information (e.g., getting a “second opinion” from a Web site), the consumer of health care generates his or her own personal health record.

The Personal Health Record This is not a new concept. Conscientious individuals routinely keep important health documents, including immunization records, summaries of episodes of care, and their own tracking notes about a chronic condition. What is new is the increased computerization of such notes. With the emphasis on developing and maintaining an electronic health record system, healthcare organizations encourage the incorporation of client-generated portfolios and the official documentation from healthcare providers into a comprehensive document. Patients’ rights to access and receive a copy of their health records has been well established and is encouraged. This is a gradual change from the days when there was limited or no routine access. The personal health record (PHR) does not replace the legal record of the healthcare provider—the PHR is developed and maintained by the patient/client and the official record by the provider. There is a related trend: having the patient access the ongoing, official record through electronic systems. Providers make this possible through the development of secure portal access to the information and encourage its use through patient education about the process. Information includes access to test results, discharge instructions, procedure information, and similar data. The goal is to increase patients’ involvement in their own care. The electronic health record is more fully discussed in the chapter on the challenges of change in the healthcare system.

Data Warehousing and Data Mining As the electronic data capture and retention and manipulation increases, so does the sheer volume of data. These electronic measures incorporate and enhance the more historical methods of the hard copy record, decentralized indexes and registries, and special studies. Data warehousing refers to the centralized depository of data collected from most or all aspects of the organization (e.g., patient demographics, financial/billing transactions, clinical decision making) gathered into one consistent computerized format. Easy connectivity to national and international data bases (e.g., National Library of Medicine, Medicare Providers Analysis and Review) is yet another feature of this process. Data mining is the analysis and extraction of data to

find meaningful facts and trends for real-time interventions in clinical decision- making support, studies and oversight review of administrative and clinical practice by designated review groups, budget support, and related data usage. Trend analysis and predictive indicators (e.g., injury prediction outcomes in pediatric emergencies or predictions of impending arrhythmia and sudden death, mortality predictions) are readily available to clinicians. Data mining is also a business; a medical center, with its fast compilation of core data and specialty data elements, may sell nonidentifiable patient data to pharmaceutical, medical device, and biotech industries.

Translational Medicine With the ready availability of support data, clinicians seek to more effectively and rapidly complete the cycle of bench to bedside to bench. Translational medicine emerges as an area of intensified interest, with hospitals coordinating these efforts through a clinical innovation office headed by a physician with an appropriate support staff. This strengthens both research capabilities and clinical practice.

The Health Information Exchange The electronic health record enhances patient care within the organization because of its real-time, comprehensive features. But what of the situations in which care is given in more than one setting? The release of information process, using traditional hard copy or even electronic transmission, usually starts after the patient is admitted. Why not develop systems of interchange of information, regardless of the point of care? Such a system would facilitate communication among providers, reduce the number of unneeded tests, and provide a more comprehensive review of patients’ past and ongoing care. Technology supports this concept; the electronic movement of health-related information is available. The coordinated efforts to make this a reality have led to the development of regional health information exchange of patient-consented information.

Privacy and Security Issues The positive aspects of technology as applied to health care are clear. But along with these positive benefits, there arise new concerns for privacy and security issues. Hackers can access and even destroy computerized data bases. Identify theft, including medical identity, is an increasing problem for individuals and organizations. Consequently, safeguards are increased to secure the data, yet keep it easily accessible by legitimate users. There is a growing body of laws and regulations relating to these issues, foremost of which is HIPAA, mandating a

variety of controls and practices to ensure patient privacy is protected. A more detailed discussion of this law and its requirements is in the chapter on the challenge of change.

Informatics Standards and Common Language The goals of data sharing in support of patient care are generally well accepted, with active implementation of systems. To make this effective, there is the continuing need for interoperability of systems along with informatics standards and common language. These efforts include the development of standard vocabulary and classification systems, such as the National Library of Medicine’s Unified Medical Language System as well as the standards developed by the Institute of Electrical and Electronic Engineers and the Health Level-7 standards. HIPAA regulations requires uniform protocols for electronic transactions for both format and content of data capture and transmission. The development of a national healthcare information infrastructure has the support of key advocates who support the development and implementation of national standards.

The Virtual Enterprise The concept of the virtual enterprise has emerged as a result of available technology in both the for-profit and nonprofit sectors. Organizations develop contractual partnerships with independent companies and individuals who provide goods and services. Instead of on-site departments, services, or units, or direct employer– employee relationships, organizations outsource many functions. By way of example, consider the contemporary health information department that has outsourced several functions: transcription, billing and coding support, release of information, and document storage and retrieval. Another example, drawn from a direct patient care program, is reflected in a chronic disease management service within a home health agency. The home health agency coordinates services from other health providers who remain independent agents. This trend is so common that, in job descriptions and want ads, the job location is noted as to on-site or virtual as the setting.

REIMBURSEMENT AND PATTERNS OF PAYMENT Patterns of payment for health care have changed in response to social, political, and economic pressures. Hospitals and clinics have deep historical roots in charitable,

not-for-profit models; along with this early approach to care there was also the fee- for-service approach as patients made payments directly to practitioners.

Health insurance programs, both nonprofit such as Blue Cross and Blue Shield and commercial insurance plans, emerged in the 1930s as partners in the payment for healthcare services. The form of insurance that many of these early plans offered was frequently referred to as “hospitalization” insurance; it covered costs when one was hospitalized, but the majority of early plans did not cover common ancillary services such as visits to physicians.

The 1960s saw the introduction of federally funded care with the creation of Medicare coverage for the elderly and Medicaid, essentially a welfare program, to provide coverage for low-income persons and the indigent. Medicare and Medicaid were established by the same federal legislation but they differ as sources of payment. Medicare reimbursement is fully federal, but Medicaid reimbursement is shared, with 50% coming from the federal government and the remaining 50% split between state and county. In some instances, the second 50% is split evenly between state and county and in some the split is different (e.g., 34% state and 16% county).

Concern for healthcare costs has been gathering momentum since the 1960s, as have efforts to control or reduce these costs. Costs clearly took a leap upward immediately following the introduction of Medicare and Medicaid; however, Medicare and Medicaid are not the sole cause of the cost escalation. Rather, costs have been driven up by a complex combination of forces that include the aforementioned programs and other government undertakings, private not-for-profit and commercial insurers, changes in medical practice and advancements in technology, proliferation of medical specialties, increases in physician fees, advances in pharmaceuticals, overexpansion of the country’s hospital system, economic improvements in the lot of healthcare workers, and the desires and demands of the public. These and other forces have kept healthcare costs rising at a rate that has outpaced overall inflation two- or threefold in some years.

As concern for healthcare costs has spread, so have attempts to control costs without adversely affecting quality or hindering access. The final two decades of the 1900s and the beginning of this century have seen some significant dollar-driven phenomena that are dramatically changing the face of healthcare delivery. Specifically, these include the following:

• The rise of competition among providers in an industry that was long considered essentially devoid of competition

• Changes in the structure of care delivery, such as system shrinkage as hospitals decertify beds; an increase in hospital closures, mergers, and other affiliations that catalyzed the growth of healthcare systems; and the proliferation of independent specialty practices

• The advent and growth and expansion of managed care

In one way or another, most modern societal concerns for health care relate directly to cost or, in some instances, to issues of access to health care, which in turn translate directly into concern for cost. Massive change in health care has become a way of life, and dollars are the principal driver of this change.

THE MANAGED CARE ERA

The Managed Care “Solution” and the Beginning of Restricted Access Aside from technological advances, most of what has occurred in recent years in the organization of healthcare delivery, and payment has been driven by concern for costs. Changes have been driven by the desire to stem alarming cost increases and, in some instances, to reduce costs overall. These efforts have been variously focused. Government and insurers have acted on the healthcare money supply, essentially forcing providers to find ways of operating on less money than they think they require. Provider organizations have taken steps to adjust expenditures to fall within the financial limitations they face. These steps have included closures, downsizing, formation of systems to take advantage of economies of scale, and otherwise seeking ways of delivering care more economically and efficiently. In this cost-conscious environment, managed care evolved.

Managed care, consisting of a number of practices intended to reduce costs and improve quality, seemed, at least in concept, to offer workable solutions to the problem of providing reasonable access to quality care at an affordable cost. Managed care included economic incentives for physicians and patients, programs for reviewing the medical necessity of specific services, increased beneficiary cost- sharing, controls on hospital inpatient admissions and lengths of stay, cost-sharing incentives for outpatient surgery, selective contracting with providers, and management of high-cost cases.

The most commonly encountered form of managed care is the health maintenance organization (HMO). The HMO concept was initially proposed in the 1960s when healthcare costs began to increase all out of proportion to other costs and so-called “normal” inflation following the introduction of Medicare and Medicaid. The HMO was formally promoted as a remedy for rising healthcare costs by the Health Maintenance Organization Act of 1973. The full title of this legislation is “An Act to amend the Public Health Service Act to provide assistance and encouragement for the establishment and expansion of health maintenance organizations, and for other purposes.” From today’s perspective it is interesting to

note that in implementing the HMO Act, it was necessary to override laws in place in a number of states that actually forbade the establishment of such entities.

The HMO Act provided for grants and loans to be used for starting or expanding HMOs. Preempting state restrictions on the establishment and operation of federally qualified HMOs, it required employers with 25 or more employees to offer federally certified HMO options if they already offered traditional health insurance to employees. (It did not require employers to offer health insurance if they did not already do so.) To become federally certified, an HMO had to offer a comprehensive package of specific benefits, be available to a broadly representative population on an equitable basis, be available at the same or lower cost than traditional insurance coverage, and provide for increased participation by consumers. Portions of the HMO Act have been amended several times since its initial passage, most notably by HIPAA.

Specifically, an HMO is a managed care plan that incorporates financing and delivery of a defined set of healthcare services to persons who are enrolled in a service network.

For the first time in the history of American health care, the introduction of managed care placed significant restrictions on the use of services. The public was introduced to the concept of the primary care physician as the “gatekeeper” to control access to specialists and various other services. Formerly, an insured individual could go to a specialist at will, and insurance would usually pay for the service. But with the gatekeeper in place, a subscriber’s visits to a specialist were covered only if the patient was properly referred by the primary care physician. Subscribers who went to specialists without referral suddenly found themselves billed for the entire cost of the specialists.

By placing restrictions on the services that would be paid for and under what circumstances they could be accessed, managed care plans exerted control over some health insurance premium costs for employers and subscribers. In return for controlled costs, users had to accept limitations on their choice of physicians, having to choose from among those who agreed to participate in a given plan and accept that plan’s payments, accept limitations on what services would be available to them, and, in most instances, agree to pay specified deductibles and copayments.

Managed care organizations and governmental payers brought pressure to bear on hospitals as well. Hospitals and physicians were encouraged to reduce the length of hospital stays, reduce the use of most ancillary services, and meet more medical needs on an outpatient basis. Review processes were established, and hospitals were penalized financially if their costs were determined to be “too high” or their inpatient stays “too long.” Eventually, payment became linked to a standard or target length of stay so that a given diagnosis was compensated at a predetermined amount regardless of how long the patient was hospitalized.

As managed care organizations grew larger and stronger, they began to negotiate with hospitals concerning the use of their services. Various plans negotiated contracts with hospitals that would provide the best price breaks for the plan’s patients, and price competition between and among providers became a reality.

By the end of the 1900s, approximately 160 million Americans were enrolled in managed care plans, encompassing what many thought to be the majority of people who were suitable for managed care. In-and-out participation of some groups, such as the younger aging (people in their 60s or so) and Medicaid patients, was anticipated. However, the bulk of people on whom managed care plans could best make their money were supposedly already enrolled. But managed care continued to grow in a manner essentially consistent with the growth of the population overall. According to the trade association America’s Health Insurance Plans, approximately 90% of insured Americans were enrolled in plans with some form of managed care by 2007,1 and total participation today continues at or near this 90% level.

Much of the movement into managed care was driven by corporate employers attempting to contain healthcare benefit costs. However, during this same period of growing managed care enrollment, the number of managed care plans experiencing financial problems also increased steadily.

It appears that managed care was able to slow the rate of health insurance premium increases throughout most of the 1990s. However, early in the first decade of the 2000s, the cost of insurance coverage again began climbing at an alarming rate. The increase continued; it was reported in 2005 that health insurance premiums would increase in some areas by more than 12% for 2006, making 2006 the fifth straight year of double-digit premium increases for many.2 This grim prediction for 2006 was fulfilled, and the trend has continued, with increases for most years since then averaging in excess of 10%.

By the end of the 1990s, it appeared that the majority of average middle-class subscribers had reached a negative consensus about managed care. This caused some damage to the political viability of for-profit managed care, and it hurt managed care overall. Indeed, it seemed increasingly likely that managed care might not be financially affordable in the long run.

The year 2000 was especially grim for the relationship between managed care plans and Medicare. As a result of decisions made during that year, nearly a million beneficiaries from 464 counties in 34 states lost their coverage on January 1, 2001, when 118 HMOs withdrew from Medicare. In addition, many of the plans that remained in Medicare increased premiums and reduced benefits in response to what were described as continually rising costs and the effects of cuts in reimbursement rates. In December 2000, Congress voted to allocate billions of additional dollars to Medicare HMOs, supposedly to reduce premiums or increase benefits to subscribers. However, wording of the legislation also allowed HMOs to pay more to

their networks of hospitals and healthcare professionals, thus consuming the majority of the additional funds. As a result, only 4 of the 118 HMOs that had withdrawn returned to Medicare.

Managed care organizations and elements of government brought additional pressure to bear on hospitals. Hospitals and physicians were encouraged to reduce the length of hospital stays, cut back on the use of ancillary services, and meet more medical needs on an outpatient basis. Review processes were established such that hospitals were penalized financially if their costs were determined to be too high or their inpatient stays too long. Eventually payment became linked to a standard, or target, length of stay so that any given diagnosis was compensated at a specific amount regardless of how long the patient was hospitalized.

As they grew larger, managed care organizations began to deal directly with hospitals, negotiating the use of their services. As various plans contracted with hospitals that would give the best price breaks for the plan’s patients, price competition between and among providers became a factor to be considered.

It is reasonable to say that although managed care provided cost-saving benefits at least for a time, it is evident that managed care plans have not been able to sustain their promises of delivering efficient and cost-effective care. An aging population, newer and more expensive technologies, newer and higher priced prescription drugs, new federal and state mandates, and pressure from healthcare providers for higher fees have essentially wiped out the savings from managed care for employers and subscribers alike. It is likely, however, that without managed care, costs and cost increases would be even more pronounced than at present. Essentially the managed care model became a permanent and common feature in the coordination of and payment for care.

The Balanced Budget Act of 1997 The Balanced Budget Act (BBA) of 1997 is worthy of mention in this discussion of managed care. This act was adopted in part because of: the increased fiscal pressure caused by the growth of Medicare payments, concern over Medicare overpayments, the desire for more rational payment methods, and a stated wish to offer beneficiaries greater choice. By mandating that federal revenues and federal expenditures be balanced each fiscal year, the BBA fundamentally altered the rules of fiscal policy making in the United States.3 (It perhaps need not be said that the mandate to balance the federal budget has been dramatically overridden in many years since then.) A balanced budget would of course be sensible, but it was the manner in which budget balancing was implemented that forced disproportionate reductions in healthcare reimbursement. In terms of its overall effects, the BBA became the most significant piece of healthcare legislation since Medicare and

Medicaid were established in 1965.4 The reductions required to balance the budget were not taken uniformly from all

elements of the budget. More than half of the federal budget—specifically the very large piece of the budget, including Department of Defense spending, Social Security, and interest on the federal debt—was insulated from cuts, meaning that the entire balancing reduction would have to come from the remaining portion (less than half) of the budget. Medicare had some time earlier become a significantly large third-party payer for healthcare services, so as a direct result of the BBA, drastic cuts occurred in Medicare reimbursement, therefore affecting the income of healthcare providers.

Some degree of relief from the BBA arrived in the form of the Balanced Budget Refinement Act (BBRA) of 1999, arising perhaps out of recognition that the act itself went too far in reducing reimbursements. When the BBRA became law, it suspended the cap that had been placed on outpatient rehabilitation services and paved the way for the design of a new payment mechanism. Regardless of these positive steps, however, the BBA brought some irreversible consequences to healthcare providers.

WHO IS REALLY PAYING THE BILLS? Payment for health care flows from a number of sources, some major and well known and some less recognizable and relatively specialized. A number of these sources can be grouped together under the heading of “government,” the largest being, of course, Medicare and Medicaid. Yet in addition to Medicare and Medicaid, there are other government programs that reimburse for health care at both state and federal levels. There are, for example, specific programs for providing health services to the dependents and survivors of military personnel and there is the health care for former military personnel provided by the hospital system of the Veterans Administration. Also under “government” are a number of state programs including, for example, Workers’ Ccompensation, which pays for health care for sick or injured workers as well as compensating for lost income. Many of the states also have unique programs designed to serve certain specific population segments (e.g., Healthy New York programs in New York State).

Next, outside of government programs, various programs can be gathered under the heading of private insurance. This collection of payers includes not-for-profit entities such as Blue Cross–Blue Shield, commercial (for-profit) insurance companies, and the many HMOs that comprise a large proportion of payers. These entities just named interlock to a considerable extent; for example, many managed care programs are operated by not-for-profits such as Blue Cross and Blue Shield,

which also administer insurance programs designed to supplement Medicare benefits.

Much health care delivered by the HMOs and other insurers subjects users to deductibles and copays, making patients and families payers to a considerable extent. (A “deductible” is a designated amount a patient must pay before certain coverage kicks in, and a “copay”—common to essentially all programs to some extent—is a designated portion of the cost of a specific service that must be borne by the patient.)

Some larger organizations have essentially entered into the health insurance business by self-insuring for their employees. Practical (and permissible) for only sizable organizations with sufficient financial capability, these self-insurers pay their employees’ claims directly using, in most instances, an administrative claim service to handle the transactions. However, most self-insurers also carry additional coverage against the possibility of catastrophic claims.

However, getting down to absolute basics, it is the population at large that pays for health care through taxes, through insurance premiums, and out of their own pockets.

Related Considerations A number of additional programs or practices in place or under active consideration affect payment for health care. To enumerate just a few:

Reference pricing is the concept under which a patient’s plan pays 100% of costs within one’s network and the patient pays 100% of costs incurred outside of the network. Reference pricing also allows insurers and employers to place a dollar limit on what the plan pays for expensive procedures, potentially resulting in some large medical bills for patients. Presently it is believed that CMS may ban reference pricing.

Regional pricing is another concept that has come under consideration in some quarters. In its simplest form, this is pricing that has its basis in the economy of a specified geographic area, suggesting that the same service may cost more in a “wealthier” region than in a “poorer” area.

Although still evolving, the concept of the medical home offers financial incentives for providers to focus on the quality of patient outcomes rather than the volume of services provided. The medical home can be a physical or virtual network of providers; the keys to its success are said to be information technology and payment reform. The medical home is designed around patient needs and aims to improve access to care and improve communication in what is promoted as an innovative approach to delivering comprehensive patient-centered preventive and primary care. The PPACA contains provisions that support use of the medical home

model including new payment policies. In addition, the financial and practical advantages of membership in the health

network subject to its coordination of the provision of care and payment for care are addressed to some extent in the PPACA.

Built into the formal reimbursement methods of the principal programs and organizations that pay for healthcare services are numerous requirements and conditions the purpose of which is cost containment. For example, there is the routine review for preventable readmission within 30 days under which some amount of reimbursement may be denied if a particular readmission within that time frame is considered not medically necessary. There is also the increased use of temporary admission to an observation unit rather than to a formal inpatient unit, reacting to the knowledge that the former, often associated with the emergency department, is less costly than a regular hospital admission and does not unnecessarily tie up a bed in an acute care unit.

Another practice that serves both coordination of patient care and cost containment is the concept of bundling for continuum of care, involving discharge planning and coordination of posthospital care, recognizing that acute hospital care is but one step in addressing a patient’s needs and that complete recovery requires organized posthospital follow-up to ensure return to health and to minimize the chances of readmission.

A fairly long-standing practice relating to both quality of care and cost containment is utilization review. Here hospital discharges are examined in detail to identify unnecessary treatments, excessive lengths of stay, and quality issues, with the intent of potentially improving quality of care while containing costs.

In general, virtually all of the reimbursement practices of the payers for health care have builtin rules, regulations, and requirements that place limits on certain practices (e.g., limiting length of hospital stays for specific diagnoses) and attendant penalties in the form of reduced or denied reimbursement.

REIMBURSEMENT SYSTEM WEAKNESSES It holds generally true that the larger and more complex a system or program, the greater the chances of error and the more opportunity there is for misuse or mistreatment of the process itself. The overall healthcare reimbursement structure is both large and complex. There are many chances for the occurrence of honest errors, and there are many opportunities for deliberate fraud and abuse. Here are a few examples:

• “Upcoding,” a process that occurs when someone submits the diagnosis-related group (DRG) code for a higher reimbursement level than what the actual case

should receive (e.g., entering the code for “appendectomy with complications” in place of “routine appendectomy)

• Double billing or false billing by providers, perhaps billing twice for certain procedures, or—rather common among fraud cases—billing for services never rendered

• Billing for more service than was rendered, as in billing for more treatment than actually was provided and billing payers for appointments that patients had actually canceled (consider the case of the provider who actually billed as much as 33 hours for a single date)

• Billing for services that are actually not covered under the prevailing reimbursement mechanism

• “Double dipping” in Medicaid programs by individuals using addresses in two states and collecting benefits from both for the same care

All manner of medical providers have been involved in fleecing, or attempting to fleece, the reimbursement system: physicians, dentists, pharmacists, physical therapists and other individual providers, as well as individuals working in institutional settings and falsifying records as in “upcoding” and claiming reimbursement for services not rendered. Reimbursement structures are generally large and complex, and there is undoubtedly the feeling among some providers that what they are doing will never be detected or that their practices will never be examined in detail (similar to the attitude of the individual who feels that “the Internal Revenue Service will never audit me”). Yet numerous providers have lost their livelihoods when caught committing fraud or otherwise abusing the system.

Fraud and abuse constitute significant problems for present reimbursement mechanisms, and constant vigilance and regular monitoring are required to keep them in check. It is likely that any complex, multilayered system can be “gamed” in some way, and thanks to Medicare and Medicaid and all else that has risen around the major payers, healthcare reimbursement is and will likely present opportunities for fraud and abuse capable of continually siphoning off an eye-opening percentage of the healthcare dollar.

SOCIAL AND ETHICAL FACTORS The use of technology, privacy concerns, and continuing issues related to healthcare availability and financing give rise to new debates about social and ethical factors. These norms have always been a part of the healthcare ethos, but from time to time, more urgent considerations are required. As noted above, a technological breakthrough occasions such renewed interest. At another time, a new legislative

mandate, such as the Patient Self-Determination Act, brings about fresh consideration of enduring concerns. Increased sensitivity to patient or consumer wishes is yet another source of attentiveness to social and ethical issues. For example, the increased use by patients of alternative therapies and interventions has reopened the question about proper integration of nontraditional care with the more standardized modes. The debate reaches into the questions of reimbursement as well; healthcare plans are increasingly approving some alternative or complementary intervention as reimbursable costs. Another ethical issue stemming from healthcare financing stems from a new practice: the embedded nurse, one who is an employee of the insurance company but assigned to the direct care team within a healthcare facility. Whose agent is this employee? What ethical dilemmas does this worker face? Do patients know that their care is being rendered by one whose assignment includes cost effectiveness as a direct part of his or her work? Rationing of health care is yet another area of continuing discussion, including “quality- adjusted remaining years” indicators and “complete lives” measures. Finally, the use of marijuana for medical purposes showcases another example of societal norms shifting to greater acceptance of such substances.

Ethical considerations such as the these result in the increased use of the ethics review committee, the institutional review board, and similar clinical and administrative review groups.

THE ROLE SET OF THE HEALTHCARE PRACTITIONER AS MANAGER The dynamic setting of healthcare organizations constitutes the environment of the manager, specifically the healthcare practitioner as manager. Often unseen by the patient or the public, the managers of departments and services work behind the scenes to support direct patient care interactions. In this specialized environment of a healthcare organization, qualified professional practitioners may assume the role of unit supervisors, project managers, or department heads. The role may emerge gradually as the numbers of patients increase, as the number and type of services expand, and as specialization occurs within a profession. The role of manager begins to emerge as budget preparations need to be made, job descriptions need to be updated and refined, and staffing patterns need to be reassessed and expanded.

For example, a physical therapy staff specialist may develop a successful program for patients with spinal cord injuries. As the practitioner most directly involved in the work, this individual may be given full administrative responsibility for that program. Alternatively, an occupational therapist may find that a small program in home care flourishes and is subsequently made into a specialized

division. Again, this credentialed practitioner in a healthcare profession may be given a managerial role. Practitioners who develop their own independent practices assume the role of manager for their business enterprises. The role of the practitioner as manager is reinforced further by various legal, regulatory, and accrediting agencies, which often require chiefs of service or department heads to be qualified practitioners in their distinct disciplines.

Classic Management Functions The healthcare practitioner–manager engages in traditional management activities— the circle of actions in which each component (e.g., planning, decision making) leads to the next. These activities are a mix of routine, repeated activities of an ongoing nature, along with periodic major activities such as preparation for and participating in accreditation processes, or major projects such as a complete systems overhaul. Figure 1–1 illustrates the interrelationships of management functions. Table 1–1 provides examples of daily activities of the professional practitioner as manager.

FIGURE 1–1 Interrelationship of Management Functions

Management functions typically include the following:

• Planning: the selection of objectives, the establishment of goals, and the factual determination of the existing situation and the desired future state

• Decision making: part of the planning process in that a commitment to one of the several alternatives (decisions) must be made. Others may assist in planning, but decision making is the privilege and burden of managers. Decision making includes the development of alternatives, conscious choice, and commitment.

• Organizing: the design of a pattern of roles and relationships that contribute to the goal. Roles are assigned, authority and responsibility are determined, and provision is made for coordination. Organization typically involves the development of the organization chart, job descriptions, and statements of work flow.

• Staffing: the determination of personnel needs and the selection, orientation, training, and continuing evaluation of the individuals who hold the required positions identified in the organizing process

• Directing or actuating: the provision of guidance and leadership so that the work performed is goal oriented. It is the exercise of the manager’s influence as well asthe process of teaching, coaching, and motivating workers.

• Controlling: the determination of what is being accomplished, the assessment of performance as it relates to the accomplishment of the organizational goals, and the initiation of corrective actions. In contemporary management practice, the larger concepts of performance improvement and total quality management include controlling.

MANAGEMENT AS AN ART AND A SCIENCE

Management has been defined as the process of getting things done through and with people. It is the planning and directing of effort and the organizing and employing of resources (both human and material) to accomplish some predetermined objective. Management is both an art and a science. Especially in its early years of development at the turn of the 20th century, management’s scientific aspects were emphasized. This scientific approach included and continues to include research and studies about the most efficient methods, leadership styles, and patterns of organization. However, management science tends to lack the distinct characteristics of an exact discipline, such as chemistry or mathematics. A more intuitive and nuanced set of elements reflect management as an art as well as a science. One speaks of the art of leadership and motivation. One relies on intuition and experience in situation of conflict or crisis.

Managers seek to combine the best of both approaches, striving to become effective managers.

Characteristics of an Effective Manager The classic functions of a manager have been noted in the previous section. The highlighting of the characteristics of the effective manager augment this role set. Five major characteristics of effective managers are:

1. They know the internal structure and characteristics of their organization: ○ Its overall mission ○ Its client characteristics and needs ○ Its specific products or services offered to meet these needs ○ Its specific setting or combination of settings and formal organizational

category (e.g., acute care, freestanding clinic) ○ Its specific laws, regulations, and accrediting standard applicable to each

type of healthcare unit 2. They know the internal and external dynamics of their organization:

○ The organization’s strengths ○ The challenges to its survival ○ The areas requiring adaptation and innovation ○ Its life cycle ○ Its network of internal and external relationships ○ Its survival strategies

3. They lead and motivate the workforce by doing the following: ○ Developing and maintaining a positive workplace environment

○ Reducing conflict ○ Increasing worker satisfaction through training and ongoing development

and the provision of proper wage and benefits ○ Maintaining effective communication

4. They engage in the search for excellence through continuous quality improvement.

5. They remain aware of and respond to the following: ○ Trends (e.g., changes in technology, patterns of reimbursement, social

issues) ○ The challenge of change and the necessity of being a change agent and a

leader

The manger’s responsibility to identify and respond to change is the focus of the following chapter.

EXERCISE: BECOMING A SPLIT- DEPARTMENT MANAGER Imagine that you are the manager of a department organized to provide service in your chosen profession. In other words, if your career is medical laboratory technology, you are a laboratory manager; if your field is physical therapy, you manage physical therapy or rehabilitation services; and so on. You are employed by a 60-bed rural hospital, an institution sufficiently small that you represent the only level of management within your function (unless your profession is nursing, in which case there will be perhaps two or three levels of management). This means that unless you are a first-line manager in nursing (e.g., head nurse), you report directly to administration.

You have been in your position for about 2 years. Following some stressful early months, you are beginning to feel that you have your job under control most of the time.

A possibility that for years had been talked about and argued throughout the local community, the merger of your hospital with a similar but larger institution (90 beds) about 10 miles away, recently became a reality. One of the initial major changes undertaken by the new corporate entity was realignment of the management structure. In addition to placing the new corporate entity under a single chief executive officer, the realignment included, for most activities, bringing each function under a single manager. Between the merger date and the present, most department managers have been involved in the unpleasant process of competing

against their counterparts for the single manager position. You are the successful candidate, the survivor. Effective next Monday, you will

be running a combined department in two locations consisting of more than twice the number of employees you have been accustomed to supervising.

Instructions Generate a list of the ways in which you believe your responsibilities and the tasks you perform are likely to change because of the merger and your resulting new role. Hint: It may be helpful to make lists of what you imagine to be the circumstances before and after your appointment. For example, two obvious points of comparison involve the number of employees (which implies many necessary tasks) and the travel inherent in the job. See how long a list you are able to generate.

If possible (e.g., within a class or discussion group), after individual lists have been generated, bring several people together, combine their lists with yours, and see if a group process can further expand the list.

Also, address the following questions:

1. What does this split-department situation do to your efficiency as a manager, and how can you compensate for this change?

2. On which specific management skill should the newly appointed split- department manager be concentrating?

NOTES 1. “Fast facts.” Healthdecisions.org. America’s health insurance plans.

www.healthdecisions.org/learningcenter/facts.aspx. 2. “Premiums for Health Insurance Up 12.7%,” Rochester (New York) Democrat &

Chronicle, August 31, 2005. 3. K. M. Paget, “The Balanced Budget Trap,” The American Prospect

(November/December 1996): 1–2. 4. W. H. Ettinger Jr., “The Balanced Budget Act of 1997: Implications for the Practice of

Geriatric Medicine,” The Business of Medicine 46 (1998): 530–533.

http://Healthdecisions.org

http://www.healthdecisions.org/learningcenter/facts.aspx

CHAPTER 2 The Challenge of Change

CHAPTER OBJECTIVES • Identify the impact of change on organizational life. • Identify the manager’s role as change agent. • Review examples of successful change. • Examine a major change having ongoing impact. • Describe the organizational change process. • Identify specific strategies for dealing with resistance to change.

THE IMPACT OF CHANGE Change in the healthcare environment is continuous and challenging; the trends and issues in the healthcare setting reflect the reality in every stage of the life cycle of the organization, as well as in its attendant survival strategies. Trends and issues intensify, becoming mandates for change in patient care, setting, and administrative support. This affects workers at all levels. Such changes consume financial and administrative resources; they have the potential of draining emotional and physical energy away from primary goals. Thus, the managers accept the role of change agent, seeking to stabilize the organization in the face of change.

THE MANAGER AS CHANGE AGENT Managers, as the visible leaders of their units, assume the function of change agents. This change agent role involves moving the trend or issue from challenge to stable and routine. This is accomplished in several ways:

• Mediating imposed change through adjusting patterns of practice, staffing, and

administrative routines • Monitoring horizon events through active assessment of trends and issues • Creating a change-ready environment • Taking the lead in accepting change

REVIEW OF SUCCESSFUL CHANGE Managers foster a change-ready environment by reminding the work group of successful changes. This raises the comfort level of the group and provides insight into strategies for achieving desired outcomes. Six examples are provided here to illustrate the process of successful change:

• Year 2000 (Y2K): change as opportunity • Patient Self-Determination Act (PSDA): routinization of change • Health Insurance Portability and Accountability Act (HIPAA): extensive change

via legislation • Electronic health records: proactive change • Economic and market forces: anticipatory readiness through organizational

restructuring • Disruption in personal circumstances: revitalization through career development

Change as Opportunity: Y2K Recall the transition to the new century: Y2K. The phrase alone reminds us of successful responses to an inevitable change. It also reminds us of the pre-Y2K concerns about technology-dependent systems: would they work? Faced with the possibility of massive systems failure, managers carefully defined the characteristics of this anticipated change:

1. A definitive event with an exact timetable 2. Well known ahead of time (3- or 4-year run-up) 3. Unknowns or uncertainty mixed with known technical aspects: which systems

might fail, what would the resulting impact be (e.g., failure of power grids, communication disruption, financial infrastructure chaos)

During the run-up to Y2K, managers assessed the potential impact and planned accordingly. Furthermore, many managers seized the opportunity to make even bigger changes. When the cost of upgrading some existing systems was compared with adopting new systems, managers chose to spend the money and time on a

comprehensive overhaul. Funding such a major project became part of the challenge. Many chose a

combination of borrowing, along with “bare bones” budgets, with deferred maintenance and elimination of discretionary projects (e.g., refurbishing) to meet this need. The end result in many organizations was the adoption of new, well- integrated computerized systems. This overall plan of upgrading was supplemented with contingency planning closer to the December 31, 1999, deadline. Managers took such practical steps as:

• Eliminating all backlogs (e.g., coding, billing, transcription) • Preregistering selected patient groups (e.g., prenatal care patients) • Obtaining and warehousing extra supplies • Adjusting staffing patterns for the eve of Y2K and the days immediately

following it, with workers available and trained to carry out manual backup for critical functions

Managers also took the opportunity to review and update the emergency preparedness and disaster plans for the healthcare organization. Again, the anticipated Y2K change was the catalytic agent for renewed efforts in these areas. Y2K came and ran its course; the change was absorbed with relative ease because of careful planning.

The Routinization of Change: The Patient Self- Determination Act of 1990 End-of-life care and related decisions have always been a part of the healthcare environment. However, technological change (e.g., advances in life support systems) along with definitive court cases (e.g., Quinlan, Cruzan, Conroy) led to a renewed interest in these issues. This interest, in turn, resulted in the passage of the PSDA, which had implications for patient care as well as the administrative support systems.

The response to this change was orderly and timely because the healthcare providers and the administrative teams assessed the change in a systematic manner. This strategy of absorbing change through rapid routinization into existing modes of practice included the following:

1. Outreach to clients or patients and their families, along with the public at large, to provide information and guidance about healthcare proxies, advance directives, and living wills. Information about support services such as social service, chaplaincy, and hospice care was included as part of the regular client/patient education programs.

2. Review and update of do not resuscitate (DNR) orders and related protocols for full or selected therapeutic efforts.

3. Review of plan of care protocols for “balance of life” admissions. 4. Increased emphasis on spiritual and psychological considerations of patients

and families, with documentation through values history or similar assessments.

5. Renewed involvement of the ethics committee of the medical staff to provide the healthcare practitioner, patient, and family with guidance. The committee also adopted review protocols to assess patterns of compliance with advance directives and end-of-life care.

6. Documentation and related administrative processes augmented to reflect the details of this sequence of care (e.g., documentation that an advance directive was made, movement of the document with the patient as he or she changed location, flagging the chart to indicate the presence of the directive). Existing policies and procedures were updated to reflect these additional practices.

The changes stemming from the PSDA were easily managed through systematic review and adjustment of existing, well-established routines. However, there is a potential downside to routinizing change: the changes might become so well accepted that they are more or less ignored. For example, the living will becomes just another piece of paper or data entry, checked off as being available but not truly part of the care plan.

Because response to legislated change is often required, it is useful to examine yet another such mandate. A consideration of HIPAA reflects a different dynamic in the organizational process of responding to new requirements.

Extensive Change via Legislation: Health Insurance Portability and Accountability Act of 1996 This act, known commonly by the acronym HIPAA, crept inconspicuously on the scene as Public Law Number 104 of the 191st Congress (PL 104-191). When it was a newly passed law, its most visible portion was broadly described by the name of the law, addressing primarily “portability” of employee health insurance.

The intent of HIPAA was to enable workers to change jobs without fear of losing healthcare coverage. It enabled workers to move from one employer’s plan to another’s without gaps in coverage and without encountering restrictions based on preexisting conditions. It proclaimed that a worker could move from plan to plan without disruption of coverage.

In 1996, a great many healthcare managers did not concern themselves with

HIPAA. Human resources managers became most aware of the new law because it concerned their benefits plans, but the burden of notification was borne mostly by the employers’ health insurance carriers, so there was little to do other than answering employees’ questions. For many managers, the employer had no concerns about HIPAA beyond ensuring health insurance portability. But HIPAA’s major impact was to come later, and its arrival was a genuine eye-opener for many. This law consists of five sections: titles I, II, III, IV, and V.

Title II in the Spotlight Titles I, III, IV, and V of HIPAA deal with employee health insurance, promoting medical savings accounts, and setting standards for covering long-term care. Title II is the section driving most HIPAA-related change. This section is called “Preventing Health Care Fraud and Abuse, Administrative Simplification, and Medical Liability Reform.” It is referred to as just Administrative Simplification, a term that is misleading at best; for many of the organizations that have had to comply with it, the effects have been anything but simple.

Administrative Simplification includes several requirements designated for implementation at differing times. Compliance with the Privacy Rule, the most contentious part of HIPAA, was required by April 14, 2003. Compliance with the Transactions and Code Sets (TCS) Rule was required by October 16, 2003, and the Security Rule was set for implementation in April 2005. The Centers for Medicare and Medicaid Services have issued, and continue to issue, a wide variety of rules and guidelines, with managers implementing these routinely. HIPAA has become a fixed feature in healthcare systems.

Nearly all of the controversy over the intent versus the reality of HIPAA involves the Privacy Rule. In trying to strike a balance between the accessibility of personal health information by those who truly need it and matters of patient privacy, portions of HIPAA have created considerable work and expense for healthcare providers and organizations that do business with them, not to mention creating inconvenience and frustration for patients and others.

The Continuing Privacy Controversy Reactions to the Privacy Rule have been numerous. Patients and their advocates claimed that these new requirements were forcing a choice between access to medical care and control of their personal medical information. Government, however, claimed that the rules would successfully balance patient privacy against the needs of the healthcare industry for information for research promoting public health objectives and improving the quality of care.

When HIPAA’s privacy regulations first received widespread exposure, hospitals, insurers, health maintenance organizations, and others claimed that the Privacy Rule would impose costly new burdens on the industry. At the same time, Congress was claiming that HIPAA’s protections were immensely popular with consumers. Consumer advocates hailed the Privacy Rule as a major step toward comprehensive standards for medical privacy while suggesting that it did not go far enough.

To comply with the Privacy Rule, affected organizations were required to

• Publish policies and procedures addressing the handling of patient medical information

• Train employees in the proper handling of protected health information • Monitor compliance with all requirements for handling protected health

information • Maintain documented proof that all pertinent requirements for information

handling requirements are fulfilled

In many instances, the HIPAA privacy requirements are causing frustration for patients and others. For example, a spouse who has to help obtain a referral or follow up on a test result cannot do so without the signed authorization of the patient (unless the patient is a minor). Anyone other than a minor or a legally incapable or incapacitated individual must give written permission for anyone else to receive any of his or her personal medical information.

There are a number of instances in which personal medical information can be used without patient consent. These instances, along with all patients’ rights concerning personal medical information, must be delineated in the Privacy Notice that every provider organization must provide to every patient.

Effects on an Organization All healthcare plans and providers must comply with HIPAA. Provider organizations include physicians’ and dentists’ offices; hospitals, nursing homes, and hospices; home health providers; clinical laboratories; imaging services; pharmacies, clinics, and freestanding surgical centers and urgent care centers. In addition, such organizations include any other entities that provide health-related services to individuals. Also required to comply are other organizations that serve the direct providers of health care (e.g., billing services and medical equipment dealers). All affected organizations must

• Protect patient information from unauthorized use or distribution and from malfeasance and misuse

• Implement specific data formats and code sets for consistency of information processing and preservation

• Set up audit mechanisms to safeguard against fraud and abuse

All subcontractors, suppliers, or others coming into contact with protected patient information are also required to comply with the HIPAA Privacy Rule. In addition, all arrangements with such entities must define the acceptable uses of patient information.

Depending on organization size and structure, compliance with the HIPAA Privacy Rule could involve several departments (as in a mid-size to large hospital), a few people (as in a small hospital or nursing home), or a single person (as in a small medical office). Overall, whether compliance is accomplished by separate departments or just a person or two, compliance can involve a number of activities, including information technology, health information management, social services, finance, administration, and ancillary or supporting services.

The necessary changes have been numerous and have added to the workload in every affected area. Providers routinely obtain written consent from patients or their legal representatives for the use or disclosure of information in their medical records, as had been the standard practice. However, renewed attention has been focused on release of information practices. Also, providers are now legally required to disclose when patient information has been improperly accessed or disclosed.

The Privacy Rule created a widespread need for healthcare providers to revise their systems to protect patient information and combat misuse and abuse. Providers now must protect patient information in all forms, implement specific data formats and code sets, monitor compliance within their organizations, implement appropriate policies and procedures, provide training all in HIPAA’s privacy requirements, and require the organization’s outside business partners to return or destroy protected information once it is no longer needed. Also, it is not enough simply to do everything that is supposed to be done: there are also a number of documentation requirements as well. Even a provider organization’s telecommuting or home-based program must be HIPAA compliant.

Physical Layout Considerations The HIPAA Privacy Rule has necessitated changes in physical arrangements to ensure that no one other than the patient and caregiver or other legitimately involved person knows the nature of the patient’s problem—or even, for that matter, that the specific individual is a patient. Medical orders or information about an individual’s condition must be conveyed with a guarantee of privacy. Numerous organizations had to move desks or workstations, erect privacy partitions, provide soundproofing, and make other alterations so that no one other than those who are legally entitled to

hear may overhear what passes between patient or representative and a legitimately concerned party.

The Privacy Official Every healthcare provider organization must have a person designated to oversee HIPAA compliance. In a large organization, this position could be filled by a full- time HIPAA coordinator. In a small organization, such as a medical office, the task might be an additional responsibility of the office manager. This person must monitor all aspects of compliance and ensure that appropriate policies and procedures are maintained and kept current. Professional associations, including the American Health Information Management Association (AHIMA), have developed detailed position descriptions and guidelines for privacy officers.

The Department Manager and HIPAA Depending on the nature of a department’s activity, HIPAA’s requirements could significantly affect the manager’s role. For example, in addition to most managers’ involvement with the Privacy Rule, some person working in health information management must be concerned with the TCS rule. A manager within information technology or information systems will be significantly concerned with the Security Rule because of its relevance for information stored or transmitted electronically.

As with other laws affecting the workplace, there is much more to compliance with HIPAA than simply putting policies, procedures, and systems in place. Some HIPAA regulations are complex, and in the most heavily affected areas of an organization, considerable training can be required. Also, HIPAA necessitates some training for most staff regardless of department; any person who comes into contact with protected patient information must receive privacy training. As a consequence, most managers will be both trainees and trainers, learning HIPAA’s privacy requirements and communicating them to employees.

Not Going Away Some HIPAA requirements continue to be amplified, and it is clear that the law’s basic privacy requirements are here to stay in one form or another. Privacy rules will continue to affect every physician, patient, hospital, pharmacy, healthcare provider, and all other entities having contact with patient medical information in any form. The American Recovery and Reinvestment Act of 2009 and the related Health Information Technology for Economic and Clinical Health Act amplify privacy practices, with particular emphasis on breach notification. The breach notification

provisions include detailed regulations touching on the following issues:

• Notification of individuals if there is significant risk of financial, reputational, or other harm

• Time frames and manner of notification • Tracking and reporting • Internal compliance monitoring systems

HIPAA has brought with it a considerable amount of unwelcome, unwanted, and frequently burdensome change affecting the jobs of many healthcare managers. Because the requirements of HIPAA are government mandates, the individual manager has no option but to comply. The manager’s challenge, then, is to conscientiously approach the necessary changes in the role and incorporate them so that they are addressed as efficiently and effectively as possible.

As an unexpected positive outcome of HIPAA-related actions, the health information management environment has been primed to undertake major efforts in expanding electronic health records.

A Study in Proactive Change: Electronic Health Records Implementation of electronic health records reflects a proactive approach to change. The application of technology to enhance the creation and use of healthcare information has been a welcome advance. The migration from hard copy records and systems to automated ones represents change, both incremental and rapid. Data gathering and analysis via punched cards in the early 1960s was a precursor of advances to come. As the country became accustomed to electronic capture, exchange, and use of information as a result of the new technology (the credit card —easy to use, easy to carry), smart cards with embedded personal health information were a highlight in the early 1970s. Why not apply the same idea to one’s personal information? Applications of smart cards in the late 1980s included patient’s use of interactive behavioral healthcare protocols. Throughout this period, automated and outsourced administrative processes were adopted readily. The Y2K events occasioned a thorough review of systems. Advances in technology, plus related legislation in favor of electronic health records, have resulted in rapid change and a cascade of changes. Note, by way of example, the adoption of Health Level-7 standards, the creation of a national health information technology coordinator and the national health information technology plan, and such specific legislation as the Medical Modernization Act and its mandates concerning electronic prescription systems.

The electronic health record incentive program provided an additional catalyst for the adoption of this massive system change. Yes, the technology is continually

evolving, but the underlying principle is enduring: quality health information for use in patient care, research, and administrative support. Legislative mandates requiring universal adoption of electronic health records further reinforce this ongoing professional mission.

Health information practitioners have taken leadership roles in their workplaces and through their national association, AHIMA, along with its state component organizations. A strategy for proactive engagement with these changes was developed and continues to be applied as the migration from hard copy to electronic information systems unfolds. The overall strategy has six features:

1. Individual initiative within the workplace 2. Advocacy in the public arena 3. Partnership with key stakeholders 4. Outreach to clients and patients 5. Continual adjustments to information systems 6. Reassessment of health information management job roles and credentialing

Individual Initiative Within the workplace, individual health information managers have steadily adopted computer technology to support basic operations. Workflow and processes have been gradually converted over time, including automated master patient indexes, coding and reimbursement processes, digital imaging, and speech recognition dictation. Internal administrative systems have served as building blocks for the expansion of computerized systems to include electronic health records. Although individual initiative continues to be an important facet of this transition, fostering change through advocacy has been primarily an organized group effort through the national association, AHIMA.

Advocacy in the Public Arena External forces, particularly law and regulation, are affecting the process of developing electronic health records. It is essential, then, that professional practitioners help shape the debate, contributing their knowledge and expertise through organized efforts. Regular interaction with lawmakers and regulatory agency officials has been central to this process. Participation in work groups, task forces, and special initiatives has been steady. Landmark events bear the imprint of such involvement, including the Centers for Disease Control and Prevention’s Public Health Information Network to implement the Consolidated Health

Informatics standards, the Public Health Data Standards Consortium, the Department of Health and Human Services (DHHS), the American Health Information Community and its initiatives toward creating a national health information network, and the Certification Commission for Healthcare Information Technology.

Partnerships with Key Stakeholders The health information profession has long been the authoritative source of practice standards. With the advent of electronic health records, many of the questions that have arisen are variations of issues with which health information management practitioners have successfully dealt. Those experiences have prepared these practitioners to offer guidance in such areas as documentation content and standardization, authentication of documentation, informed consent, accuracy of patient information, access and authorized use of data, and data security.

AHIMA has developed a series of position papers, statements of best practices, and guidelines for these and related topics. This organization has strengthened its efforts through partnership with key stakeholders, as the following examples demonstrate

• American Health Information Community (DHHS): standards for electronic health data

• American Medical Informatics Association: data standards • Medical Group Management Association: performance improvements and need

for consistent data standards • National Library of Medicine: data mapping (e.g., Systematized Nomenclature

of Medicine and International Classification of Disease interface) • American Society for Testing and Materials and its committee on health

informatics: core data elements and definitions • Corporate partner industry briefings: cosponsored exchange sessions

Through these and similar outreach efforts, AHIMA makes available valuable guidance to those involved in adopting electronic health records.

Another major initiative by AHIMA has been the move toward open membership. In recognition of the important partnership with information technology specialists, clinicians, and others with a shared interest in health information, as well as to foster even greater teamwork, the AHIMA members voted to eliminate associate membership, moving this group into the active membership category. An open, inclusive membership provides additional strength to the association in its efforts to support the electronic health record initiative.

Outreach to Clients and Patients Consumers are an important partner in the effective use of electronic health records. AHIMA has developed an initiative to raise public awareness of these personal health records. As part of this initiative, individual health information practitioners, using AHIMA-created presentations, interact at local and regional levels with consumer groups such as local chambers of commerce, health fair coordinators, and specialty support groups (e.g., cancer support groups). Participation in the Blue Button initiative (begun by the Department of Veterans Affairs) has provided another opportunity to educate the public about electronic health records. Presentations and articles by health information management professionals concerning the health information exchange or “how to” explanations about accessing an electronic health record for one’s personal use have fostered patient engagement in this unfolding endeavor.

An important adjunct to this outreach is advocacy. Clients and patients must continue to have trust in the process of revealing their personal information fully and truthfully during healthcare interactions. AHIMA continues to press for specific protective legislation with a nondiscrimination focus: protect the patient from any discriminatory action stemming from documented information about patient care encounters.

Continual Adjustments to Information Systems In summary, electronic health record initiatives reflect the best in proactive involvement by managers in facing major change. As the transition from paper to electronic records continues, AHIMA has provided position papers, best practices guidelines, and training materials including document imaging to link paper documents to electronic health records, along with retention guidelines for postscanning management of data; “copy and paste” guidelines; making corrections, amendments, and deletions to ensure record integrity; the definition of the legal record; and e-discovery rules under federal rules of civil procedures.

Reassessing Health Information Management Job Roles and Credentialing The changing landscape of health information management job roles and functions has produced associations that periodically review this work. Such evaluation has become a more urgent priority as attention to the need to reassess both traditional jobs as well as emerging ones. Logical steps have included identifying the new configuration of jobs and role sets, identifying the associated knowledge and competencies, and developing and expanding the educational preparatory levels

(associate, bachelor’s, and master’s degrees, as well as graduate certificate in healthcare informatics). The credentialing process has also been expanded to include new categories of specialization (e.g., Certified Documentation Improvement Practitioner, Certification in Healthcare Privacy and Security).

Economic and Market Forces: Anticipatory Readiness Through Organizational Restructuring Sometimes an organization as a whole faces severe circumstances caused by economic and market forces. Consider the situation of a facility offering two levels of care for frail, elderly people: personal care and assisted living. This facility opened 40 years ago and has been in the same physical building since then. It has had a history of modest but steady success. An analysis of the balance sheet reflected breakeven points for 11 of the 40 years and 14 years of modest profit. Only the first few years showed yearly losses, primarily because of startup costs. Then, most recently, there was a 5-year run of steady loss and increased debt, due to increased competition in local market and to the need for expensive renovations to the 40-year old physical facility. Decreasing reimbursement rates from third-party payers added to this erosion of revenue.

To reverse this trend, the management team undertook the process of preparing the organization to survive and thrive in a new era. The team restructured the organization. It also anticipated probable changes in state law, including those leading to a decrease in skilled care beds through a buy-back provision. Decreased reimbursement for this level of care gave the organization an additional reason to convert some units to increase the size of its dementia care service. Assisted living care was discontinued. The assisted living building was converted to additional personal care and respite care, plus an adult day care center. Comprehensive home care services, using a contractual provider, rounded out the reconfigured services. Through all of these efforts, the organization emerged from its threatened state and became a leading provider in its geographic region.

Disruption in Personal Circumstances: Revitalization Through Career Development The individual is certainly not immune to the pressure of change. Consider the situation of the health information professional whose family circumstances require increased income over the next several years. This credentialed practitioner had been working part-time as a coding specialist in a community hospital. There were no anticipated resignations in the department management team, and internal advancement was unlikely. Furthermore, this woman needed to remain in the region

for family reasons. Recognizing the constraints in her situation, she made and implemented a plan for advancement. First, she utilized the AHIMA career development and self-assessment program to identify competencies needing upgrading. While continuing to work, she undertook master’s degree studies in health informatics and participated in several projects. These projects included research in correctional facilities, juvenile detention centers, and protective service agencies. Through this health information professional’s involvement in local civic activity, an opportunity developed for her to work in first local, and then regional, correctional facilities. She worked first as a part-time consultant and then as the full- time director of the health information department. Both her personal and professional goals were met.

Using the foregoing examples as background, let us now consider the theoretical aspects of organizational change.

CHANGE AND RESISTANCE TO CHANGE Change is inevitable, but change can also be chaotic and painful. Alfred North Whitehead once said, “The art of progress is to preserve order amid change and to preserve change amid order.” That statement captures the essence of change and its effects on all of life. Much change is beneficial, even necessary, but change is often upsetting and unsettling and thus must be controlled. For good or ill, change is inevitable. So, too, is resistance to change inevitable.

This section addresses the inevitability of change, including how, as individuals, we tend to deal with change and how, as managers, we can deal with employee resistance to change. In discussing this topic, it is necessary to look at individual attitudes toward change, those of both managers and employees alike, because resistance is a human reaction that can arise in anyone regardless of organizational position. In other words, the manager who is expected to be a change agent and supportive of inevitable change may initially experience feelings of resistance equivalent to those of the employee. It is also necessary to consider how to meet change when it occurs and how to make change work.

Significant change—change that has the power to confuse, frustrate, and very nearly overwhelm—is a frequent modern concern. Broadscale change has been a phenomenon affecting only the recent few generations, and for the most part people remain unable to shake off centuries of programming that causes them to dig in their heels and resist when change that they neither want nor welcome threatens to pull them down.

The Collision of Constancy and Change

Humans have been thoroughly conditioned by many centuries of little or no change to expect constancy. Up until a few decades ago, an individual could adopt a career and with few exceptions expect to remain in that career for a lifetime. The effects of the knowledge explosion and the Industrial Revolution that preceded it, however, included changes that rendered some occupations obsolete or changed them dramatically. Occupations that had existed for several generations all but vanished as machines took over work that had long been done by hand. Entire industries disappeared. For example, whaling, once an economic mainstay of the northeastern United States, shriveled and died as petroleum products replaced whale oil. Many individuals have seen their jobs and careers disappear as a consequence of change that continues to accelerate to this day.

Those working in the delivery of health care have seen and are seeing new medical technologies arise to either replace or augment existing technologies, in some instances making it necessary for workers to learn new skills or seek new occupations. Some individuals still working in diagnostic imaging were first employed when imaging was entirely X-ray; these people have seen the addition of the computerized axial tomography (CAT) scan, magnetic resonance imaging (MRI), positron emission tomography (PET) scan, and other technologies. One technologist who had been employed in a hospital laboratory for 30 years observed that more than 80% of the tests she performed on a routine basis did not exist when she first entered the field. A professional in another field, comparing the changes in college course curricula in his field over a period of 30 years, observed that he would have to take one or two new courses each semester for the rest of his life to remain completely current with the pace of change in his field.

On a simpler level, for the conduct of routine business functions, whether in health care or elsewhere, where have all the typewriters (and typewriter makers) gone? And considering the rapid advances in electronics that are seeing devices becoming both smaller and more powerful, one might soon be inspired to ask, where have the personal computers gone?

People have been conditioned by centuries of little change to expect constancy or near-constancy. That, plus a natural tendency to seek equilibrium with the surroundings, conditions many people to be automatic resisters of change. They are continually attempting to preserve equilibrium with the environment, and whenever it is disturbed they tend to take steps to reestablish that equilibrium—to return to a “comfort zone.” Certainly not all people behave in the same manner, but it is likely that most people seek equilibrium with their surroundings and tend to equate security with constancy. Indeed, security was once likely to be found in adopting an occupation and doing it well for life or in remaining a loyal employee of one organization for life. No longer, however, is there security in constancy; rather, today’s security, to the extent that it may exist, lies in flexibility and adaptability.

The Roots of Resistance The principal cause of most resistance to change is the disturbance of the previously mentioned equilibrium. Resistance will, of course, be influenced considerably by one’s knowledge of where a given change is coming from. It is unlikely that a person will resist a change with which he or she wholeheartedly agrees or one that is his or her own idea to begin with. The person does not resist such a change because it is welcome and, therefore, does not threaten one’s equilibrium. Thus it is not change itself that people resist but rather being changed—being made to change by forces or circumstances outside of themselves.

A secondary major cause of resistance lies in the inability of people to mentally conceive of certain possibilities or think beyond the boundaries of what they presently know or believe. The limitations imposed by what people know and what they believe can provide significant barriers to creativity and progress. Ideas that are today deemed revolutionary were not originally welcomed with open minds. Many people we have come to think of as innovators and visionaries were, in their day, regarded as dreamers, charlatans, or crackpots. Here are four examples.

1. Barely 2 months before the Wright brothers flew, a noted scientist publicly explained why a heavier-than-air flying machine could never work. However, the brothers went ahead and flew anyway; they had an advantage in not knowing “it couldn’t be done.”

2. A device called a “telephone” was branded a fraud, with an “expert” proclaiming that even if it were possible to transmit human voice over wires, the device would have no practical value.

3. When television was new, the head of a major Hollywood studio proclaimed that people would soon get tired of staring at a plywood box every night.

4. Even in the field of medicine, change has often been thought impossible: in 1837, leading British surgeon Sir John Erichson stated that the abdomen, the chest, and the brain would “forever be shut from the intrusion of the wise and humane surgeon.” Note as well that many people alive today once thought that surgery on a living heart would never be possible.

To a considerable extent, then, the roots of resistance to change are within human beings themselves.

Primary Causes of Resistance Concerning change that occurs in the workplace, people tend to be thrown off balance by changes that are thrust on them and especially by the way in which many of these changes are introduced. Common sources of change in the work

organization occur in many areas:

• Organizational structure, when departments are altered or interdepartmental relationships or management reporting relationships are changed, including the changes that result from merger, affiliation, or system formation

• Management, whether in a department, a division, or an entire organization • Product or service lines, as services are added, dropped, or altered significantly • Introduction of new technology, bringing with it new equipment that employees

must learn to use • Job restructuring, altering the duties of particular jobs, such as combining jobs

that were formerly separate • Methods and procedures, requiring workers to learn new ways of doing their

jobs • The organization’s policies, especially personnel policies affecting terms and

conditions of employment

Consider how much—or perhaps how little—control the average rank-and-file employee or the typical department manager can exert over the foregoing changes. In most instances, the individual is essentially powerless. Managers and some employees might perhaps have a voice in restructuring jobs and altering methods and procedures, and perhaps they might be involved in selecting or recommending new equipment, but chances are they have little or no voice in the decisions necessitating such changes. It is doubtful that many employees or managers below the level of executive management have any influence on changes in products or services. And concerning the remainder of the major sources of change described— significant sources of stress and resistance for managers and employees alike—rank- and-file employees and their department managers are powerless.

Organizational Changes Depending on the extent of reorganization, structural changes within a healthcare organization, such as combining departments or groups or realigning departments under different executives, can engender ill feelings and generate considerable resistance. Most department managers and their employees are well aware that reorganizing under any name—reengineering, downsizing, whatever—often means that some people will lose their jobs, so fear and insecurity and thus resistance increase while productivity inevitably decreases. Even more likely to upset employees are the changes accompanying merger or other form of affiliation, acquisition by a larger organization, or health system formation.

Management Changes Changes in management are among the most potentially upsetting changes employees can experience. The stress of a management change, and thus the resistance to it, is concentrated within the hierarchy beneath the management position that is turning over; therefore, a change in department manager will affect primarily that department, whereas a change in chief executive officer will affect the entire organization. A change in management almost always involves exchanging a known quantity for a complete or partial unknown, and it is fear and apprehension concerning the unknown that causes most initial resistance to management changes.

Policy Changes Major changes in the policies of the organization, especially personnel policies affecting terms and conditions of employment, are likely to spark a certain amount of employee resistance, especially if employees perceive they are losing something. In these years of fiscal belt-tightening, it is not uncommon to see, for example, employers in health care and elsewhere shifting an increasing portion of ever- growing health insurance costs to employees, or reducing the corporate contribution to defined-contribution retirement plans or other investment plans, or reducing the sick-time benefit and combining the remainder with vacation and personal time in “paid time off” plans. Such policy changes have inspired so much resistance for some employers that they have become major issues in union organizing campaigns and labor contract negotiations.

Many Causes Resistance can occur anywhere, resulting from almost any change within an organization, often arising in situations that no one had thought would prompt any objections. Times of relative turmoil in health care, with all of the fallout of “merger mania” and all of the cost-reducing and cost-saving pressures brought to bear on the healthcare delivery system, finds the healthcare worker—and the healthcare manager as well—working in an environment of intensifying change and an eroding sense of security.

Meeting Change Head-On The healthcare department manager is in a uniquely difficult position relative to change that has an impact on the healthcare organization. As an employee, the manager is just as affected by change as the rank-and-file employees and is just as likely to feel helpless, demoralized, and resistant. Yet it is up to the manager to try

to minimize the negative reactions of the work group and attempt to raise employee morale and ensure continued productivity. If the manager openly projects doom, gloom, and resistance, the staff will be all the more likely to become more deeply mired in doom, gloom, and resistance themselves, ensuring that morale and productivity both suffer. It can be a most difficult role for the manager to function as “cheerleader” when there seems to be nothing to cheer about. Yet the manager must make a conscious effort to rise above all the negative thinking. Succeeding at doing so is largely a matter of attitude, including the willingness to take a moderate amount of risk.

Flexibility and Adaptability As noted, people can no longer find security in constancy, maintaining loyalty to the same ideas, concepts, and institutions for life. Rather, security, to whatever extent it exists today, is more likely found in flexibility and adaptability. The manager who remains rooted in place, with a fixed set of ideas and an unchanging concept of the job, will not be particularly successful; however, the manager who can move about, who can flex and adapt as circumstances change, stands a much greater chance of success. Also, to enhance the department’s chances of success in adjusting to changing circumstances, the manager must be a role model for flexibility and adaptability.

A department manager may be able to help some employees increase their flexibility by instituting cross-training wherever possible. For cross-training to be effective, it is necessary that there be a number of employees distributed across multiple jobs of approximately the same skill or grade level; thus, it is not possible in every department. When cross-training is possible, however, there are benefits for employee, department, and organization alike. With people trained in multiple activities, coverage for vacations and other absences is more readily accomplished, employees get the advantages of task variety, and employees may become more secure during times of readjustment by being capable of moving into certain other jobs, already trained and competent.

A Matter of Control The department manager who becomes caught up in a sea of change should immediately learn the difference between what can be controlled and what cannot be controlled. Much energy is wasted in trying to control that which is uncontrollable. For example, a manager may be greatly stressed about an impending merger and subsequent combination of departments, but there is nothing that the manager can do about it; it will happen whether he or she wishes it or not.

Stress as a response to change, both real and impending, is an emotional reaction.

An important early step in gaining a measure of control over one’s circumstances is learning to control one’s emotions. A person may have little or no control over the changes themselves; however, he or she has complete control over how one’s response to the changes.

Fortunately, there are usually a few factors that the individual department manager can control to some extent. Reorganizing or reengineering frequently results in the need to combine positions and restructure a number of jobs—that is, change job descriptions, assignments, crew or team sizes, equipment, or later services. These actions usually entail changes in methods and procedures, changes that can be determined in detail within the department by the manager, often with the participation of the employees.

Addressing Resistance with Employees A manager responsible for implementing change has three available avenues along which to approach employees regarding a specific change. The manager can (1) simply tell them what to do, (2) convince them of the necessity for doing it, or (3) involve them in planning for the change.

Tell Them The use of specific orders or commands is one of the hallmarks of the autocratic or authoritarian leader. The boss is the boss, a giver of orders who either makes a decision and orders its implementation or relays without expansion or clarification the mandate from above.

The authoritarian approach is sometimes necessary; occasionally, it is the only option available under urgent or completely unanticipated circumstances. However, in most situations the “tell-them” approach is the approach most likely to generate resistance, so it should be used in only those rare instances when it is the only means available.

Convince Them In most instances, including those in which the change in question is an absolute mandate from top management, the individual manager has room for explanation and persuasion. At the very least, there is the opportunity to try making each employee aware of the reasons for the change and the necessity for its implementation. It may be necessary for the manager to champion the cause of something clearly distasteful to all concerned (except, most likely, to those mandating compliance) because it may be good for the institution overall or good

for patients, or even perhaps because it is mandated by new government regulations. The employees may not like what they are called on to do, but they are more likely to respond as needed if they know and understand why the change must be implemented.

The employees deserve all the information available, and this information often serves the manager well because it can remove the shadow of the unknown from the employees and thus lessen their resistance. Few, if any, changes cannot be approached by this means. The authoritarian “tell-them” approach should be reserved as a last resort to be used on those occasions when employees clearly cannot be “sold” on the change.

Involve Them Whenever possible, and especially if it affects the way they do their assigned jobs, employees should become involved in shaping the details of any particular change. It has been repeatedly demonstrated that employees are far more likely to understand and comply when they have a voice in determining the form and substance of the change. For example, if new equipment is under consideration and there is sufficient lead time, it is helpful to obtain the input of the people who will have to work with the equipment once it is in place. This sort of involvement not only enhances employee cooperation but often leads to a better decision because of the perspective of the people doing the hands-on work. When expansion or remodeling will change the characteristics of the department, employee input in the planning stages will bring the workers’ perspective into determining optimal layout and work flow. Through involvement, change can become a positive force. Employees will be more likely to comply because they own part of the change; in effect, a piece of it is their idea.

There is another potential benefit to involvement as well: employee knowledge of the details of the work in ways the manager may never have. The manager supervises a number of tasks, some of which he or she may have once done personally. However, the employees regularly perform in hands-on fashion the tasks the manager only oversees. Thus, the employees usually know the details of the work far better than the manager and are in a better position to provide the basis for positive change in task performance.

The numerous sources of management advice that promote the value of employee involvement are correct. The participative and consultative approaches to management are the best ways of getting things done through employees. The most effective ways of reducing or removing the fear of the unknown make full use of communication and involvement.

Guidelines for Effective Management of Change To secure employee cooperation and participation and successfully manage change in the workplace, it is necessary for the manager to take the following steps:

• Plan thoroughly. Fully evaluate the potential change and examine all implications of its potential impact on the department and the total organization.

• Communicate fully. Completely communicate the change, starting early, ensuring that the employees are not taken by surprise. This should ideally be two-way communication, preparing the way for employees’ involvement by soliciting their comments or suggestions.

• Convince employees. As necessary, take steps to sell employees on the value and benefits of the proposed change. When possible, appeal to employees’ self- interest, letting them know how they stand to benefit from the change and how it might make their work easier.

• Involve employees when possible. It is not possible to completely involve employees in all matters, but involvement is nevertheless possible on many occasions. Be especially aware of the value of employees as a source of job knowledge, and tap this source not only for the acceptance of change but also for the development of improvements.

• Monitor implementation. As with the implementation of any decision, monitor the implementation of any change until the new way is established as part of the accepted work pattern. A new work method, dependent for its success on willing adoption by individual employees, can be introduced in a burst of enthusiasm. Do not let it die of its own weight as the novelty wears off and old habits return. New habits are not easily formed, and the employees need all the help the manager can furnish through conscientious follow-up.

True Resistance Resistance to change will never be completely eliminated. People possess differing degrees of flexibility and exhibit varying degrees of acceptance of ideas that are not purely their own. However, involvement helps, and the manager will eventually discover, if not already having done so, that most employees are willing to cooperate and genuinely want to contribute. Beyond involvement, however, continuing communication is the key. Full knowledge and understanding of what is happening and why it is happening are the strongest forces the manager can bring to bear on the problems of resistance to change. Ultimately, one will discover that it is not change that people resist so much as they resist being changed.

In addition to applying the foregoing strategies, managers facilitate their response

to change by

1. Recommitting to the full spectrum of their role through a review of the enduring functions of the manager

2. Remaining attentive to ○ Developments in the history of management and the ways in which

managers adjusted their focus from time to time ○ Shifts in organizational life from informal to formal, stable organizational

patterns ○ Opportunities for building a strong network of internal and external

relationships

ONE MORE CHALLENGE: THE PATIENT PROTECTION AND AFFORDABLE CARE ACT OF 2010 The major legislation known as the Patient Protection and Affordable Care Act of 2010, more commonly referred to as the Affordable Care Act, affects the healthcare system at all levels. Middle managers need to use all of the strategies described in this chapter to deal with the massive changes associated with this legislation focusing on the provision of affordable care and healthcare reform. They need to take into account the political aspects of the legislation’s passage, which are likely to lead to further amendments, deletions, and changes in its implementation time frame. The federal mandates, in turn, will generate companion state-level legislation. More than 100 regulatory agencies, boards, and councils are empowered to issue guidelines and mandatory regulations. The designated time frame for the implementation of the federal law is from 2010 to 2018. Thus, many people face an almost decade-long period of sustained change.

The manager who has a positive attitude will more easily respond to these challenges than one who is resistant. Flexibility, creativity, and attentiveness to the unfolding mandates—these traits will serve the manager well. A commitment to factual analysis will lead the manager to develop a system for monitoring the details of this law. For guidance, the manager should turn to trusted sources, such as professional associations—especially these organizations’ legislative divisions, which monitor primary documents such as federal and state regulation publications. The manager might partner with several peers in the work setting to study the unfolding mandates and share insight about their impact.

Following is a suggested template for use in tracking these changes. A few

examples are included under the headings as a starter.

• Impact on the organizational setting ○ Increase in community health centers ○ Development of independence-at-home programs ○ Creation of community-based transition programs for Medicare patients at

high risk for readmission to acute care ○ Phasing out of physician-owned specialty hospitals ○ Increase in use of observation units as a bridge between emergency care and

admission/readmission to inpatient care • Patterns of care

○ Increase in use of outcome measurement for clinical effectiveness research ○ Implementation of wellness programs and preventive care (e.g., smoking

cessation counseling) ○ Wellness care incentives ○ Increased emphasis on coordination of care for all stages of care, with

particular attention to discharge planning and reduction of preventable readmission within 30 days

○ Creation of medical homes or health homes programs (i.e., a decentralized coordinator of care) for chronic illness care. (Note: The term homes is not used to denote a place to live; in this context, it means the primary caregiver who coordinates various aspects of care including referrals to specialists.)

• Practitioners ○ Increased funding for training ○ Increased utilization of physician assistants and nurse practitioners ○ Increased roles for pharmacists in direct counseling of patients concerning

medication management • Clients

○ Increased numbers as individuals come under new health insurance coverage ○ Surge in demand for specific services as coverage for these services unfolds

(e.g., free annual physical examination) ○ Increased need for client education about the details of coverage and the

time frames associated with various benefits (e.g., preexisting conditions coverage starts in 2010 for children but does not begin for adults until 2014)

○ Increased need to capture eligibility data (e.g., income levels, prescription medication expenses for the benefit period, Medicare or Medicaid coverage)

○ Increased sensitivity to patients’ concerns about their coverage and their continued access to care. This involves the development of trusted adviser

contacts who assist clients with their understanding of their eligibility for, and coverage options, with regard to healthcare insurance plans

• Employees ○ Need for timely information about changes in health insurance coverage,

copayments, and deductibles ○ Need for annual information (on W-2 forms) about the dollar value of the

health insurance fringe benefit ○ Concern for job security when the organizational setting changes ○ Questions about job rotation (e.g., if mergers occur or if community-based

programs are developed, will the employee be obliged to rotate among various geographic locations?)

○ Need for more frequent continuing education (e.g., intake processing and health insurance questions)

• Specific systems impact ○ Budget adjustments to include resources for more frequent continuing

education ○ Increase in fraud detection processes ○ Increase in patient-centered outcomes standards research and studies ○ Increase in monitoring of discharge planning, coordination of care,

readmission rates, and supportive rationale

The manager constantly attends to change, meets it through managing the organization through its life cycle, uses strategies for organizational adaptation and survival, and strengthens the organization’s relationships with key constituents and stakeholders. These concepts are discussed in subsequent chapters.

CASE: IN NEED OF IMPROVEMENT? You are an administrative staff specialist newly employed by the hospital to act as a management engineer and address a number of issues relating to operating efficiency. Your first assignment is to analyze work methods and staffing in the central sterile supply division of materials management. The department was singled out for study for the following reasons:

• The manager—a registered nurse who has held the job for more than 25 years— has requested two more processing aides, although her staff is already one person larger than that of another area hospital of equivalent size.

• There has been a recent, seemingly unexplainable, upturn in the consumption of

disposables. • A number of storage shelves appear to be stocked to overflowing with

infrequently used items. • The department issues frequent rush orders to obtain needed items that have

completely disappeared. • Observed conditions in the department include an overcrowded storage area, a

seemingly inadequate decontamination area, and a grossly oversized processing area referred to by most employees as “the ballroom.”

On your initial visit to the department, the first thing the manager says to you is, “So you’re the one who’s going to tell us what we’re doing wrong?” Her tone is none too friendly.

Instructions Develop a proposed approach to a complete study of the department, including the “sales pitch” you would use to try to win the manager’s cooperation and support. Specify what should be done, why it should be done, and how you propose to address the inevitable resistance of both manager and staff.

CHAPTER 3 Organizational Adaptation and

Survival

CHAPTER OBJECTIVES • Present the concept of the organization as a total system. • Describe the evolution of the total system approach to management. • Describe the development and characteristics of the formal organization. • Identify the approaches to the classification of organizations and apply these

to the healthcare organization. • Introduce the concept of the clientele network and describe the application

of these components to the healthcare organization. • Identify the need for organizational survival as a fundamental goal of

organizational effort. • Describe selected management strategies used to enhance organizational

survival. • Analyze the phases of the organizational life cycle that reflect major changes

in the organization and relate these to the functions of the manager.

THE ORGANIZATION AS A TOTAL SYSTEM The manager’s environment is the formal organization, with its multiple aspects and ever changing dynamics. The effective manager knows the internal and external dynamics of the organization: its strengths and vulnerabilities, challenges to its survival, areas requiring adaptation and innovation, its life cycle, its network of internal and external relationships, and its survival strategies.

There is a subtlety to the interaction of these dimensions of organizational life. Although much is written down in the organization’s major documents (e.g., its

formal history, mission statement, policies, procedures, organizational charts), there are other layers of interaction about which the manager has both an interest and a concern. There is a kind of “tribal knowledge” within an organization; there are early warning cues about conflict, change, and opportunity. A manager does not want to miss these important signals or be blind-sided. Thus, the astute manager drills down into the fabric of the organization, using the tools mentioned above. The manager observes both the broad characteristics of the organization along with noting the fine details. In addition, the manager views the organization as a total system: the work per se, the workers, the clients, the internal and external mandates and requirements, and the interaction of the public-at-large with the organization.

An organization does not exist in a static world; rather, it is in a continual state of transaction with its environment. As an open system, the organization receives inputs from its environment, acts on them and is acted on by them, and produces outputs such as goods and services (and even organizational survival, which can be considered an essential output.) Consequently, the organizational environment consists of both internal and external components. The specific functions of the manager are modified by the organizational environment (i.e., the specific attributes of the given work setting).

Classical organizational theory provides the manager with concepts to assess the organizational environment, including the following:

• Examination of its characteristics and components through a typology of organizations

• Analysis of its clientele network • Review of its life cycle

Managers are enabled, through continual monitoring of the environment, to anticipate change and prepare for it rather than dealing with it through reactive responses. A short review of the history of management is a starting place for identifying past practice and current trends.

THE HISTORY OF MANAGEMENT Knowledge of the history of management provides a framework within which contemporary managerial challenges may be reviewed. Modern managers benefit from the experiences of their predecessors. They may assess current problems and plan solutions by using theories that have been developed and tested over time. Contemporary executives may take from past approaches the elements that have been proved successful and seek to integrate them into a unified system of modern management practice.1

In an examination of the phases in management history, it must be remembered that history is not completely linear. Any period in history involves the interplay of components that cannot be separated into distinct elements, and each period is part of a continuum of events. The specific features of management history phases given here are intended to exemplify the predominant emphasis within each period and are only highlights.

Another cautionary note is warranted in regard to assigning dates to various periods. The dates given here are intended as guides. There is no precise day and year when one school of thought or predominant approach began or ended. As in any study of history, the dates suggest approximate periods when particular practices were developed and applied with sufficient regularity as to constitute a school of management thought or a predominant approach. The classic concepts presented here provide a base for ongoing research and study about formal organizations.

Scientific Management The work of Frederick Taylor (1865–1915) forms the commonly accepted basis of scientific management. Taylor started as a day laborer in a steel mill, advanced to foreman, and experienced the struggles of middle management as workers resisted top executives’ efforts to achieve more productivity. He faced the basic question: what is a fair day’s work? With Carl G. L. Barth (1860–1939) and Henry L. Gantt (1861–1919), Taylor made a scientific study of workers, machines, and the workplace. These pioneers originated modern industrial practices of standardization of parts, uniformity of work methods, and the assembly line. In addition, Frank Gilbreth (1868–1924) and Lillian Gilbreth (1878–1972) developed a classification system for fundamental motions to facilitate the study of work methods. (Lillian Gilbreth may be of particular interest to occupational therapists because much of her later work concerned the efficiency of physically handicapped women in the management of their homes.) The concept of scientific management continues to be the basis for continuous quality improvement, productivity studies, and cost containment.

The Behavioralists and the Human Relations Approach Although the major figures in the development of scientific management emphasized the work rather than the worker, concern for the latter was apparent. Lillian Gilbreth, a psychologist, tended to stress the needs of the employee. Frank Gilbreth developed a model promotion plan that emphasized regular meetings between employee and the individual responsible for evaluating the employee’s work. The behavioralists increased the focus on the worker, applying the behavioral

sciences to worker productivity and interaction. There remains to this day the shorthand reference to this era: the Hawthorne effect, in which positive change in productivity, reduction of conflict and the like are attributed to the increase in human interaction as much as they are to streamlining the work and introducing efficiency measure. The term stems from the work of Elton Mayo and F. J. Roethlisberger at Western Electric’s Hawthorne works. Through these studies, the importance of the informal group and the social and motivational needs of workers were recognized. The behavioral science and human relations approaches may be linked because both emphasize the worker’s social and psychological needs and stress group dynamics, psychology, and sociology. The emphasis on quality circles and total quality management, as well as the contemporary use of appreciative inquiry methods of assessing the strengths of an organization, are examples of this approach.

Structuralism Because work is done within specific organizational patterns and because the worker-superior roles imply authority relationships, the structure or framework within which these patterns occur has been studied. Structuralism is based on Max Weber’s theory of bureaucracy or formal organization. Major theorists in the structuralist school of thought (e.g., Robert K. Merton, Philip Selznik, Peter Blau) have given particular attention to line and staff relationships, authority structure, the decision-making process, and the effect of organizational life on the individual worker. These issues continue to this day. Note, for example, the renewed discussions of best organizational pattern: specialized units or the “silo” pattern versus a “flatter” organizational pattern, with teams of workers and fewer authority layers.

The Management Process School This approach focuses on the managerial functions: the work of the chief executive and those in leadership–authority roles. Henri Fayol (1841–1925) is credited with having developed the concept of the functions of the manager. The basic processes and functions of management, including the universality of these elements, was the focus of study in the late 1930s and early 1940s. The manager as leader and leadership styles, and the role of middle managers, continue to be the focus of research.

The Quantitative or Operations Research Approach Problem solving and decision making with the aid of mathematical models and the

use of probability and statistical inference characterize the quantitative or operations research approach to management. Also called the management science school, this approach includes various quantitative approaches to executive processes and is characterized by an interdisciplinary systems approach. The urgency of the problems in World War II and in the space program hastened the development of mathematical models and computer technology for problem solving. The current adoption of the Six Sigma approach to continuous quality improvement relies on statistical analysis as one of its main elements of assessing organizational performance. The current emphasis on data-driven, evidenced-based patterns of patient care reflect the overall concept of quantitative analysis.

THE SYSTEMS APPROACH Each school of management thought tends to emphasize one major feature of an organization:

1. Scientific management focuses on the work. 2. Human relations and behavioralism stress the worker and worker–manager

relationship. 3. Structuralism emphasizes organizational design. 4. Management process theory focuses on the functions of the manager. 5. Management science theory adds computer technology to the scientific

approach.

The search for a management method that takes into account each of these essential features led to the systems approach. This focuses on the organization as a whole, its internal and external components, the people in the organization, the work processes, and the organizational environment. The total environment of the organization, and the interrelationship of all of its parts, is seen as a continuous cycle of absorbing inputs from the organizational environment, processing these as throughputs, resulting in productive output. This cycle (input–throughput–output) may be applied to the organization as a whole or to any of its divisions. The changes in the organizational environment can be assessed continually in a structured manner to determine the impact of change and to make necessary adjustments.

Management theorists turned to biology and related sciences (e.g., L. von Bertalanffy, Kenneth E. Boulding) to develop this ecological approach to the study of organizations.2 A change in any one aspect of the environment has an impact on other components. The specifics are analyzed—always in terms of the whole. The organization or formal institution is considered an entity that lives in a specific

environment and has essential parts that are interdependent.

Basic Systems Concepts and Definitions A system may be defined as an assemblage or combination of things or parts forming a complex or unitary whole—a set of interaction units. The essential focus of the systems approach is the relationship and interdependence of the parts. The systems approach moves beyond structure or function (e.g., organization charts, departmentation) to emphasize the flow of information, the work, the inputs and the outputs. Systems add horizontal relationships to the vertical ones contained in traditional organizational theory. The systems model is made up of four basic components: inputs, throughputs or processes, outputs, and feedback. These components are considered within the overall environment.

The Nature of Inputs Inputs are the elements the system must accept because they are imposed by outside forces. The many constraints on organizational processes, such as government regulation and economic factors, are typical inputs imposed by outside groups. Certain inputs are needed to achieve organizational goals; for example, the inputs often are the raw materials that are processed to produce some object or service. The concepts of inputs may be expanded to include the demands made on the system, such as deadlines, priorities, or conflicting pressures. Goodwill toward the organization and general support (of the lack of these) also may be included as inputs.

A systematic review of inputs for a healthcare organization or one of its departments could include the following elements:

• Characteristics of the clients: average length of stay, diagnostic categories, payment status

• Legal and accrediting agency requirements: federal Medicare provisions, institutional licensure, certification of healthcare practitioners

• Federal and state laws concerning employment: collective bargaining legislation, the Occupational Safety and Health Act, workers’ compensation legislation, Civil Rights Act

• Multiple goals: patient care, teaching, research

For more examples of inputs, recall the earlier discussion of the overall setting of healthcare organizations.

The Nature of Outputs Outputs are the goods and services that the organization (or subdivision or unit) must produce. These outputs may be routine, frequently predictable, and somewhat easy to identify. The stated purpose of the organization contains information on its basic, obvious outputs. For example, a fire department provides fire protection, a hospital offers patient care, a department store sells goods, a factory produces items, and an airline supplies transportation. Managers control routine outputs through the planning process.

Other necessary outputs are infrequent but predictable. By careful analysis of organizational data over a relatively long period, a manager can usually identify these infrequent outputs. For example, hospitals and programs are reaccredited periodically, and plans can be made for this predictable event. An organization that is tied directly to political sponsorship could take the cycle of presidential or congressional elections into account. Again, proper planning through identification and anticipation of such special periodic demands on the systems leads to greater control and, consequently, stability.

Most managers must deal with a third category of outputs: the nonpredictable ones for which they can and must plan. Certain demands on the system are made with sufficient regularity that although the exact numbers and times cannot be calculated, estimates can be made. This is an essential aspect of planning and controlling. In an outpatient clinic, for example, the number of walk-in and emergency patients is not completely predictable. To plan for these relatively random demands on the system, the manager can study patterns: times of arrival, purpose of the visit, or new or continuing client status. Some patient education would probably be done to help clients take advantage of orderly scheduling. Staffing patterns would be adjusted to meet the anticipated needs. The planning is designed to shift the nonpredictable to predictable. Other examples of nonpredictable outputs for which plans can be developed include employee turnover rates, seasonal demand for care (e.g., physical examinations for the upcoming school year). Even natural disasters associated with weather patterns (e.g., hurricane season, winter snowstorms) can be anticipated. Disaster planning, for example, is a required part of institutional planning. The renewed emphasis on disaster planning in light of bioterrorism, new strains of diseases (e.g., Ebola, flu strains), or periodic social–political disruption (riots) has added urgency to such planning.

Some outputs of a healthcare institution are as follows:

• Maintenance of licensure and accreditation status • Compliance with special federal programs concerning quality assurance • Provisions of acute care services for medical, surgical, obstetrics, and pediatric

patients

• Provision of comprehensive wellness and preventive health services for clients in a specific geographic area

Outputs may be refined further by adding specific time or quality factors, or other statements of expected performance:

• One hundred percent follow-up on all patients who fail to keep appointments • Processing of specified laboratory tests within (n) hours of receipt of specimen • Retrieval of hard copy record from remote storage within (n) minutes of receipt

of request

It may be useful to group outputs with related inputs by formulating an input– output analysis. It should be noted, however, that not every input generates a direct output; there is no one-to-one relationship in some instances. For example, the goal (output) of retrieving a hard copy record requires considerations (inputs) of accuracy of identification of the record, its location, and the delivery system procedures.

Throughputs Throughputs are the structures or processes by which inputs are converted to outputs. Physical plant, workflow, methods and procedures, and staffing patterns are throughputs. Inputs originate in the environment. Throughputs, as the term implies, are contained within the organization. Throughputs are analyzed by work sampling, simplification and methods improvement, lean management studies, reviews of staffing patterns, and physical layout.

Managers may be severely limited in their ability to control inputs, but the processes, structures, organizational patterns, and procedures that constitute throughputs are normally areas of management prerogative. In a specialized service, the control of throughputs is directly related to the manager’s professional knowledge. For example, the procedures for processing patient flow within a clinic are developed by the head of the specific service because of that person’s knowledge of patient care procedures, priorities, and the interrelationships among components of the treatment plan. The policies and procedures for the release of information from patients’ health records are aspects of highly technical processes that are the domain of the professional health information specialist.

In some cases, elements that usually belong to the throughput category are considered inputs. These elements are imposed by the internal environment of the organization. Middle managers may not be able to exert direct control over some aspects of the work (e.g., physical space allocations, budget cuts, personnel vacancies). These elements are, essentially, inputs that must be accepted.

Feedback Changes in the input–output mix must be anticipated. To respond to these changes, managers need feedback on the acceptability and adequacy of the outputs. It is through the feedback process that inputs and throughputs are adjusted to produce better outputs. The communication network and control processes are the usual sources of organized feedback. Routine, orderly feedback is provided by such activities as market research and forecasting, client surveys, periodic accrediting agency reviews, and periodic employee evaluations in the work group.

The management by objectives process, short interval scheduling, program evaluation–review techniques, and various audits (e.g., safety, financial, infection control) constitute specific management tools of planning and controlling that include structured, factual feedback. If there is an absence of planned feedback, if the communication process is not sufficiently developed to permit safe and acceptable avenues for feedback, or if the feedback actually received is ignored, a certain amount of feedback will occur spontaneously. In this case, the feedback tends to take a negative form, such as a client outburst of anger; a precipitous lawsuit; a slew of anonymous, negative letters to local news media complaining about the organization; a wildcat strike; a consumer boycott; or an epidemic. Spontaneous feedback could take a positive form, of course, such as the acclamation of a hero or leader after a crisis, or an unsolicited letter of satisfaction from a client.

Some feedback is tacit, and the manager may assume that because there is no overt evidence to the contrary, all outputs are fine. The danger in such an assumption is that problems and difficulties may not come to light until a crisis occurs. The planning process is undermined because there are no reliable data that can be used to assess the impact of change and to implement the necessary adjustments. The overall system constantly seeks a balanced state. The management functions of decision making, leadership, and particularly correction of deviation from organizational goals are necessary for the detection, identification, and proper response to changes in the organizational environment. Through the systems approach, the manager focuses on the organization as a whole, attending to each particular unit in relation to the whole. Every organization can be studied through a review of its organizational environment, its degree of formal organizational and bureaucratic characteristics and its placement in traditional classification of organizations.

For more information about these concepts, see Table 3–1.

FORMAL VERSUS INFORMAL ORGANIZATIONS

An organization is a basic social unit that has been established for the purpose of achieving a goal. A formal organization is characterized by several distinct features:

• A common goal; an accepted pattern of purpose • A set of shared values or common beliefs that give individuals a sense of

identification and belonging • Continuity of goal-oriented interaction • A division of labor deliberately planned to achieve the goal • A system of authority or a chain of command to achieve conscious integration

of the group and conscious coordination of efforts to reach the goal

Table 3–1 Relationship of Classic Management Functions and Systems Concepts

Systems Concept Predominant Management Function Input analysis

Identification of constraints Assessment of client characteristics Planning Assessment of physical space Budget allocation analysis

Throughput determination Development of policies, procedures,

methods Planning and controlling

Development of detailed departmental layout

Specification of staffing pattern Staffing Methods of worker productivity

enhancement Controlling, leadership, and motivation

Output analysis Goal formulation Planning Statement of objectives Development of management by

objectives plan Planning and controlling

Feedback mechanisms Controlling, communicating, and resolving conflict

Development of feedback processes Renewing planning cycle Adjustment of inputs and outputs in

light of feedback

Adjustment of internal throughputs

An informal organization may be characterized by some of the features of formal organizations, but it necessarily lacks one or more of these features. Individuals who share a common value may meet regularly to foster some goal, and this group may become a recognizable formal organization. Some informal groups never develop the consistent characteristics of a formal organization, however, and simply remain informal.

Formal organizations almost inevitably give rise to informal organizations. Such informal groups may be viewed as spontaneous organizations that emerge because individuals are brought together in a common workplace to pursue a common goal, which makes social interaction inescapable. Informal organizations arise as a means of easing the restrictions of formal structures, as in the cooperative communication and coordination that may occur outside of the officially mandated channels of authority. Through an informal organization’s communication network, individuals may gain valuable information that supplements or clarifies formal communications. Also, informal groups help to integrate individuals into the organization and socialize them to accept their specific organizational roles. A manager must remain aware of the existence and composition of informal groups in the organization so that their functioning affects the formal structure in positive rather than negative ways.

CLASSIFICATION OF ORGANIZATIONS When an organization’s managers understand and accept its nature, organizational conflict can be reduced and organizational viability increased, because the managers function in a manner consistent with the type of organization shaping the interactions. Personal conflict can be reduced. Should an individual be unwilling or unable to accept certain aspects of a particular organizational type, that individual may decide to move to a different organizational climate. For example, if an individual practitioner prefers not to function in a highly structured, bureaucratic setting, it is better to recognize this before accepting employment in a government- sponsored healthcare institution. An individual who believes that health care should not be “for profit” would do well to seek employment in healthcare settings that are not predicated on the business model. An individual may gain an insight into the climate of a particular organization through the use of organizational classifications

based on prime beneficiary, authority structure, and genotypic characteristics.

Prime Beneficiary Peter Blau and W. R. Scott presented a classification of organizations based on the prime beneficiary.3 Their suggested model for the analysis of organizations focuses on the question: who benefits from the existence of the organization? Four types of organizations result from the application of this criterion:

1. Mutual benefit associations, where the members are the prime beneficiaries (e.g., professional association, credit union, collective bargaining unit)

2. Business concerns, where the owners are the prime beneficiaries 3. Service organizations, where the clients are the prime beneficiaries 4. Commonweal organizations, where the public at large is the prime beneficiary

(e.g., police department, fire department)

Managers may formulate goals, establish priorities, and monitor activities to determine the effectiveness of the organization in meeting the needs of the prime beneficiary. Actions that do not foster such goals are eliminated, and proper priorities are formulated. Because the clients are the prime beneficiaries of a service organization, decisions about hours of service, the scope of services offered, and similar matters are made with the needs of clients in mind. In health care, the growing development of home care, flexible hours in outpatient clinics, and alternatives to full hospitalization are attempts at meeting the needs of the prime beneficiaries—the patients and their families. At the same time, healthcare worker units involved in collective bargaining can be considered mutual benefit associations. Managers in healthcare settings must balance the demands made by both types of organizational forms within one organization.

Authority Structure The organizational environment can also be classified according to the modes of authority that are operative in the institution. Managers must adopt leadership styles, develop procedures and methods for worker interaction, and determine client interactions in a manner that is consistent with the predominant authority structure. Healthcare organizations tend to embody more than one pattern of authority structure; for example, there are few limits on the activities of professional staff and more limits on the activities of semiskilled and unskilled workers. The work of Amatai Etzioni provides a typology of organizations based on the authority structure predominant in the institution.4 The classification that results from this approach

may be summarized as follows:

1. Predominantly coercive authority: prisons, concentration camps, custodial mental institutions, or coercive unions

2. Predominantly utilitarian, rational–legal authority: use of economic rewards; businesses, industry, unions, and the military in peacetime

3. Predominantly normative authority: use of membership, status, intrinsic values; religious organizations, universities, professional associations, mutual benefit associations, fraternal and philanthropic associations

4. Mixed structures: normative–coercive (e.g., combat units); utilitarian– normative (e.g., most labor unions); utilitarian–coercive (e.g., some early industries, some farms, company towns, ships)

Genotypic Characteristics Like the prime beneficiary concept, the classification of organizations by genotype is based on an analysis of their fundamental roots and purposes. Daniel Katz and Robert Kahn viewed organizations as subsystems of the larger society that carry out basic functions of that larger society. These basic functions are the focal point in this system of classification. The typology of organizations developed by Katz and Kahn is based on genotypes, or first-order characteristics. What is the most basic function that the organization carries out in terms of society?5 The mission of the organization stems from this fundamental concept. These first-order, basic functions are as follows:

1. Productive or economic functions: the creation of wealth or goods as occurs in businesses

2. Maintenance of society: the socialization and general care of people as occurs in education, training, indoctrination, and health care

3. Adaptive functions: the creation of knowledge as occurs in universities and as a result of research and artistic endeavors

4. Managerial/political functions: the adjudication and coordination functions and control of resources and people as occur in court systems, police departments, political parties, interest groups, and government agencies

The charter, articles of incorporation, and statement of purpose are official documents of the organization that can be used to classify the organization according to this typology.

Goal statements are derived and priorities set in terms of primary function. Managers can monitor organizational change when the actual function performed

differs from the stated function. When a social service agency spends a great deal of effort determining eligibility of patients for service under a variety of government programs, it is assuming some of the characteristics of a managerial/political organization. Sometimes this adjudication interferes with the delivery of the healthcare service; managers must make decisions in the light of this conflict. If priority is given to research and education over direct patient care, the healthcare practitioner must again come to terms with the true nature of the organization.

CLASSIFICATION OF HEALTHCARE ORGANIZATIONS When a healthcare organization is classified according to these typologies, the complexity of the setting becomes apparent. Classification by prime beneficiary offers several possibilities. In terms of direct patient care, for example, the healthcare organization can be classified as a typical service organization. Conversely, if it is a for-profit institution, classification as a business organization is more appropriate. If the healthcare organization has mixed goals, as does a teaching hospital associated with a medical school, it can be defined as a service organization with respect to its clients—both the physicians to be educated and the patients to be treated. The potentially conflicting priorities of teaching and direct patient care underlie the selection of patients for treatment, however; preference may be given to those patients who are “interesting” cases for teaching purposes. Even when a healthcare institution is not directly associated with a medical school, a variety of clinical affiliation arrangements may be developed to meet the needs of such practitioners as occupational and physical therapists, medical technologists, social workers, health information administrators, dietitians, and other groups that require clinical practice as part of their educational sequence. In developing goal statements for a department, the chief of service must keep this secondary goal in mind.

A healthcare organization also is a commonweal organization insofar as it protects the public interest in matters of general community health, such as the benefits of the facility’s research efforts for the public at large. In addition, healthcare institutions offer a variety of free health monitoring programs as a means of fostering health maintenance in the community.

Etzioni included the hospital as an example of a normative authority structure. This point could be argued, however, depending on the focus of organizational analysis. Professional staff members tend to function in the normative mode; their codes of ethics, their professional training, and the general level of behavior expected of them modify their individual participation in the organization as much as, if not more than, the formal bylaws and contractual arrangements. In this sense,

the normative authority structure predominates. When the healthcare organization is viewed from another perspective, it seems to function more as a mixed normative– utilitarian structure. Given the business orientation and the increasing unionization of workers in the healthcare field, the utilitarian model seems to be a more appropriate category.

A coercive element is sometimes introduced into the healthcare setting, as when individuals are assigned to healthcare jobs in wartime as an alternative to military service or when hospital volunteer work is given as part of a court sentence. In such cases, a mix of normative–utilitarian–coercive authority is required, and the manager must adopt a variety of leadership and motivational styles in working with the different groups in the organization. Worker or member motivation and the source of the manager’s authority differ for these different groups.

In the Katz and Kahn genotypic classification, the healthcare organization fits two categories, again indicating the mixed mandates of such entities. As an organization concerned with restoration, the healthcare establishment functions to maintain society. It also performs adaptive functions when higher education and research are major goals.

CLASSIC BUREAUCRACY Bureaucracy is such a common aspect of organizational life that it is often treated as synonymous with formal organization. The study of bureaucracy in its pure form was the work of the structuralists in management history: Max Weber, Peter Blau and W. Richard Scott, and Robert K. Merton. Weber’s work is pivotal, as it presented the chief characteristics of bureaucracy in its pure form. Weber regarded the bureaucratic form as an ideal type and described the theoretically perfect organization.6 In effect, he codified the major characteristics of formal organizations in which rational decision making and administrative efficiency are maximized. He did not include the dysfunctional aspects or the aberrations that occur when any characteristics are exaggerated, as in the popular equating of bureaucracy with “red tape.” From the works of Weber and others, a composite set of characteristics or descriptive statements may be derived concerning the formal organization or bureaucracy.

1. Size a. Large scale of operations, large number of clients, high volume of work, and

wide geographical dispersion b. Communication beyond face-to-face, personal interaction

2. Division of labor

a. Systematic division of labor b. Clear limits and boundaries of work units

3. Specialization a. A result of division of labor b. Each unit’s pursuit of its goal without conflict because of clear boundaries c. Areas of specialization and division of labor that correspond with official

jurisdictional areas d. Specific sphere of competence for each incumbent e. Promotion of staff expertise f. Technical qualifications for officeholders

4. Official jurisdictional areas a. Fixed by rules, laws, or administrative regulation b. Specific official duties for each office

5. Rational–legal authority a. Formal authority attached to the official position or office b. Authority delegated in a stable way c. Clear rules delineating the use of authority d. Depersonalization of office: emphasis on the position, not the person

6. Principle of hierarchy a. Firmly ordered system of supervision and subordination b. Each lower office or position under the control and supervision of a higher

one c. Systematic checking and reinforcing of compliance

7. Rules a. Providing continuity of operations b. Promoting stability, regardless of changing personnel c. Routinizing the work d. Generating “red tape”

8. Impersonality a. Impersonal orientation by officials b. Emphasis on the rules and regulations c. Disregard of personal considerations in clients and employees d. Rational judgments free of personal feeling e. Social distance among successive levels of the hierarchy

f. Social distance from clients 9. The bureaucrat

a. Career with system of promotion to reward loyalty and service b. Special training required because of specialization, division of labor, or

technical rules c. Separation of manager from owner d. Compensation by salary, not direct payment by clients

10. The bureau (or office or administrative unit) a. Formulation and recording of all administrative acts, decisions, and rules b. Enhancement of systematic interpretation of norms and enforcement of rules c. Written documents, equipment, and support staff employed to maintain

records d. Office management based on expert, specialized training e. Physical property, equipment, and supplies clearly separate from personal

belongings and domicile of the officeholder

These characteristics are interwoven, each flowing from the others. For example, the growing size necessitates a division of labor, which in turn fosters specialization.

One of the dreams of many direct patient care practitioners is a healthcare delivery system that does not become bogged down in formalities. The private practice model seems to offer the solution. If the private practice or small group practice flourishes, however, the characteristics of formal organizations inevitably begin to emerge—for example, specialization and division of labor, procedures for uniformity, some form of authority structure, and a variety of rules. The wisest approach seems to involve taking the best features of formal bureaucracy and making particular efforts to avoid the negative elements, such as impersonality. Family-centered approaches to health care or the team approach are models that tend to offset the impersonalization associated with large health care organizations.

CONSEQUENCES OF ORGANIZATIONAL FORM Managers work in specific organizational environments, and their specific functions are shaped and modified by the organizational form, structure, and authority climate. Some specific consequences concern the following organizational characteristics:

• Size. The more layers in the hierarchy, the greater (potentially) the limits on managers’ freedom in decision making. Their decisions may be subject to

review at several levels, and more decisions may be imposed from these higher levels.

• Organizational climate. The degree to which clients, workers, and other managers participate in planning and decision-making processes is determined in part by the authority climate. Managers may have to modify their management or leadership style if it is inconsistent with the organization’s authority structure. The basis of motivation may vary. In the highly normative setting, for example, members willingly participate; in the coercive organization, the basis of motivation tends to rest on the avoidance of punishment.

• Degree of bureaucracy. A highly bureaucratic organization may be associated with great predictability in routine practices but less innovation and more resistance to change. Efforts to offset distortion caused by layering in communication may constitute a large portion of the activities of a manager in a highly bureaucratic organization.

• Phase in the life cycle. The openness to innovation and the vigorous, aggressive undertakings through goal expansion and multiplication that characterize some stages of the life cycle may permit the manager to undertake a variety of activities that are precluded by concerns for organizational survival in other phases of the life cycle.

For these reasons, managers must assess the organizational setting and their own roles. The major concepts of the clientele network, organizational life cycle, and analysis of organizational goals are tools for such assessments. Their active use fosters in the manager an awareness of the overall organizational dynamics that shape managerial practice, worker interaction, and client services.

THE CLIENTELE NETWORK Managers must devote constant attention to the web of relationships reflecting the needs and interests of individuals and groups both internal and external to the organization. Common terms used to describe these relationships include critical partners, stakeholders, champions, superusers, and communities of interest.

A major charge given implicitly to any manager is the building of external relationships and developing a framework for partnership. This framework connects the people of the organization with one another and with the larger communities of interest. To do this, the manager must identify critical relationships, develop satisfactory working relationships with the several key individuals and groups involved, and, finally, work at maintaining these relationships. With the conservation of organizational resources, time, money, and personnel as a mandate,

the manager seeks to capitalize on available external sources of power, influence, advice, and support as well as to identify those areas of potential difficulty, such as competition and rivalry, erosion of client goodwill, and shifting client demand and loyalty. In an era of increasing regulation of health care, the contemporary manager in the healthcare setting must identify and comply with multiple sets of changing regulations and guidelines issued by federal and state government agencies as well as by the various accrediting agencies, such as The Joint Commission or the Continuing Care Accreditation Commission.

Like a living organism, an organization exists in a dynamic environment to which it must continually adapt. The manager identifies these units and constructs a network of the pattern of interrelationships. Bertram Gross has developed the concept of the clientele network, noting that any organization is usually surrounded by a complex array of people, units, and other organizations that interrelate with it on the basis of various roles. He has provided a framework for analyzing these key relationships, using the categories of client, suppliers, advisers, controllers, and adversaries.7 The following discussion applies Gross’s concepts to the healthcare organization.

Wherever the concept of organization is used, a department manager could well substitute individual service or department. Although such a department or service is obviously a part of the organization, the development of the clientele network for a unit within the organization yields information about the critical relationships, clients, adversaries, and supporters of that department. Department-level managers must be aware of the unique environment of their departments or services as well as the overall environment of their organization.

CLIENTS The most obvious and immediate individuals and groups who make significant demands on the organization are the clients. Gross used the term clients in a broad sense—that is, to refer to those for whom goods and services are provided by the organization. Immediate, visible clients in health care, both for the organization and for any department directly involved in patient care services, are the patients.

The providers of direct healthcare services are immediate, visible clients for certain units within the organizations. The billing and accounts receivable office, the legal staff, and the health information service offer support services to assist physicians, nurses, and social workers in the provision of patient care. Given the traditional and historical development of the modern hospital, it could be said that the physicians are a special class of clients in that the organization of the hospital or clinic gives them the necessary support personnel and services for patient care.

Physicians in different specialties are clients of each other, because they depend on each other for consultative services and referrals.

Certain services may be placed into the client category vis-à-vis each other. Some service units, such as physical therapy, are income producing; because the resources obtained are used on behalf of the whole organization, other units may be considered clients of the income-producing units. The billing and accounts receivable office relies on the health information service to supply certain documentation to satisfy financial claims, and the safety committee relies on the several patient care and administrative departments to supply the information necessary to perform its function.

The use of the broadest possible definition of “client” alerts the manager to the subtle facets of organizational relationships. The manager who recognizes the number of distinct client groups can more effectively monitor their several and sometimes conflicting demands for services.

Although one step removed from the immediate services or goods offered by the organization, less visible clients are nonetheless legitimate users of the services or goods. By identifying these secondary clients, the manager has a key to the primary and secondary goals of the organization or unit. In the many educational programs offered within healthcare organizations, for example, the sponsoring institutions (e.g., a college or university), the health professionals, and the technical students are secondary, less visible clients. Hospitals traditionally have direct patient care as a primary goal, with teaching and research as secondary goals. The ordering of priorities should stem from recognition of the multilevel client demands.

The same physicians who are immediate clients in terms of their need for support services for their direct patient care activities are less visible clients in terms of their need for opportunities for education and research. The employees of the organizations are, in a sense, less visible clients, given that one of the organizational outputs is the provision of jobs. Occasionally, in health care the provision of jobs is an explicit goal. For example, the neighborhood health centers sponsored by the federal government were intended not only to provide healthcare services but also to afford job opportunities to area residents. Employees also depend on the employer for important resources (e.g., wellness programs, health insurance, retirement plans, continuing education) to advance in their careers. There is also the less tangible need: the need for recognition—being valued, celebrated, motivated.

Clients twice removed from the immediate goal of the organization may be termed remote clients. Many of these individuals and groups do not even know they are being served. In addition to patient care, teaching, and research, a third goal of healthcare organizations is generally given as the protection of the public at large— that is, remote clients. Remote clients of the healthcare organization benefit from the research done by the physicians and related research teams. For example, remote

client benefits can be seen in immunization outreach programs. The maintenance of herd immunity is taken for granted by the public; healthcare providers are proactive in ensuring this protection through intensive efforts regarding immunization. Outreach efforts are carried out regarding many other topics (e.g., Lyme disease prevention, stroke, cancer, and wellness initiatives). Public lectures, free screening, educational materials—all are common means of reaching remote clients.

Managers, in assessing the stated and implied goals, may readily identify them by analyzing the needs of primary, visible clients as well as those of the less visible and remote clients. If the client demand is relatively stable, planning, organizing, and staffing needs may be assessed in a stable manner. The net effect is efficiency in the allocation of resources of money, space, and personnel.

There is within the client group a potential capacity to control the organization. On the one hand, when a business has only one major purchaser of its goods or an agency has only one group to serve, the clients could easily take charge of the organization, limiting its independence. On the other hand, the organization with multiple clients must set priorities, balance conflicting demands, and maneuver so as to satisfy several groups.

The manager maintains continuous awareness of potential new clients and their needs; for example, the ever-growing leisure culture and amateur sports creates an increased need for physical therapy services. The aging of the “baby boomer” population and increased longevity will lead to an increase in the need for such services as subacute care, caregiver support groups, and adult respite care. Managers reach out to such potential clients in a variety of ways such as participating in community-sponsored events (e.g., blood drives, weight loss seminars, preventive health initiatives). Managers also get involved with the many support groups (e.g., for kidney disease, breast cancer, arthritis, and autism), offering space for their meetings and presenting educational lectures.

SUPPLIERS Three categories of suppliers are identified by Gross: resource suppliers, associates, and supporters.

Resource Suppliers Because no organization is totally self-sufficient, it must take in the necessary resources, raw material, money, and goodwill that it needs to survive and function. In this sense, the organization is the client of other organizations.

Within the given organization, one department or service is the supplier of

another. In assessing workflow patterns, this concept is useful in identifying which aspects of the work are within the unit’s immediate control and which originate in one or several other departments. For example, the health information service is the client of several other units in this sense. The proper gathering of patient identification information is the work of the several admissions and intake units; a health information department is dependent on these units for that part of the workflow. A centralized, computerized information technology system is dependent in the same way. The laboratory, radiology department, physical therapy department, and occupational therapy department all depend on the nursing service (or other unit that has the task of coordinating patient transportation in-house) to bring, send, or prepare patients so that the service/unit can proceed with its own work in a predictable manner. Essential information for the formulation of job descriptions concerning interdepartmental relationships or for the development of cross-training programs within the organization is obtained from an awareness of those organizational components that act as resource suppliers to each other.

In the same sense, the chief executive officer can be seen as a resource supplier, making the final adjudication in the allocation of space, money, and personnel to the units. The manager of the department or service should know the needs of other departments and should develop strategic alliances in the competition for scarce resources.

Resource suppliers are often external to the organization. Companies making specialty products or offering specialty services have a unique relationship to the healthcare organization. Such suppliers may be limited in number; in fact, there may be only one such supplier in a geographic area. The viability of such an organization is of interest and concern for the manager who relies on these products or services. Furthermore, with the implementation of such federal regulations as the Health Insurance Portability and Accountability Act and with issues relating to risk management, the healthcare organization that contracts with one or another such resource supplier needs to work with that resource supplier to ensure that it, too, follows the specific regulations. These considerations include policies, procedures, and safeguards relating to patient privacy and confidentiality. Chain-of-trust agreements are required for organizations dealing directly with patient care information (such as an outsourced transcription service or a medical billing service). The healthcare manager will attend to the quality of products and services from external sources because these become part of the services offered by the healthcare organization.

In addition, there are points of vulnerability in the relationships between the organization and its resource suppliers. If a supplier goes out of business, with or without notice, the organization must find a new, reliable provider and look into reclamation of the organization’s resources (e.g., documents stored or processed off- site). If there is a long-term, locked-in contract with a supplier, the organization may

not be able to take advantage of another supplier who can provide needed goods on more favorable terms. If there is little or no competition among many suppliers, the few suppliers hold the power in negotiations. Finally, if a department manager finds that a supplier will not continue to provide the goods or services until a bill is paid, an awkward, indeed, difficult situation may develop; the payment process within an organization might be slow, or even fraught with problems, all of which are beyond the middle manager’s ability to solve.

Managers take opportunities to partner with resource suppliers in special project development. For example, health information educators work with vendors to create virtual laboratory modules for use in educational institutions as well as for in- service training in healthcare settings. Another example is found in the partnerships of university-based departments of physical and rehabilitation medicine and a research and training program in life skills adjustment.

Associates Individuals or groups outside the organization who work cooperatively with the organization in a joint effort are associates of the organization. Associates have a common interest and common work that unites them with the organization. The manager who recognizes the efforts of associates will actively obtain their cooperation. Through informal sharing of ideas among themselves, the various healthcare practitioners frequently act as associates to one another. The health information practitioners from several area hospitals may collaborate informally on release of information concerns and work to publicize the regional health information exchange. The communities of practice and related sharing of best practices sponsored by the American Health Information Management Association (AHIMA) is yet another example of associate activity. The Joint Position Statement on Health Information Confidentiality, developed by the American Medical Informatics Association and AHIMA, is yet another example of associate interaction. The discussion about electronic health records in Chapter 2 contains a listing of groups who partner in this major joint effort.

Associate interaction is a useful as an ongoing activity, especially when a new demand on the system arises (e.g., the adoption of a new coding/classification system). When an organization is challenged by the requirements of meeting accrediting standards, the accrediting agency (usually categorized as a controller) provides associate-style interaction with the healthcare partner (e.g., the Commission on Accreditation of Rehabilitation Facilities), provides a staff coach to the organization when it applies for accreditation. It coordinates peer review groups to give even further assistance.

Supporters Various politically, socially, and economically powerful individuals and groups in the society may be supporters of the organization. They mobilize “friendly power” for the organization, giving it encouragement and developing a climate of goodwill toward the organization. Such supporters can coordinate major activities, such as fund-raising, public relations, and intermediate services for the organization. This type of support helps the organization conserve its own resources for direct application to immediate goals, such as providing direct patient care. Individual organizations may quite simply lack the power to mobilize certain political or economic resources on their own behalf and may depend on a “friend in the castle” to help in these matters. The traditional pattern of appointing the political, social, and economic elite to the board of trustees in healthcare organizations is often an effort to mobilize such power on behalf of these organizations. Professional associations foster this relationship through regularly scheduled interaction with both state and federal lawmakers. For example, Capitol Hill Day, usually coordinated at the national level by the professional associations, is one such endeavor. Members of the association use this opportunity for face-to-face interaction with their elected officials, calling attention to issues of interest and concern. Testimony at hearings or availability for expert review on relevant topics are other examples of this type of interaction.

Occasionally, a nationally prominent figure demonstrates a particular interest in health care because of some personal experience with a particular health problem. In a sense, poliomyelitis, heart disease, and breast cancer received more attention because they affected a president or a member of his family. Leading political figures may work toward the passage of legislation on behalf of some specific health care need. A number of well-known entertainers and sports figures have supported fund-raising activities for certain healthcare issues. Such individuals command resources unavailable to a single institution.

The Lions Club programs to support eye care, the Easter Seals program in fund- raising and coordination of volunteers to work with developmentally challenged persons, and the Shriners’ traditional support of health care for children with disabilities illustrate the typical activity of supporters. The traditional hospital auxiliary is yet another example of a support group. Its fund-raising activities may facilitate the development of special programs such as wound care surgery equipment, cataract surgery at no cost for those unable to pay, or the “No One Dies Alone” project. Supporters may help coordinate activities to the mutual benefit of all participants, offsetting the destructive aspect of competition and facilitating compliance with standards set by controllers by making resources available for use by the organization.

Although an organization may not actively declare itself a supporter, the net

effect of its activities may provide support. Advocacy groups for privacy in general, for example, have helped raise the social consciousness of the public toward all issues concerning privacy, thus helping healthcare institutions to develop guidelines for the restrictive release of information. In such situations, collaboration in the development of and lobbying for pertinent state legislation becomes possible.

Sometimes a client group takes on the dual roles of both supporter and resource supplier, as in the case of hospice care. Medicare requirements for hospice programs include the mandate that a minimum 5% of all hospice care be given by volunteers. Clients become volunteers, thereby helping the organization meet this mandate.

ADVISERS Although they are like supporters in some ways, advisers have more specific activities that tend to set trends for the industry. Advisers provide a particular form of resource or support through their advice. Gross stressed an important difference between supporters and advisers; the assistance and support of advisers help the organization use its resources and the support it receives from other sources. Advisers stand apart from the organization and often have a more impersonal relationship with the organization than do supporters.

The advice may be in the form of overall guidelines, position papers, data analysis, sample procedures and methods, best practices and benchmarking, or model legislation. The various professional organizations provide abundant resources for use. Sometimes an external organization has legal and accrediting authority over the organization; this is discussed in the next section on controllers. These same controllers occasionally take on the additional role of adviser because they want the licensed/accredited group to succeed. Thus, the controlling organization becomes an adviser through the provision of interpretive guidelines, sample policies and practices, educational material, and training sessions. If the accrediting process is too unwieldy, punitive, or costly, an organization may forgo it. Although it must meet licensure standards, accreditation is voluntary. The accrediting agencies stand to lose if they do not encourage and assist their constituency.

CONTROLLERS Those individuals or groups who have power over the organization are controllers. Healthcare organizations must comply with the regulations of several federal and state government agencies as well as with the mandates of the various accrediting agencies. A multispecialty healthcare organization is required to meet detailed

regulations from different state agencies as a condition for licensure. For example, social service agencies must meet a variety of regulations from the following government agencies:

• Adoption and foster care: Office of Children, Youth, and Families • Residential school and outpatient psychiatric clinic: Mental Health and

Substance Abuse Services • Personal care home: Office of Social Programs • Skilled nursing facility: Department of Health

Several organizations and agencies have such control power. The level of detail varies greatly, ranging from the optimal standards stated by The Joint Commission to the highly detailed regulations (e.g., required room size) in a state law. Chapter 1 contains a discussion of settings, laws, regulations, and standards.

Certain controllers are internal to the organization and yet constitute a kind of separate organization. Workers as individuals are a part of the organization, but the unions that represent them stand outside the organization, exerting specific pressure on it through collective bargaining. The governing board is an integral part of the hierarchical structure, but in some ways the board of trustees is separate from the line managers, who are controlled by the decisions made by the top-level management group. The assessment of the net effect of such controllers’ input gives the manager a sense of clear boundaries for planning and decision making. However innovative an idea might be, for example, the manager must still keep management practices in line with these constraints.

Controllers may also impose conflicting regulations on the institution, such as the mandate of the federal government to maintain almost absolute confidentiality of alcohol and drug abuse records and the mandate of third-party payers to provide satisfactory evidence of treatment for reimbursement. Managers may be forced to change their managerial style as a result of certain constraints imposed by a controller (e.g., the details of a union contract may limit severely the use of the laissez-faire style of management). By means of survey questionnaires and site visits, the manager may assess the net effect of these multiple regulations on workflow, services offered, staffing patterns mandated, and job descriptions restricted and refined.

ADVERSARIES Health care traditionally carries overtones of great compassion and deep charitable roots. However, healthcare organizations, like many other organizations, have opponents and enemies as well as competitors and rivals. The rising cost of

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healthcare tends to be a source of conflict for healthcare professionals and the organizations in which they work.

Indeed, clients themselves at times take an adversarial stance because of small, cumulative changes in the organization. These are listed below:

• As the organization grows and assumes more and more impersonal characteristics, clients may become disaffected. Instead of speaking to a person, one may reach an answering machine, or instead of going to a familiar location, one must go to an off-site clinic or even to a newly acquired facility in another town.

• Patients may sense that they are second-class citizens because they do not participate in the health system’s managed care insurance plan. Being reminded that a certain aspect of care would be paid for more readily if one has a “gold level” membership is disconcerting and erodes trust.

• The use of the electronic health system leads to inadvertent impersonalization. Here a clinician must look at the computer screen more than at the patient, or instead of a short but personable set of interactions at registration, a patient checks in using a personal computer.

• A patient may bring a full-scale, formal malpractice lawsuit. • The healthcare organization’s interaction with third-party payers may lead to an

adversarial relationship. Denial of claims is the arena for this dynamic. The effect of denials spills over into the organization’s relationship with its primary clients, the patients, with an attendant loss of goodwill. When final billing is received by the patient many months after the care event, or the billing is broken down into the care and the unreimbursed support services (facilities, supplies), patients become alienated.

Also, current and former employees sometimes take an adversarial role as whistle-blowers; this behavior may flow from good intentions or result from some negative experience. Employees who face reduction in staffing or many changes resulting from lean management initiatives may feel threatened by job loss or the disturbance of familiar relationships and routines.

All of this leads to shifting loyalty. Identifying and reducing, even eliminating, adversarial relationships remains an important managerial duty. Managers seek to offset disaffection by clients through processes such as risk management, customer/patient satisfaction surveys, development of ombudsman programs, and the use of expert advisers to assist with insurance claim issues.

Outright opponents or enemies are those individuals or groups who seek actively and aggressively to limit the organization in its activity. These opponents or enemies may have the power to bring an activity to a halt or to prohibit an activity from being started. For example, clients do not wish to have certain facilities, such as

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drug treatment centers or group homes for the developmentally challenged, too close to their homes. Furthermore, they may want ample parking and easy access to their hospital, but they do not want to disturb local housing units or business areas. Zoning codes may be enforced to prevent the development of alternative treatment facilities or the expansion of existing facilities. Clients may withdraw financial support as evidence of displeasure. In this high-tech age, organizations must deal with hackers, identity theft operatives, and systems hijackers. This threat to the organization requires diligent attention regarding detection and prevention, as well as processes to deal with the aftermath when a disruptive event occurs.

The concept of competition is well understood and accepted in the economic arena. Within reasonable boundaries, competition is favorable for clients because it forces providers to make products or services better or more accessible. The sharp edge of competition is also evident in healthcare delivery, possibly because certain factors in contemporary culture are producing shifts in client loyalty. These factors include erosion of strong ethnic and religious ties to one hospital or health center along with urban and suburban migration patterns.

Given a dropping inpatient census, a hospital may compete actively with a freestanding medical clinic by offering its own outpatient clinic services. To attract patients, one obstetrics unit may offer the latest in fetal monitoring, whereas another may stress family-centered childbirth. An urban medical school or medical center may offer the benefits of highly specialized techniques to offset a census drop because certain clients seek to avoid the city. A hospital seeking financial bond approval for an expanded facility or for some special activity may engage in active outreach to increase its patient population.

Rivals, according to Gross, are those who produce different products but compete for resources, assistance, and support. In the healthcare setting, specialty hospitals could be considered the rivals of general hospitals (e.g., a children’s hospital versus a pediatric unit in a general hospital, a lying-in hospital versus an obstetrics unit). When the emphasis in definition is placed on competition for the same resources, there is evidence of rivalry among healthcare institutions for scarce personnel (e.g., registered nurses for the 3:00 to 11:00 P.M. shift, trained coding specialists, physicians for the emergency department).

Within an organization, one department may be cast as rival to another for needed space, additional personnel, and special funds. Managers may find that the same departments that are clients may also be supporters and rivals.

COALITIONS FOR BUILDING COMMUNITY AND CLIENT INVOLVEMENT

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The analysis of an organization through the application of the clientele network illustrates the intertwining of the organization with its local community. Healthcare organizations generally command respect; communities rely on them not only for health care but also for employment. The organization’s management team is viewed as a major part of community leadership. In turn, the concerns of the community have an impact on the healthcare organization—job losses or gains, crime, and infrastructure development, to name a few salient issues.

Helping the community build alliances is an aspect of leadership. How is this best accomplished? There are some tried-and-true steps in community building. First, the management/leadership team clarifies, internally, the level of its involvement in community affairs. The prudent course in one situation might be simply starting the conversation—that is, helping raise the issue in a general way. In another situation, the organization might commit to a highly visible leadership role, or the provision of physical space for meetings and the loan of staff. Identification of the specific issue of focus (e.g., need for area-wide transportation, need for more elder care programs, economic development) is part of this process.

With this focus clarified, the team then starts its outreach efforts to the communities of interest and stakeholders. Team members devote efforts to developing and supporting community-based leadership, with the continuing offer of support. The leadership team, now expanded to include community members, sharpens its focus again, determining which specific problem to solve, which alternatives are available, how to select the best alternative, and how to develop a program of action. In many situations, the program of action involves local, state, or federal government entities. A healthcare organization, through its board of trustees, usually has one or more individuals who are power holders in their own right and whose influence can be used to advance the cause. Sometimes special funding is available through private or public grants; the healthcare organization, through its research and development division, might be the most effective agent to apply for and receive such funding.

As with any program, during its implementation and again at its conclusion, a variety of processes are used to provide feedback during this process. Community building and the development of ongoing alliances are mutually supportive endeavors. These skills are part of the manager’s portfolio.

EXAMPLE OF CLIENTELE NETWORK FOR A PHYSICAL THERAPY UNIT A tabulation method can be used to analyze a departmental clientele network. The development of such a reference tool for the internal environment of the

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organization provides the manager with much information concerning relationships to be developed, aspects of the workflow to be considered, and regulations and guidelines that must be satisfied. The following is the clientele network of a spinal cord treatment service in a physical therapy department:

I. Clients A. Immediate clients

1. Patients of the spinal cord injury service 2. Hospital personnel assigned to the spinal cord injury service

B. Secondary clients 1. Family members 2. Hospital medical staff for in-service education and clarification of

policies and procedures 3. Physical therapy students on clinical affiliation 4. Local hospitals requesting information on special programs dealing

with treatment of the spinal cord–injured patient C. Remote clients

1. Local hospitals 2. Home health agencies 3. School systems (sports injury care)

II. Suppliers A. Resources

1. Physicians within the hospital who refer patients to the spinal cord injury unit

2. Medical supply companies that supply equipment for both the patients and the department

3. Bureau of Vocational Rehabilitation, which covers the cost of treatment and equipment

4. Hospital transport system B. Associates

1. National spinal cord treatment centers 2. Other direct patient services (e.g., nursing, occupational therapy,

speech, psychology, social services) 3. Home health agencies 4. Professional association educational materials

C. Supporters 1. Hospital physicians and residents 2. Community service organizations

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3. Auxiliary organizations serving the spinal cord service 4. Medical supply companies 5. County wheelchair sports association 6. Public relations department of the hospital

III. Advisers A. American Physical Therapy Association B. Hospital administrators C. Other direct patient care services within the hospital D. Insurance companies

IV. Controllers A. Accreditation agencies

1. The Joint Commission 2. Commission on Accreditation of Rehabilitation Facilities

B. Federal government 1. Medicare reimbursement regulations 2. Equal employment opportunity 3. Working conditions

C. State government 1. Licensing regulations for physical therapists 2. Medicaid reimbursement regulations

D. County hospital association E. Professional association codes of ethics F. Unions G. Hospital policies H. Third-party payers

V. Adversaries A. Opponents and enemies

1. Consumer groups 2. Hospital personnel resistant to change

B. Rivals and competitors 1. Other local rehabilitation centers sharing the same clientele network 2. Independent group practices specializing in rehabilitation

INTRODUCING ORGANIZATIONAL SURVIVAL STRATEGIES

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Organizational survival and growth are implicit goals requiring the investment of energy and resources. Normally, only higher levels of management need give attention to organizational survival; it may be taken for granted by most employees or members, some of whom may even take actions that threaten the organization’s survival (e.g., a prolonged strike). There may be an unwillingness to admit the legitimacy of survival as a goal because it seems self-serving. However, managers disregard the concept of organizational survival—whether the whole corporation or just a department or unit—at their own peril.

So fundamental is the goal of organizational survival that it underpins all other goals. Fostering this goal contributes to the satisfaction of the more explicit goals of the group or organization. Survival is articulated as a goal in certain phases of organizational development—for example, when competition threatens. The clientele network includes competitors, rivals, enemies, and opponents that must be faced. Certain threats to organizational survival may be identified:

• Lack of strong, formal leadership after the early charismatic leadership of the founders

• Too-rapid change either within or outside the organization • Shifting client demand, either with the loss of clients or with the increased

exercise of control by clients • Competition from stronger organizations • High turnover rate in either the rank and file or the leadership • Failure to recognize and accept organizational survival as a legitimate, although

not the sole, organizational purpose

These factors drain from the organization the energy that should be goal-directed. An organization ensures its survival through certain strategies and processes,

such as bureaucratic imperialism, co-optation, patterns of adaptation, goal multiplication and expansion, use of organizational roles, conflict limitation, and integration of the individual into the organization. Astute managers recognize such patterns of organizational behavior and assess them realistically. A weak organization or unit cannot pull together the money, resources, and power to serve its clients effectively.

BUREAUCRATIC IMPERIALISM An organization develops to pursue a particular goal, serve a specific client group, or promote the good of a certain group. In effect, an organization stakes out its territory. Thus, a professional association seeks to represent the interests of members

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who have something in common, such as specific academic training and professional practice. A hospital or home health agency seeks to serve a particular area. A union focuses on the needs of one or several categories of workers. A political party attempts to bring in members who hold a particular political philosophy. A government agency seeks to serve a specific constituency.

The classic definition of bureaucratic imperialism reflects the idea that a bureaucratic organization exerts a kind of pressure to develop a particular client group and then to expand it. It becomes imperialistic in the underlying power struggle and competition that ensues when any other group seeks to deal with the same clients, members, or area of jurisdiction. Matthew Holden, Jr., coined the term bureaucratic imperialism and defined it in the context of federal government agencies that must consider such factors as clients to be served, political aspects to be assessed, and benefits to be shared among administrative officials and key political clients. According to Holden’s definition of the concept, bureaucratic imperialism is “a matter of interagency conflict in which two or more agencies try to assert permanent control over the same jurisdiction, or in which one agency actually seeks to take over another agency as well as the jurisdiction of that agency”.8 The idea of agency can be expanded to include any organization, the various components of the clientele network can be substituted for the constituency, and the role of manager can replace that of the administrative politician in those organizations that are not in the formal political setting.

Managers in many organizations can recognize the elements of this competitive mode of interaction among organizations. There may even be such competition among departments and units within an organization. In the healthcare field, competition may be seen in the areas of professional licensure and practice, accreditation processes for the organizations as a whole, the delineation of clients to be served, and similar areas.

Professional licensure has the effect of annexing specific “territory” as the proper domain of a given professional group, but other groups may seek to carry out the same, or at least similar, activities. For example, there is the question of the role of chiropractors in traditional healthcare settings. Is the use of radiological techniques the exclusive jurisdiction of physicians and trained radiological technicians or should the law be changed to permit chiropractors greater use of these techniques? Psychiatrists question the expanding role of others who have entered the field of behavioral health. As each healthcare profession develops, the question of jurisdiction emerges.

The accreditation process in health care reflects similar struggles for jurisdiction. Which shall be the definitive accreditation process for behavioral care facilities— that approved by the American Psychiatric Association or that approved by The Joint Commission? Should all of these processes be set aside, leaving only state

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governments to exercise such control through the licensure of institutions? Long- established professional associations (e.g., AHIMA) have developed sound examination and credentialing processes, only to see the rise of for-profit organizations that develop their own categories and provide certification.

Other examples may be drawn from the healthcare setting. There has been a jurisdictional dispute over blood banking between the American Red Cross and the American Association of Blood Banks, as well as competition among health maintenance organizations, or HMOs, with the more traditional Blue Cross–Blue Shield-type plans and commercial medical insurance companies.

Certain trends have occasioned the development of new organizational positions (e.g., chief privacy officer, chief compliance officer, chief information officer, health informatician). Are these new professions or do they fall under the education and credentialing of existing professional organizations? To state this question another way—whose organizational territory encompasses information technology? Within an organization, which department or service will be the designated leader for information technology application? No doubt the tasks will remain shared among several departments, with each continuing to exert its own prerogatives.

Another example may be drawn for the development and implementation of electronic health records—which agency or organization will be the final arbiter of core data elements, formats, standards, and technological aspects of the system? The Health Level-7 International has relatively universal acceptance. The Joint Commission has its elements of practice, AHIMA has its information governance principles, and ECRI (formerly the Emergency Care Research Institute) has clinical standards for core content as well as support technology (as does the American Society for Testing and Measurement). The Institute of Medicine promulgates core functions for electronic health records. Managers must attend to these competing groups, which in turn must cooperate with one another.

Although the charitable nature of health care has been emphasized traditionally, the elements of competition and underlying conflict must be recognized. With shifts in patient populations and changes in each healthcare profession, healthcare managers must assess the effects of bureaucratic imperialism in a realistic manner. The competition engendered by bureaucratic imperialism and the resultant total or partial “colonization” of an organizational unit or client group may be functional. Holden noted that conflict not only forces organizational regrouping by clarifying client loyalty and wishes but also sharpens support for the agency or unit that “wins.” Furthermore, it disrupts the bureaucratic form from time to time, causing a healthy review of client need, organizational purpose, and structural pattern.

CO-OPTATION

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Another method that organizations use to help ensure their survival is co-optation, an organizational strategy for adapting and responding to change. Philip Selznick described and labeled this strategy, which is viewed as both cooperative and adaptive. He defined co-optation as “an adaptive response on the part of the organization in response to the social forces in its environment; by this means, the organization averts threats to its stability by absorbing new elements into the leadership of the organization”.9 The organization, in effect, shares organizational power by absorbing these new elements. Selznick called it a realistic adjustment to the centers of institutional strength.

Formal Versus Informal Co-optation In formal co-optation, the symbols of authority and administrative burdens are shared, but no substantial power is transferred. The organization does not permit the co-opted group to interfere with organizational unity of command. Normal bureaucratic processes tend to provide sufficient checks and balances on any co- opted group, just as they tend to restrict the actions of managers. Through formal co- optation, however, the organization seeks to demonstrate its accessibility to its various publics.

In health care, the co-optation process is suggested by the practice of appointing “ordinary” citizens to the board of trustees. Community behavioral care health centers and some neighborhood health centers tend to emphasize consumer or community representation. Health planning agencies include both providers and consumers in planning for health care on a regional or statewide basis. The formalization of nursing home ombudsmen or patient/resident councils is still another example of this process.

Professional associations in those disciplines that have technical-level practitioners have sought to open their governing processes in response to the growing strength of the technical-level group. Increases in numbers, greater degree of training, further specialization, and a general emphasis on the democratic process and provision of rights for all members have fostered changes in these associations. Open membership, such as that adopted by AHIMA, is an example of positive cooptation; the rapid developments in the wider field of information technology gave impetus to including the information technology specialists in the existing health information arena. Without cooperative adaptation to such internal changes, there is a risk that additional associations will be formed, possibly weakening the parent organization.

When an organization seeks to deal less overtly with shifting centers of power and to maintain the legitimacy of its own power, co-optation may be informal in nature. For example, managers may meet unofficially with informally delegated

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representatives of clients, employees, or outside groups. Organizational leaders may deal regularly with some groups, but there are no visible changes in the official leadership structures. No new positions are created; committee membership remains intact. Informal co-optation may be more important than formal co-optation because of its emphasis on true power, although each form serves its unique purpose. An organization can blend formal and informal co-optation processes, as they are not mutually exclusive.

Control of Co-opted Groups Although the co-opted group could gain strength and attempt to consolidate power, this does not happen frequently for several reasons. First, the organization has the means of controlling participation. For example, only limited support may be given to the group; there may be no physical space, money, or staff available to give to the co-opted group, or management could simply withhold support. Another possible course is to assign so much activity to the co-opted group that it cannot succeed easily. With this approach, key leaders of the co-opted group generally retain their regular work assignments but now have additional projects and tasks relating to their special causes. Co-opted leaders also become the buffer individuals in the organization, because the group has placed its trust in them and looks for results faster than they can be produced. Such leaders may find their base of action eroded and their activity turning into a thankless task.

In a more Machiavellian approach, organizational authorities could schedule meetings at inconvenient hours or control their agendas in such a way that issues of significance to the co-opted group are too far down on the list of discussion items to be dealt with under the time constraints. Absolute insistence on parliamentary procedure may also be used as a weapon of control; a novice in the use of Robert’s Rules of Order is at a distinct disadvantage when compared with a seasoned expert.

The subtle psychological process that occurs in the co-opted individual who is taken into the formal organization as a distinct outsider acts as another controlling measure. The person suddenly becomes, for this moment, one of the power holders and derives new status. Certain perquisites also are granted. A consumer representative, for example, may find his or her way paid, quite legitimately, for a special conference or fact-finding trip to study a problem. The individual, in becoming privy to more data and sometimes to confidential data, may start to “see things” from the organization’s point of view. Also, certain subtle social barriers may make the co-opted individual uncomfortable, even though they may not be raised intentionally and may be part of the normal course of action for the group.

Individuals representing pressure groups find that their own time and energies are limited, even if they desire power. Other activities continue to demand their energies. In addition, certain issues lose popularity, and pressure groups may find

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their power base has eroded. Finally, the agenda items that were causes of conflict may become the recurring business of the organization. The conflict may become a routine, and the structure to deal with it may become a part of the formal organization. In the collective bargaining process, for example, the union is a part of the organization, and its leaders have built-in protection from factors that erode effective participation. Labor union officials commonly have certain reductions in workload so that they may attend to union business, space may be provided for their offices or meetings, and they may seek meetings with management as often as executives seek sessions with them. Co-optation has occurred in such a case, but without a loss of identity of the co-opted group. In healthcare organizations, consumer participation has become part of the organizations’ continuing activity through the development of a more stable process for consumer input, such as the community governing board models.

HIBERNATION AND ADAPTATION To maintain its equilibrium, an organization must adapt to changing inputs. This adjustment may take the passive form of hibernation, in which the institution enters a phase of retrenchment. Cutting losses may be the sensible option. If efforts to maintain an acceptable census in certain hospital units, such as obstetrics or pediatrics, are unsuccessful, there may be an administrative decision to close those units and concentrate on providing quality patient care in the remaining services. An organization may adjust or adapt to changing inputs more actively by anticipating them. Staff specialists may be brought in, equipment and physical facilities updated, and goals restated. Finally, the overall corporate form may be restructured as a permanent reorganization that formalizes the cumulative effects of changes. A hospital may move from private sponsorship to a state-related affiliated status, or a healthcare center may become the base service unit for behavioral care programs in the area. An assisted living facility may regroup as a personal care facility. Recall the example from an earlier discussion under adaptation to change.

The relationships among the concepts of hibernation, adaptation, and permanent change can be seen in the following case history of a state behavioral care hospital. After the state legislature cut the budget of all such state hospitals, the institution director began to set priorities for services so that the institution could survive. The least productive departments were asked to decrease their staff. The rehabilitation department lost two aide positions. The institution director had to force the organization into a state of hibernation to accomplish some essential conservation of resources. The director of rehabilitation services revised the department goals to improve the chances of departmental survival. After closing ancillary services, the director concentrated staff on visible areas of the hospital and asked them to make

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their work particularly praiseworthy. At the same time, the director emphasized the need to document services so that patients’ progress in therapy programs could be demonstrated. The director adapted to the change in the organization.

The program changes proved successful. The director of the rehabilitation department consolidated the changes and modified the department’s goals. Instead of offering periodic programs to adolescent, neurological, geriatric, and acute care patients, the staff would concentrate on acutely ill geriatric patients. The staff applied for funds that were available to treat this population. At the same time, the staff determined that the adolescent unit could benefit from their services. Although funds were shrinking, the staff serviced this unit because needs in that area were unmet. The director and the staff decided to apply for private funds to service neurological and acute care cases so that these programs could also continue. By adopting a combined strategy of hibernation and adaptation, with alternate plans for expansion, the department director was able to foster not only departmental survival but, ultimately, departmental growth.

Another example of hibernation as a survival strategy is illustrated by the response of a continuing care or retirement community to several challenges. Planning assumptions, budget projections, short- and long-term investments, and fee structures were based on expectations of a modest to robust profit. Unfortunately, a prolonged economic downturn reduced the rate of return on investments with no concomitant decrease in costs. Credit lines became more difficult to obtain and came with much higher interest rates. An increase in regulatory requirements for the assisted living component of the facility would have required major renovations that were cost prohibitive. As a response to these factors, the assisted living component was eliminated and other expansion plans were put on hold. Plans to seek additional, voluntary accreditation were also postponed until the organization had evidence that such accreditation would enhance its attractiveness as a care facility, with a resulting increase in admissions.

GOAL SUCCESSION, MULTIPLICATION, AND EXPANSION Because an organization that effectively serves multiple client groups can attract money, materials, and personnel more readily than an organization with a more limited constituency, leaders may actively seek to expand the original goals of the organization. In addition to the pressures in the organizational environment that may force the organization to modify its goals as an adaptive response, success in reaching organizational goals may enable managers to focus on expanded or even new goals. The terms goal succession, goal expansion, and goal multiplication are

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used to describe the process in which goals are modified, usually in a positive manner.

Amatai Etzioni described this tendency of organizations to find new goals when old ones have been realized or cannot be attained.10 In goal succession, one goal is reached and is succeeded by a new one. One example is the March of Dimes, which began as a formal organization with the goal of eradicating polio; this objective was achieved. The organization had strong support and a well-developed formal structure. Rather than disband, the organization celebrated its achievement and undertook a new goal: the prevention of birth defects. Another example of this pattern involves the actions of a group of local merchants. They formed a cooperative group to coordinate clean-up efforts after catastrophic flooding—a goal that was met. However, a strong cooperative group had been formed and solid administrative structures had been developed; community and regional support was strong. Rather than disband after meeting its original goal, the group took on new goals of fostering economic development and promoting tourism. In addition, sometimes an organization takes on additional goals because the original goals are relatively unattainable. For example, a church may add a variety of social services to attract members when the worship services and doctrinal substance per se do not increase the church’s membership. A missionary group may offer a variety of healthcare or educational services when its direct evangelical methods cannot be used. The original goal is not abandoned, but it is sought indirectly; more tangible goals of service and outreach succeed this primary goal.

Goal expansion is the process in which the original goal is retained and enlarged with variations. Many examples can be described:

• A college or university includes continuing education as well as traditional classes.

• An acute care facility may open a rehabilitation or convalescent care hospital as an adjunct to its short-stay services.

• A medical center opens a specialty division just for the comprehensive care of senior citizens.

• A special day program for people with fetal alcohol spectrum disorder (FASD) adds an emergency overnight or short-stay unit. This same program partners with the National Association of Counsel for Children, which focuses on judicial proceedings affecting the client group (adolescents with FASD) common to both organizations.

• The Joint Commission continues to focus primarily on inpatient acute care hospital accreditation but has expanded its standards and accreditation process to include home care, outpatient, and emergency care units.

• A collective bargaining unit negotiates specific benefits for its workers and

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takes on the administrative processing of certain elements, such as the pension fund. The basic goal of improving the circumstances of the workers is retained and expanded beyond immediate economic benefits.

• A long-term care (skilled care) facility expands its goals to provide a new service: a memory care or Alzheimer’s disease unit.

• The Easter Seals Association reflects a history of goal expansion, beginning with services for children with disabilities and currently offering additional services to families affected by autism. In response to the growing number of military service members who are returning from active duty with disabilities, the organization has broadened its client group to serve them.

• A community pharmacy implements comprehensive medication review for its customers.

• The Red Cross, which was originally organized to provide disaster relief in World War I, subsequently assists in coordinating relief from all disasters, regardless of cause. In recent years, this same agency has expanded its child care safety training to include grandparents who have become increasingly common caretakers of the young. Another example can be found in the personal care setting, where some of these facilities offer respite care in a secure unit, thus providing family members the opportunity to take a break.

Note that in all of these examples, the basic goals are retained, and the new ones are derived from them. The new goals are closely related and are essentially extensions of the original goals.

Goal multiplication is also a process in which an original goal is retained and new ones added. In this case, however, the new goals reflect the organization’s effort to diversify. Goal multiplication is often the natural outgrowth of success. A hospital may offer patient care as its traditional, primary goal. To this it may add the goal of education of physicians, nurses, and other healthcare professionals. Because excellence in education is frequently related to the adequacy of the institution’s research programs, research may subsequently become a goal. The hospital may take on a goal of participating in social reform, seeking to undertake affirmative action hiring plans and to foster employment within its neighborhood. It may offer special training programs for those who are unemployed in its area or for those who are physically or developmentally impaired. It may coordinate extensive social services in an effort to assist patients and their families with both immediate healthcare problems and the larger social and economic problems they face. Large medical centers may take on activities such as real estate ventures, because (1) they need housing for visiting fellows, associates, and students in training, and (2) they view such pursuits as income-producing ventures.

Similar examples can be found in the business sector. A large hotel–motel

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corporation, with its resources for dealing with temporary living quarters, may go into the nursing home industry or the drug and alcohol treatment facility business by offering food, laundry, and housekeeping services; it may even operate a chain of convalescent or alcohol and drug rehabilitation centers. Several real estate firms might consolidate their efforts in direct sale of homes and then offer mortgage services as an additional program. Organizations may take on a variety of goals as a means of diversification; resources are directed toward satisfaction of all the goals. Such multiplication of goals is seen as a positive state of organizational growth.

ORGANIZATIONAL LIFE CYCLE Organizational change can be monitored through the analysis of an organization’s life cycle. This concept is drawn from the pattern seen in living organisms. In management and administrative literature, the development of this model stems from the work of Marver Bernstein, who analyzed the stages of evolution and growth of independent federal regulatory commissions.11 This model of the life cycle can be applied to advantage by any manager who wishes to analyze a particular management setting. The following material presents an application of this model to the healthcare setting.

The organization is assessed not in chronological years but in phases of growth and development. No absolute number of years can be assigned to each phase, and any attempt to do so to predict characteristics would force and possibly distort the model. The value of organizational analysis by means of the life cycle lies in its emphasis on characteristics of the stages rather than the years. For example, the neighborhood health centers established in the 1960s under Office of Economic Opportunity sponsorship had a relatively short life span in comparison with the life span of some large urban hospitals that are approaching a century or more of service. Both types of organizations have experienced the phases of the life cycle, with the former having completed the entire phase through decline and—in its original form—extinction.

The phases of the organizational life cycle usually meld into one another, just as they do in the biological model. Human beings do not suddenly become adolescents, adults, or senior citizens. So, too, organizations normally move from one phase to another at an imperceptible rate with some blurring of boundaries. Finally, not every organization reflects in detail every characteristic of each phase. The emphasis is on the cluster of characteristics that are predominant at a specific time.

Gestation

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In this early formative stage, there is a gradual recognition and articulation of need or shared purpose. This stage often predates the formal organization; indeed, a major characteristic of this period is the movement from informal to formal organization. The impetus for organizing is strong, as it is necessary to bring together in an organized way the prime movers of the fledgling organization, its members (workers), and its clients.

Leadership tends to be strong and committed, and members are willing to work hard. Members’ identification with organizational goals is strong because the members are in the unique situation of actualizing their internalized goals; in contrast, those who become part of the institution later must subsequently internalize the institution’s objectives. Members of the management team find innovation the order of the day. Creative ideas meet with ready acceptance, because there is no precedent to act as a barrier to innovation. If there is a precedent in a parent organization, it may be cast off easily as part of the rejection of the old organization. A self-selection process also occurs, with individuals leaving if they do not agree with the form the organizational entity is taking. This is largely a flexible process, free of the formal resignation and separation procedures that come later.

Youth The early enthusiasm of the gestational phase carries over into the development of a formal organization. Idealism and high hopes continue to dominate the psychological atmosphere. The creativity of the gestational period is channeled toward developing an organization that will be free of the problems of similar institutions. There is a strong camaraderie among the original group of leaders and members. Organizational patterns exhibit a certain inevitability, however. If a creative new organization is successful, it is likely to experience an increase in clients that will force it to formalize policies and procedures rapidly so as to handle the greater demand for service.

Some crisis may occur that precipitates expansion earlier than planned. A health center may have a plan for gradual neighborhood outreach, for example, but a sudden epidemic of “flu” may bring an influx of clients before it is staffed adequately. Management must make rapid adjustments in clinic hours and staffing patterns to meet the demand for specific services and, at the same time, to continue its plan for comprehensive health screening. A center for the developmentally challenged may schedule one opening date, but a court order to vacate a large, decaying facility may require the new center to accept the immediate transfer of many patients. Routine, recurring situations are met by increasingly complex procedures and rules. Additional staff is needed, recruited, and brought into the organization, perhaps even in a crash program rather than through the gradual integration of new members.

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At this point, a new generation of worker enters the organization. These workers are one phase removed from the era of idealism and deeply shared commitment to the organization’s goals. The organizational structure (e.g., workflow, job descriptions, line and staff relationships, and roles and authority) is tested. For the newcomer brought in at the management level, formal position or hierarchical office is the primary base of authority. Other members of the management team, as the pioneers, know one another’s strengths and weaknesses intimately, but these managers may need to test the newcomer’s personal attributes and technical competence. Sometimes, because the new organization attempts to deal with some problem in an innovative manner, an individual healthcare practitioner is hired in a nontraditional role; not only the professional and technical competence but also the managerial competence of that individual are tested.

Communication networks are essential in any organization. During an organization’s youth, it is necessary to rely on formal communication because the informal patterns are not yet well developed, except within the core group. This lack of an easy, anonymous, informal communication network forces individuals to communicate mainly along formal lines of authority. The core group may become more and more closed, more and more “in,” relying on well-developed, secure relationships that stem from a shared history in the developing organization, while the newcomers form a distinct “out” group.

The jockeying for power and position may be intense. If managers hold an innovative office, those who oppose such creative organizational patterns may exert significant pressure to acquire jurisdiction or to force a return to traditional ways. Because there may have been much innovation in the overall organizational pattern during the gestation–youth transition stage, managers have little or no precedent against which they can measure their actions.

Certain problems center on the implementation of the original plans. The planners may start to experience frustration with managers who enter the organization during this period of formalization. Perhaps the original plans need modification; perhaps the innovative, ideal approach of the original group is not working, largely because of the change in the size of the organization. The line managers find themselves in the difficult situation of seeming to fail at the task on the one hand and being unable to make the original planners change their view on the other hand. The promise of innovation becomes empty, however, if the original planners guard innovation as their prerogative and refuse to accept other ideas.

In the youth phase of an organization, more time must be devoted to orientation and similar formal processes of integrating new individuals into the organization. Certain difficulties may be encountered in recruiting additional supervisors and professional practitioners. For example, there may be no secure retirement funds, only minimal group medical and life insurance, and a lack of benefits that are predicated on long-term investments and large membership. Salary ranges may be

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modest in comparison with those of more established organizations simply because insufficient time has passed for the development of adequate resources. The strong normative sense of idealism may have a negative effect on potential workers as well as a positive one; a certain dedication to the organization’s cause may be expected, and it may also be assumed that personnel should be willing to work hard without being rewarded monetarily.

During these early years, a subtle cueing system emerges—what is valued, what is rewarded. There is a need to develop the customary external markers associated with motivation: awards and recognition events. Although it is important to develop these, managers must avoid trivializing this process by overrewarding accomplishment (e.g., a 1-year pin). Managers should focus instead on markers such as safety records, number of client encounters (e.g., 1,000), or certain goals the (e.g., training 100% of employees in a specific topic). These elements foster a sense of organizational stability and decrease worker concerns about job security.

The dynamics of bureaucratic imperialism are evident at this early stage. The youthful organization is exerting its claim in the marketplace of health care, trying to operate from a place of strength. Meanwhile, an existing organization may compete intensively for clients and resources. The new organization, with its limited resources, may become less innovative because it is not sure of its strength. It may choose to fight only those battles in which victory is certain. In a healthcare organization, the new unit may be treated as a stepchild of related healthcare institutions. A new community behavioral health center or a home care organization, for example, may have to choose between competing with older, traditional units within the parent organization and being completely independent, still competing for resources but with less legitimacy of claim. A struggle not unlike the classic parent– adolescent conflict may emerge. Thus, organizational energy may go into an internal struggle for survival rather than into serving clients and expanding goals.

If the client groups are well defined and no other group or institution is offering the same service, a youthful organization may flourish. A burn unit in a hospital may have an excellent chance of survival as an organization because of the specificity of its clients as compared, for example, with the chance of a general medical clinic’s survival. A similar positive climate may foster the development of units for treatment of spinal cord injury or for rehabilitation of the hand as specialized services. In effect, a highly specialized client group may afford a unit or an organization a virtual monopoly, which will tend to place the unit or organization in a position of strength.

A particularly challenging aspect of the transition from gestation to youth is the necessary development of articles of incorporation and related bylaws. The closely knit group of founders must make plans to anticipate difficulties, conflicts, and the possibility of failure. Provision for removal of board members or officers, auditing of business records, succession plans to replace themselves, and the disposition of

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assets if the venture fails are concepts seemingly at odds with the idealism of this stage.

Middle Age The multiple constraints on the organization at middle age are compounded by several factors. In addition to the external influences that shape the work of the organization, internal factors must be dealt with, such as the organizational pattern, the growing bureaucratic form, the weight of decision by precedent, and an increasing number of traditions.

However, the organization also reaps many benefits from middle age. Many activities are routine and predictable; roles are clear; and communication, both formal and informal, is relatively reliable. These years are potentially stable and productive. There is a reasonable receptivity to new ideas, but middle age is not usually a time of constant massive or rapid change and disruption, even the positive disruption resulting from major innovation. The manager in an organization in its middle age performs the basic traditional management processes in a relatively predictable manner. Assessing change and adapting to it has become well established.

Periods of rejuvenation are precipitated by a variety of events. A new leader may act as a catalytic agent, bringing new vision to the organization; for example, the president of a corporation may push for goal expansion by introducing a new line of products, or an aggressive hospital administrator may push for the development of an alternative health care service model. Mergers and affiliations with new and developing types of healthcare institutions, such as community health centers and home care programs, may be the catalyst. Although primarily negative events, the fiscal chaos associated with bankruptcy or the loss of accreditation as a hospital may cause the organization to reassess its goals and restructure its form, thereby giving itself a new lease on life. Sheer competition, coupled with a strong belief in its mission of comprehensive care, might cause a community hospital to add services in specialties such as sports medicine and rehabilitation, cardiac treatment, behavioral health for older adults, and on-site comprehensive imaging and laboratory services.

Some external crisis or change of articulated values in the larger society may make the organization vital once again. The recent emergence of alternative modes of communal living reflects individuals’ search for a mode of living that combats the alienation of urban society; organizations that provide alternative modes of living can be revitalized because of this new interest in shared living arrangements. The renewed interest in domiciliary care of the elderly reflects this trend. The effect of war on the vitality of the military is an obvious example of crisis as a catalytic agent that causes a spurt of new growth for an organization. The growth of consumer and environmental agencies is another organizational response to change or crisis in the

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larger society. In health care, family practice has developed as a specialty in response to

patients’ wishes for a more comprehensive, more personal type of medical care. The hospice concept for the terminally ill became an alternative to the highly specialized setting of the acute care hospital.

An organization may experience a significant surge of vitality because of some internal activity, such as unionization of workers. During the covert as well as the overt stage of unionization, management may take steps to “get the house in order,” including greater emphasis on worker–management cooperation in reaching the fundamental goals of the organization. Client groups may become more active, both to focus attention on the institution’s primary purpose and to mobilize client goodwill in the face of the potential adversary (i.e., the union).

Yet another catalytic agent for revitalization of an organization is change in its sponsorship. Although such change (decreased presence of members of the sponsoring group, such as religious sisters) may alienate sectors of the original client group (those with strong ties to the founding sponsors), survival strategies already noted may be used to offset this potential loss of goodwill. Thus, celebration of the organization’s milestones, its history, its long-term clients, along with formal and informal co-optation, helps restrengthen these ties. A strategy that can be used to advantage at such times of transition involves the temporary use of an outside management group. This management team, focusing on transition and/or turnaround efforts, has the advantage of objectivity. It can become also the target of the unhappiness of clients about changes, thus absorbing the negative energy of the passing phase. The middle managers are shielded from the negativity and thus they are able to focus on motivating and leading the workers and clients through the changing era.

In addition, legislation of massive scope, particularly at the federal level, may have a rejuvenating effect. The infusion of money into the healthcare system via Medicare and Medicaid is partly responsible for the growth of the long-term care industry, although population trends and sociological patterns for care of the aged outside of the family setting are contributing factors. The passage of government- sponsored healthcare planning and resource development initiatives rejuvenated some of the existing health planning agencies; their gradual phasing out of such initiatives, of course, has had the opposite effect in some instances by forcing a decline in certain planning groups. Changes in state professional licensure laws may bring certain professional groups into a season of new vigor because their scope of practice has been enlarged.

The bureaucratic hierarchy protects managers who derive authority from a position that traditionally is well defined by the organization’s middle age. Planning and decision making are shared responsibilities, subject to several hierarchical levels

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of review. The same events that may spur rejuvenation also may hurl the organization into a state of decline, the major characteristic of the final stage: old age.

Old Age Staid routines, resistance to change, a long history of “how we do things,” little or no innovation, and concern with survival are the obvious characteristics of an organization in decline. There may be feeble attempts to maintain the status quo or to serve clients in a minimal fashion, but the greater organizational energy is directed toward efforts to survive. If the end is inevitable, resources are guarded so that the institution can fulfill its obligations to its contractual suppliers and to its past and present employees (e.g., through vested pension funds, severance pay, related termination benefits). There may even be a well-organized, overt process of seeking job placement for employees. Time and resources may be made available to such individuals. This stage is a delicate one: members are competing for the same jobs in the same, or closely related, organizations and/or in the same geographic region. Employees become competitors with one another. Workers who keep applying for jobs, only to be rejected, become demoralized and anxious.

Because of an organization’s dwindling resources, it may no longer serve clients well, and all but the most loyal clients will look for other organizations. The organization in decline cannot attract new clients; the cycle is broken. Without clients, the organization cannot mobilize financial and political resources to maintain its physical facilities, expand services, respond to technological change, or remain in compliance with new licensure or regulatory mandates. The end, which may come swiftly, may be brought about by a decision to close and a specific plan to do so in an orderly way. For example, a department store might announce a liquidation sale that ends with the closing date. Only the internal details of closing need attention; as far as clients are concerned, the organization has died.

A final closing date may be imposed on an organization. In a bankruptcy, for example, the date may be determined in the course of legal proceedings. Legislation that initially establishes certain programs may include a termination date, although the date is more commonly set when legislation to continue funding the program fails. The changes in medical care evaluation under professional standards review organizations and the Office of Economic Opportunity neighborhood health centers are examples in the healthcare field of programs that moved into a state of decline or closure when funding was no longer available through federal, state, or county legislation.

The closing decision may be a more passive one; there may be a gradual diminution of services and selective plant shutdowns and layoffs, as may occur in manufacturing corporations that rely primarily on military or space contracts.

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Bankruptcy is costly in economic and political terms in some cases, so the decision is implemented slowly. Indeed, it sometimes seems that no one actually makes a decision in some institutions that decline. Because of its unpopularity, the decision to close certain services, such as healthcare services, may be made in a somewhat passive way; however, the seemingly gradual slipping away of clients and the deterioration or outright closing of urban hospitals may be accompanied by the emergence of competitive forms of health care, such as home care units, neighborhood health centers, and mobile clinics.

Although some organizations cease to exist entirely, others may change form or exist under new sponsorship. For example, some of the neighborhood health centers under specialty grant sponsorship have been absorbed into other federal government systems of health clinics. Some hospitals that had been owned and controlled by religious orders have become community-based, nonprofit institutions. Some organizations seem only to change title and official sponsorship. The various types of agencies for healthcare planning have included regional medical programs and regional comprehensive health planning programs, and statewide declining organization may find themselves in a caretaker role that health planning agencies; the organizational structure, not the total mandate, of these agencies has changed or been eliminated.

Managers overseeing the closing stages of an organization face both challenges and opportunities. To end well becomes an unspoken goal and a goal that must be made explicit. Managers must come to terms with the realities associated with phasing out an organization. It will be a stressful time for all, and managers need to attend to personal well-being. Yes, there is a personal goal of being a “class act” right to the end. This starts with a decision—to stay to the end or to leave earlier. If a manager does not have a contractual obligation to stay, he or she might leave as soon as possible and plan accordingly. Ambivalence, lack of enthusiasm, and anxiety surface and contribute to poor leadership at this critical stage. Proceeding with forthrightness and directness is usually the best choice. But if a manager chooses to stay to the end, his or her attitude should flow from this unspoken mandate, ending well. There is much work to accomplish in the closure of an organization. Here are some of the main features of management concerns and activities:

• Adopt and communicate a positive attitude about the unfolding events. • Develop robust communication processes to offset rumors and uncertainties and

to maintain the trust of workers and clients. • Attend to the needs of the clients/patients by providing:

a. Notice of closing and related information b. Continuity of care plans and referrals

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c. Detailed information about alternate points of care d. Detailed information about accessing/obtaining health records and

information about final billing and claims • Give timely notice to secondary clients (e.g., clinical affiliation agreements with

colleges and university educational programs, on-the-job training programs with community-based groups).

• Attend to the needs of the workers: a. Give clear, timely information about the phases of the closure. b. State policy and procedures for using sick leave, vacation time, or

compensation time, and any related options if available (e.g., additional pay instead of taking time off).

c. State the policy and procedure for requesting time off for job interviews. d. Develop opportunities for lateral transfer to obtain additional job

experience. e. Make sure awards and recognition deadlines are met. f. Work with human relations department to ensure workers understand their

benefits and the associated requirements (e.g., health insurance coverage). • Attend to the relationships with resource suppliers and supporter:

a. Give timely notice and accurate information about the upcoming closure. b. Renegotiate contracts to phase out the arrangement, or, in some cases, to

extend it (e.g., outsourced billing and coding, off-site storage, leased equipment).

Managers must develop plans to phase out essential activity and also prepare for the associated costs:

1. Payment of pensions, retirement funds, severance pay, escrow accounts (e.g., as in the case of continuing care facilities)

2. Continuance of health insurance, worker compensation, and unemployment insurance plans for the period mandated by law

3. Retention of, and access to, business and healthcare records 4. Renegotiation contracts for outsourced functions or leased equipment 5. Development a plan for maintaining essential functions (on site or outsourced)

such as final billing and claims processing, storage of records 6. Arrangement of coverage by hiring temporary workers to offset the increased

worker unavailability time due to increased use of vacation time, etc. 7. Participation in the final due diligence review, usually carried out by external

consultants and auditors

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One final activity flows from the need for psychological and symbolic closure. The many constituents of the organization, both internal and external, observe how well or how poorly this is accomplished. Thus, managers explicitly arrange for the retirement of organizational symbols such as logo, motto, and colors; items of historical meaning are honored and disposed of with care; and traditional fund- raising events are passed on to the new organization. The final closing event is more than a formality. It is public relations at its best. An old saying provides some guiding wisdom here: if it is done right, it is right forever.

Paradoxically, this may be a time of great opportunity for managers. Middle managers may have an opportunity to participate in activities outside their normal scope as the executive team grows thin. This may be the ideal time for middle managers to try their hand at related jobs, because failure may be ascribed to the situation rather than to inexperience or even incompetence. The same holds true for employees; managers can use this opportunity to motivate the remaining workers by giving them new opportunities to gain experience and to enhance their résumés. Valuable experience may be gained because this may also be a time of great creativity as the gestational phase begins for a new organization with its unique opportunities, challenges, and frustrations. Throughout the life cycle of the organization, strong leadership is needed. The next section contains a discussion of the manager as leader.

NOTES 1. For additional reading about the early development of the history of management, see:

a. Luther Gulick and Lyndall F. Urwick, eds., Papers of the Science of Administration (New York: Institute of Public Administration, 1929).

b. Henri Fayol, General and Industrial Administration (Geneva, Switzerland: International Management Institute, 1929).

c. Chester Bernard, The Functions of the Executive (Cambridge, MA: Harvard University Press, 1968).

d. James Mooney and A. C. Reiley, The Principles of Organizations (New York: Harper, 1939).

2. Ludwig von Bertalanffy, “General Systems Theory: A Critical Review,” General System 7 (1962): 1–20; and Kenneth F. Boulding, “General Systems Theory: The Skeleton of Science,” Management Science 2 (1956): 197–208.

3. Peter Blau and W. R. Scott, Formal Organization (San Francisco: Chandler, 1962), 42. 4. Amatai Etzioni, A Comparative Analysis of Complex Organizations (Glencoe, IL: Free

Press, 1961). 5. Daniel Katz and Robert L. Kahn, The Social Psychology of Organizations (New York:

John Wiley and Sons, 1967), 11.

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6. Max Weber, The Theory of Social and Economic Organization, trans. A. M. Henderson and Talcott Parsons; ed. Talcott Parsons (Glencoe, IL: Free Press, 1947), 324–386.

7. Bertram Gross, Organizations and Their Managing (New York: Free Press, 1968), 114– 132 passim.

8. Matthew Holden, Jr., “Imperialism in Bureaucracy,” American Political Science Review (December 1966): 943.

9. Philip Selznick, TVA and the Grass Roots (New York: Harper Torchbooks, 1966), 13, 260–261.

10. Amatai Etzioni, Modern Organizations (Englewood Cliffs, NJ: Prentice-Hall, 1964), 13–14.

11. Marver Bernstein, Regulating Business by Independent Commission (Princeton, NJ: Princeton University Press, 1955).

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CHAPTER 4 Leadership and the Manager

CHAPTER OBJECTIVES • Address the role of the manager as a principal agent of change. • Differentiate among the terms power, influence, and authority. • Recognize the importance of authority for organizational stability. • Identify the sources of power, influence, and authority. • Relate the sources of power, influence, and authority to the organizational

position of the line manager. • Recognize the limits placed on the use of power and authority in

organizational settings. • Recognize the importance of delegation of authority. • Explore the nature of leadership and the reasons why individuals seek

leadership positions. • Identify the styles of leadership, their characteristics, and the circumstances

under which they are applied.

CHANGE AND THE MANAGER The healthcare setting of today is a highly dynamic environment in which the individual manager must embrace the reality of constant change and accept and fulfill the role of change agent within the organization. It is only through addressing essential change and truly leading employees in its acceptance and implementation that the manager can be successful in the long term. Denying or resisting change does not merely mean standing still but losing ground and actually going backward relative to technology and society as they race ahead.

The department manager must be able to deal with employee resistance to change, including the most frequently encountered causes of resistance and how best

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to approach resistance to change with employees. However, this implies that the manager is already completely on board with the necessity for a particular change. It is now appropriate to acknowledge that the manager may well be fully as susceptible to resistance as the employees. Who is the manger but simply another employee? He or she can be just as affected by misgivings and uncertainty about impending change as the rank-and-file staff. A discussion of how managers may deal with change appears in Chapter 2.

Thus, the manager may have a difficult task up front in the implementation of change, especially change mandated “from on high” or forced by external circumstances, because the manager has nearly the same potential for resistance as the employees. Even the knowledge that a certain change is inevitable regardless of what it entails does not necessarily guarantee that the manager will be a willing advocate for the change.

Of course the manager, and just about everyone else for that matter, is likely to champion a change that was his or her own idea. But when ideas or directives or other requirements come from elsewhere, the manager, who may experience some feeling of resistance, must deliberately strive to overcome that feeling and become champion of the change. It is often extremely difficult for the manager who feels some personal misgivings to go forward as the driver of change.

We are told repeatedly that the manager can address change with the employees in three ways: tell them what to do, convince them of what must be done, or involve them in determining what must be done. This third approach, involving them, is all well and good—but often it cannot be used. The first approach, the tell-them-what- to-do route, is avoided if possible because it does little to temper resistance. This leaves the second approach, the need for the manager to convince the employees of what must be done. Clearly, many employees are more likely to get on board with a particular change if they know why it must be done. And an honest why is not simply telling the employees that it is “orders from administration” or blaming it on the ever-present yet never identifiable “they” as in “they are making me do it.”

The central point of this brief discussion is that if the manager is to be a true agent of change and an honest and effective catalyst for change, the first person to be accepting and supportive of change is the manager. So if you, the manager, experience doubts or misgivings about some change that lies ahead, work these out within yourself and with your superiors as necessary. Your employees should be able to see you as a true agent of change who is there to support their efforts in implementing change and helping them through it such that everyone, yourself included, achieves a new comfort zone as essential change becomes part of the norm.

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WHY FOLLOW THE MANAGER? The manager issues an order or directive, and the result is compliance. But why do employees obey? Is it even appropriate to use the term obey to describe this compliance? Which bases of authority are operative in superior–subordinate transactions? What are the limits of a manager’s authority? What if a particular supervisor is seen as a weak manager? Are there remedies available for addressing problems related to weak or ineffective management leadership? Of what value to the organization is the authority structure? What are the consequences for life within the organization if there is not general, unchallenged compliance most of the time? When actions of compliance are described, which term provides the proper point of reference—power, authority, or influence? Are these terms mutually exclusive or are they synonymous when used in the context of organizational relationships? These questions arise when discussion of authority in organizations is undertaken.

Organizational behavior is controlled behavior, behavior that is directed toward goal attainment. The authority structure is created to ensure adherence to organizational norms, to suppress spontaneous or random behavior, and to induce purposeful behavior consistent with the aims of the organization. No matter how the work within the organization is divided, no matter the extent to which specialization, departmentation, centralization, or decentralization is formalized, there must be some measure of legitimate authority if the organization is to be effective. The concept of formal authority is supported by the two related concepts of power and influence. These concepts may be separated for analytical purposes; in actual practice, however, the concepts of authority, power, and influence are intertwined.

THE CONCEPT OF POWER Power is the ability to obtain compliance by means of some form of coercion, whether blatant or subtle; one’s own will prevail even in the face of resistance. Power is force or naked strength; it is a mental hold over another. Like authority and influence, power is aimed at encouraging compliance, but it does not seek consensus or agreement as a condition of that compliance.

Power is always relational. An individual who has power over another person can narrow that person’s range of choices and obtain compliance. The power holder does not necessarily force compliance by physical acts but rather may operate in more subtle ways, such as an implied threat to apply sanctions. Latent power is frequently as effective as an overt show of power. Power attaches to people, not to official positions. The formal authority holder (i.e., the person who has the official title, organizational position, and grant of authority) may or may not have power in

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addition to this formal grant of authority. An imbalance in superior–subordinate relationships can occur when a

nonofficeholder has more power than the official officeholder. This can even be seen in family life. For example, when a 2-year-old boy shows signs of an incipient temper tantrum in the middle of the annual family gathering, the power balance clearly is in favor of the child if the tantrum pattern has developed. The child does not have to carry out the explosive behavior; the mere threat of the possibility brings about some desired behavior from the parent caught in the situation.

Workers often have some degree of power over line supervisors and managers. A worker with specific technical knowledge can withhold key information from a manager or can develop a relationship that is personally favorable. Information may not actually be withheld; the mere possibility that the manager cannot rely on an individual is enough to shift the balance, at least temporarily, in favor of the worker. Groups of workers can control a manager when it is known that the manager is responsible for meeting a deadline or filling a quota; the manager’s ability to do so is dependent on the cooperation of the workers. Normal, steady output may be produced routinely, but the ability to make that extra push needed to surpass the quota or reach a special level of output rests more with the workers than with the manager. Strikes by workers are classic examples of mobilized power, but the power shifts back in favor of management if striking workers are terminated during a strike.

When an individual can supply something that a person values and cannot obtain elsewhere in an accepted manner, or when the individual can deprive one of something valued, then there is a power relationship. This implicit or explicit power relationship may or may not be perceived by one or both parties.

THE CONCEPT OF INFLUENCE Like power, influence is the capacity to produce effects on others or obtain compliance from others, but it differs from power in the manner in which compliance is evoked. Power is coercive, but influence is accepted voluntarily. Influence is the capacity to obtain compliance without relying on formal actions, rules, or force. In relationships governed by influence, not only compliance but also consensus and agreement are sought; persuasion rather than latent or overt force is the major factor in influence. Influence supplements power, and it is sometimes difficult to distinguish latent power from influence in a given situation. Does the individual comply because of a relationship of influence or because of the latent power factor? Together, power and influence supplement formal authority.

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THE CONCEPT OF FORMAL AUTHORITY Authority may be described as legitimate power. It is the right to issue orders, to direct action, and to command or exact compliance. It is the right given to a manager to employ resources, make commitments, and exercise control. By a grant of formal authority, the manager is entitled, empowered, and authorized to act; thus, the manager incurs a responsibility to act. Authority may be expressed by direct command or instruction or, more commonly, by request or suggestion. Through the delegation of authority, coordination is established in the organization.

The authority mandate is delineated, communicated, and reinforced in several ways, including organizational charts, job descriptions, procedure manuals, and work rules. Although the exercise of authority in many situations tends to be similar to transactions of influence, authority differs from influence in that authority is clearly vested in the formal chain of command. Individuals are given specific grants of authority as a result of organizational position. Power and influence may be exercised by an individual authority holder, but they may also be exercised by individuals who do not have specific grants of authority.

Authority is both complemented and supplemented by power on the one hand and influence on the other hand. It is within the realm of formal authority to exact compliance by the threat of firing a person for failure to comply; however, this may be such a rare occurrence in an organization that such a threat is really an application of power more than an exercise of authority. However, formal aspects of authority may be so well developed that the major transactions remain at the level of influence, with the influence based largely on the holding of formal office. The infrequent use of formal authoritative directives to evoke compliance may indicate organizational health; that is, people know what to do and perform willingly.

THE IMPORTANCE OF AUTHORITY When a subordinate refuses to accept the orders of a superior, the superior has several choices, each of which carries potentially negative consequences for the attainment of organizational goals. The superior can accept the insubordination, withdraw the order, and call on others to carry out the directive. This action would probably further weaken authority, however, because the superior would most likely be perceived as lacking the subtle blend of power and authority needed to exact compliance on a predictable basis. A chain reaction of insubordination could occur. If other workers are asked to carry out a directive that had been refused by one worker, resentment could build up and produce negative consequences. If the order is withdrawn completely, of course, the work will not be accomplished.

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The manager who decides to enforce compliance may suspend or fire the insubordinate worker, but the superior still must find a worker to carry out the directive. If there is a chain reaction of insubordination, it may become impractical to suspend or fire the entire work force. In such circumstances, the situation moves from one of authority to one of power. Therefore, managers must identify and widen their bases of authority to help ensure a stable work climate.

SOURCES OF POWER, INFLUENCE, AND AUTHORITY The manager’s organizational relationships flow along the continuum of power, influence, and authority, varying in emphasis at different times and in different situations. To more fully understand the dynamics of the power–influence–authority triad, it is useful to examine the sources or bases of authority in formal organizations. The wider the base of authority, the stronger the manager’s position; with a broad base of authority, the manager can work in the realm of influence and need not rely only on the formal grant of authority that attaches to organizational position.

The sources of formal authority have been studied by several theorists in the disciplines of social psychology, management, and political science. A review of the literature suggests several sources or bases of authority: (1) acceptance or consent, (2) patterns of formal organization, (3) cultural expectations, (4) technical competence and expertise, and (5) characteristics of authority holders. The limits or weaknesses of each theory are offset by the approach taken in another.

The Consent Theory of Authority The belief that authority involves a subordinate’s acceptance of a superior’s decision is the basis for the acceptance or consent theory of formal authority. A superior has authority only insofar as the subordinate accepts it. This theory implies that members of the organization have a choice concerning compliance, even when often they do not. It remains important to recognize the concepts of acceptance and consent to identify the centers of more subtle and diffuse resistance to authority, even when there is no overt and massive insubordination.

The zone of indifference and the zone of acceptance are two similar concepts in the acceptance or consent theory of authority. Chester Barnard used the term zone of indifference to describe that area in which an individual accepts an order without conscious questioning.1 Barnard noted that the manager establishes an overall setting by means of preliminary education, prior persuasive efforts, and known

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inducements for compliance. The order then lies within the range that is more or less anticipated by the subordinate, who accepts it without conscious questioning or resistance because it is consistent with the overall organizational framework. Herbert Simon used the term zone of acceptance to reflect the same authority relationship. The zone of acceptance, according to Simon, is an area established by subordinates within which they are willing to accept the decisions made for them by their superior.2 Simon noted that this zone is modified by positive and negative sanctions in the authority relationship, as well as by such factors as community of purpose, habit, and leadership.

Coupled with the foregoing factors is the concept of the rule of anticipated reactions, which Simon included in his discussion of the zone of acceptance.3 According to this rule, subordinates seek to act in a manner that is acceptable to their superior, even when there has been no explicit command. The authority system, including anticipated review of actions, is so well developed that the superior needs only to review actions rather than issue commands. The past organizational history in which positive and negative sanctions were enforced is recalled; the expectation of the review of actions is fostered so that the subordinates’ zone of acceptance is expanded.

Another approach to the concept of authority as a relationship between organizational leaders and their followers is described by Robert Presthus, who posited a transactional view of authority in which there is reciprocity among individuals at different levels in the hierarchy.4 Compliance with authority is in some way rewarding to the individual, and the individual, therefore, plays an active role in defining and accepting authority. Everyone has formal authority, in that each person has a formal role in the organization. There is, Presthus stated, an implicit bargaining and exchange of authority, with each individual deferring to the other.

The notion of reciprocal expectations in authority relationships is further supported in Edgar Schein’s discussion of the psychological contract.5 As in Barnard’s concept of the zone of indifference and in Simon’s rule of anticipated reactions, the premise of member acceptance of organizational authority and its attendant control system is basic to the psychological contract. The workers’ acceptance of authority constitutes a realm of upward influence; in turn, the workers expect the authority holders to honor the implicit restrictions on their grant of authority. The workers expect the authority holders to refrain from ordering actions that are inconsistent with the general climate of the given organization and from taking advantage of the workers’ acceptance of authority. The workers also expect as part of this psychological contract the rewards of compliance (i.e., positive sanctions readily given and negative sanctions kept at a minimum).

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The Theory of Formal Organizational Authority In his classic study of bureaucracies, Max Weber discussed three forms of authority: charismatic, traditional, and rational–legal. Charisma, as defined by Weber, is a “certain quality of an individual personality by virtue of which he is set apart from ordinary men and treated as endowed with supernatural, superhuman, or at least specifically exceptional qualities.”6 The social, religious, and political groups that form around charismatic leaders tend to lack formal role structure. The routines of bureaucratic structure are not developed and may even be disdained by the group. Charismatic authority figures function as revolutionary forces against established systems of leadership and authority. Such authority is not bound by explicit rules but rather remains invested in the key charismatic individual. Personal devotion to the leader or what might be termed an almost irrational faith in the leader bind the members of the group to one another and to the leader.

Because charismatic authority is linked to the individual leader, the organization’s survival is similarly linked. If the organization is to endure, it must take on some of the characteristics of formal organizations, including a formalized authority pattern. In this area, two developments are possible. Charismatic leadership may evolve into a traditional system of authority, or it may develop into the rational–legal system of formal authority. In traditionalism, a pattern of succession is developed. A successor may be designated by the leader or hereditary/kinship succession may be established; then a system of transferring the leadership to the legitimately designated individual or heir must be developed. This, in turn, leads to a system of roles and formal authority. Weber uses the term routinization of charisma to describe this transformation of charismatic authority into, first, traditional authority, and then rational–legal authority.

Rational–legal authority is the authority predicated in formal organizations. It is generally assumed that formal organizations come into being and derive legitimacy from an overall social and legal system. Individuals accept authority within the formal organizational structure because the rights and duties of members of the organization are consistent with the more abstract rules that individuals in the larger society accept as legitimate and rational.

Within the formal organization, a system of roles and authority relationships is carefully constructed to enable the organization to survive and move toward its formal goal on a continuing, stable basis. Authority has its basis in the organizational position, not in any individual. Weber described in detail the major characteristics of bureaucratic structures; the following characteristics relate to the rational-legal authority structure:7

1. The principle of fixed and official jurisdictional areas means that areas are generally ordered by rules—that is, by laws or administrative regulations.

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a. The regular activities required for the purposes of the bureaucratically governed structure are distributed in a fixed way as official duties.

b. The authority to give the commands required for the discharge of these duties is distributed in a stable way and is strictly delimited in a fixed way as official duties.

c. Methodical provision is made for the regular and continuous fulfillment of these duties and for the execution of the corresponding rights; only persons who have generally regulated qualifications to serve are employed.

2. The principles of office hierarchy and of levels of graded authority mean that there is a firmly ordered system of superiority and subordination in which supervision of the lower offices is carried out by the higher ones.

The theory of formal organizational authority rests on this rational–legal system of formal office, impersonality of the officeholder, and a system of rules and regulations to constrain the grant of authority. Delegation of formal authority from top management to each successive level of management is the basis of formal organizational authority. Authority is derived from official position and is circumscribed by the limits imposed by the hierarchical order.

Cultural Expectations Both the consent theory of authority and the theory of formal organizational authority include an implicit assumption that individuals in a society are culturally induced to accept authority. Furthermore, the acceptable use of authority in organizations is defined in part by the larger societal mores as well as by union contract, corporate law, and state and federal law and regulation.

Acceptance of the status system in a society is learned as part of the general socialization process. General deference to authority is ingrained early in psychosocial development, and social roles with their sanctions are accepted and reinforced throughout life. The role of employee carries with it both formal and informal sanctions; insubordination is not generally condoned. Even as a group cheers the occasional rebel, there is attendant discomfort because something is out of order in the relationship. When the insubordination of an individual begins to threaten the economic security of the group, there is counterpressure on that individual to bring about reacceptance of authority. Fear of authority may bring about a similar response of renewed acceptance of authority and counterpressure on any dissidents.

The expected zone of acceptance or zone of indifference varies with different social roles. These variables are rarely spelled out in great detail; they are learned as much through the pervasive cultural formation process as through the formal

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orientation process in any one organization. There is a kind of “group mind” that includes the general realization that a particular behavior pattern is part of a given role, and the entire role set reinforces this general acceptance of authority.

Technical Competence and Expertise Three terms reflect the organizational authority that is derived from or based on the technical competence and expertise of the individual, regardless of which office or position the individual holds in the organization. These terms are functional authority, law of the situation, and authority of facts.

Functional authority is the limited right that line or staff members (or departments) may exercise over specified activities for which they are responsible. Functional authority is given to the line or staff member as an exception to the principle of unity of command. For purposes of this discussion on the sources of authority, it is useful to emphasize the special character of functional authority, which is given to a line or staff member primarily because that individual has specialized knowledge and technical competence. For example, the human resources manager normally assists all other department heads in matters of employee relations, although this manager has no authority to intervene directly in manager– employee relations. The situation changes when there is a legally binding collective bargaining agreement: the human resources manager, with special training in labor relations, may be given functional authority over all matters stemming from the union contract because of specialized knowledge. Another example is that of information technology support staff who, because of technical competence, are given authority to make final decisions over certain aspects of data collection. The authority is granted because of the technical competence of the staff members.

Mary Parker Follett, a pioneer in management thought, introduced the terms law of the situation and authority of facts.8 Follett described the ideal authority relationship as that stemming from the situation as a whole. Each participant in the organization who is assumed to have the necessary qualifications for the position held has authority associated with that position. Orders become depersonalized in that each participant in the process studies and accepts the factors in the situation as a whole. Follett stated that one person should not give orders to another person but rather both should agree to take their orders from the situation.9 She developed this concept further: both the employer and the employee should study the situation and should apply their specialized knowledge and technical competence through the principles of scientific management. The emphasis shifts, in Follett’s approach, from authority derived from one’s official position or office to authority derived from the situation. The individual who has the most knowledge and competence to make the decision and issue the order in a particular situation has the authority to do so. The

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staff assistant or a key employee potentially has as much authority in a particular situation as does the holder of a hierarchical office. The incident command system used in hospital disaster management is an example of law of the situation, with command passing from unit manager, clinical specialist, or safety officer as the circumstance requires.

Closely tied to the concept of law of the situation is that of authority of facts. Follett stressed that, in modern organizations, individuals exercise authority and leadership because of their expert knowledge.10 Again, leadership and authority shift from the hierarchical position to the situation. The person with the knowledge demanded by the situation tends to exercise effective authority.

Both of these concepts place emphasis on the depersonalization of orders. At the same time, the source of the authority is highly personal, in that knowledge and competence for the exercise of authority belong to an individual. Underlying the concepts of functional authority, law of the situation, and authority of facts is the theme that authority is derived from the technical competence and knowledge of individuals in the organization who do not necessarily hold formal office in the line hierarchy.

Characteristics of Authority Holders Authority rests in individuals. The talents and traits of the individual may become the source of authority, as in the case of the charismatic leader. A person holding power may use this as a base for gaining legitimate authority, or a group may invest the person of power with legitimate authority as a protective measure and seek to impose the limits and customs of authority. They may also accept the power holder as formal officeholder as a means of accepting the situation without further conflict. Technical competence and knowledge are also personal characteristics that become the basis of authority in certain situations.

Authority by Default A weak form of authority stems from situations in which the group members, either by conscious decision or by lack of attention to authority–leadership succession, do not develop strong, clear, authority patterns. A professional organization, for example, might decide to rotate authority–leadership roles through a nomination process that limits the choice of candidates from specific geographic regions. In another organization, the committee chair role might be simply rotated through all the members in turn, either because members do not wish to have any one department as dominant or simply because the task is seen as a chore. In another organization, provision for succession might be weakened because the same few

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members hold officer positions for years, so no new leadership is developed. Of course, the time invariably comes when a long-term authority holder is no

longer able to continue. A vacuum then arises, and a newer member is prevailed on to assume the office. When such occurs, authority by default is the rule. The officeholder must attend to building up the office or accept the realities of the situation, as he or she has only a limited authority mandate.

The Manager’s Use of Sources of Authority In practice, managers should recognize all the potential sources of authority and weigh the contribution of each theory to obtain as complete a picture of the authority nexus as possible. They should assess their own grants of authority and try to determine which elements tend to strengthen their authority and which tend to erode it.

The base of authority shifts from time to time. As an example, suppose an individual is offered the position of department head of a health information service because of that individual’s competence in the administration of health information systems; this specialized knowledge and technical competence is the first pillar of authority. When the individual accepts the position, the formal authority mandate of that official position is added. This authority, in turn, is shaped by the prevailing organizational climate, which includes either a wide or narrow zone of acceptance on the part of employees. The personal traits of the authority holder complete the authority base for that office.

The individual with a participative management style may emphasize those aspects of authority that widen the zone of acceptance. The setting itself may dictate the predominant authority base, as in the law of the situation; in a highly technical setting, those persons with the most technical knowledge use this knowledge as the base of authority. Although there is a tendency to downplay internal politics in organizations such as healthcare institutions, some individual managers may use power as a major source of authority. Astute managers regularly assess the several bases of authority available to them to enhance the authority relationships and thereby contribute more effectively to the achievement of organizational goals.

RESTRICTIONS ON THE USE OF AUTHORITY Several factors restrict the use of authority. Some constraints stem from internal factors, such as the limits placed on authority at each organizational level; others stem from external factors, such as laws, regulations, and ethical considerations. The following is a systematic summary of these factors:

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1. Organizational position. Each holder of authority receives a limited delegation of authority consistent with the position held in the organization. An individual has no legitimate formal authority beyond that accorded to the organizational position.

2. Legal and contractual mandates. Authority is limited by federal, state, and municipal laws and regulations relating to safety, work hours, licensure, and scope of practice; by internal corporate charter and bylaws; and by union contract.

3. Social limitations. The social codes, mores, and values of society at large include both implicit and explicit limits on the behavior of individuals. Authority holders are expected to act in a manner consistent with the predominant value system of the society. These social limitations are major factors in shaping the zone of acceptance and the general cultural deference of individuals who are members of organizations.

4. Physical limits. An authority holder can neither force a person to do something that is simply beyond that person’s physical capabilities nor escape the natural limits of the physical environment, such as climate or physical laws.

5. Technological constraints. The advances and the limitations of the state of the art must be considered in the exercise of authority; no amount of power or authority can bring about a result that is beyond the technical ability of the individuals.

6. Economic constraints. The scarcity of needed resources limits the behavior of formal authority holders.

7. Zone of acceptance of organization members. Both authority and power have their limits in that the net cost of using either must be calculated. When a weak manager is faced with a strong employee group, perhaps as encountered in a strong union setting, the cost of using even legitimate authority may be too high; the authority grant is actually diminished.

Although many employees do not have complete freedom to choose what they will or will not do, they may resist authority in subtle ways, such as adherence to job duties exactly as stated in the job description, passive resistance, and failure to take initiative in any area not specifically designated by the supervisor. The manager must move into a distinct leadership position to develop a wide zone of acceptance, as leadership becomes an essential adjunct to the exercise of authority.

IMPORTANCE OF DELEGATION Although the manager retains overall responsibility and authority for the work of the

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department or service, he or she must necessarily delegate authority to specific workers under his or her jurisdiction. Simply put, it is not possible for the manager to carry out every task. Therefore, each worker receives delegated authority from the manager to proceed on a day-to-day basis. Empowerment of the workers is essential.

Managers set up the parameters for action through several means: the development of policies and procedures, the promulgation of work rules and codes of behavior, the development of job descriptions with job duties and expectations well delineated, and the presentations of formal orientation and training programs associated with job duties. The manager consciously selects an appropriate style of leadership and communication to further enhance an atmosphere in which workers accept responsibility for their part in meeting the organizational goals.

A manager who is new to the role may experience some uneasiness with delegating. First, there is simply that natural tendency to think, “I can do this better or faster myself.” Second, a manager may harbor some fears. For instance, if the worker fails at the task, the responsibility still rests with the manager; it is the manager who will take the heat, so to speak. There is also a certain loss of satisfaction and recognition; managers are often removed from day-to-day interaction with patients and their families and their own professional peers who remain in the arena of active, hands-on practice. Recognition of these inner barriers to delegation is the first step to overcoming resistance to this necessary aspect of authority.

“Dos” and “Don’ts” of Delegation Know when to delegate. In most day-to-day circumstances, delegation of authority is the norm. Routine tasks such as employee scheduling, for example, are easily accomplished by the supervisor closest to the unit. Certain highly specialized tasks such as revenue-cycle/compliance reviews are best delegated to a member of the department team who specializes in the area. Such a person would have the most up- to-date knowledge related to the topic. Workflow coordination and routine problem solving between or among working units are best accomplished by the immediate unit supervisors who are in continual interaction. Delegation is also a part of team development; the manager builds capability and confidence in the assistant managers, unit supervisors, and specialists. Delegation is part of the intentional training and mentoring goals of the manager.

Know when not to delegate. Certain activities remain the primary responsibility of the manager and normally are not delegated, such as hiring, disciplinary action, and termination. Generally, any task that falls under the heading of personnel management cannot be delegated; no nonmanagement employee must ever be empowered to make personnel decisions that affect other nonmanagement employees. Throughout each process, there will be input from unit managers and

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supervisors, but the final action is that of the manager. Complex or volatile employee or client situations sometimes arise; these, too, are the manager’s responsibility. Overall systems and workflow, along with equipment and layout, are the manager’s concerns, although there is input from unit managers and supervisors.

Avoid common pitfalls associated with delegation. Two common pitfalls can occur inadvertently; the prudent manager takes care to avoid these. First, a manager might undermine a unit supervisor by countermanding, even informally, a decision made by the first-line supervisor. For example, a unit supervisor might deny a request for a schedule change by an employee because of workflow or staffing considerations. The employee might informally ask the manager to approve the desired schedule change. Managers who allow themselves to override a subordinate manager’s decisions undercut the authority and responsibility grant of this manager. (This is not the same thing as the normal grievance or appeal process during which an employee may meet with a higher-level manager at designated steps in the course of the seeking resolution.) Second, a manager, with the best of intentions, solicits information on a regular basis, perhaps daily, from unit managers. The casual but purposeful question, “How are things going in your unit today?” may lead to on-the- spot reports of one or another workflow or staffing problem. The concerned manager might readily respond, “I’ll look into that and get back to you,” instead of involving the subordinate supervisor in solving the problem.

Interact with workers regularly. It is necessary to set up a balanced system of availability and support. The manager remains available to unit supervisors through a mix of formal and informal interactions, such as the following:

• Formal, periodic meetings with individual supervisors for in-depth feedback about a specific activity. These meetings focus on workflow and related problem solving.

• Formal development meetings with individual supervisors or the team of supervisors. The focus is development of supervisory skills, mentoring, and career path development.

• Informal day-to-day “prn” interaction. • A combination of formal and informal daily briefing, sometimes referred to as

“the huddle.”

The final practice involves a brief daily meeting, about 15 minutes in length, held sometime between the early morning and midday. By this time, any immediate concerns will have surfaced, yet there is sufficient time remaining in the day to solve most problems that arise. The team usually remains standing while each supervisor summarizes the particular concerns in his or her functional unit, allowing each member of the team to become aware of workflow impact, employee issues, and “news of the day.” Team members are able to make immediate plans to deal with

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intradepartmental concerns without the manager’s having to mediate such coordination. An administrative assistant also attends, bringing materials for distribution on the spot, which eliminates the accumulation of materials in the inbox for each team member. The manager comments on such materials if follow-up is required. The assistant’s presence also facilitates actions that keep things moving without further instruction—for example, he or she will follow up on a purchase order or check on a question relating to a payroll matter.

The manager typically rotates the location of “the huddle” among the different units of the department unless confidential information is involved. In the latter case, the unit supervisor of that department leads a roundtable briefing. This action provides visibility of the authority–responsibility mandate entrusted to that supervisor. The employees of the unit see their unit supervisor as a member of the team. Furthermore, this experience of leading a roundtable briefing provides additional training in leadership for each team member. “The huddle” takes place daily, even when the manager is unable to attend, thereby reinforcing the role set of the supervisors as designated agents of the manager. This practice empowers the unit supervisors by enabling them to take the lead.

Effects of Good Delegation Recognition of the benefits of proper delegation and, conversely, awareness of the consequences of poor delegation further enhance a manager’s ability to delegate. Just as proper delegation increases the zone of acceptance on the part of employees, so failure to delegate demoralizes workers, thereby shrinking their field of cooperation. Morale suffers, turnover rates increase, and loss of productivity results. When workers in regular contact with clients cannot easily take immediate and effective action, client groups become alienated and unhappy and seek services elsewhere. The organization develops a reputation for being wrapped in bureaucratic red tape.

Finally, without proper delegation, a manager must remain constantly present to authorize action; this is time consuming and wasteful of managerial resources. It is also unrealistic because a manager’s duties frequently require being out of the department or office and even away from the premises. With a manager’s commitment to delegation in place, and with, the day-to-day activities flow toward accomplishing the overall mission of the organization.

LEADERSHIP Frequently, when professionals describe a leader as a powerful person who has made it to the top of his or her field, they use the expression “industry leader” or

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