We have frequently discussed the turbulent conditions under which HCOs have had to operate. The profession is constantly in a period of flux and change. However, after a decade of implementing managed care coinciding with a period of mergers, acquisitions and new start-ups, the health care industry has started to re-institutionalize to some extent. One of the major ramifications of the decade of changes is reflected in the ownership of the HCO. Most of today's organizations are part of a "health care system", or they have developed affiilations with other health care organizations. It is important for today's health care student to be able to understand the structure of these organizations. HCOs today are more complex than they were 10 years ago. However, at the core of every individual organization, whether it is part of a system or not, are some of the basic tenets of organizational structure.

Mintzberg’s Concepts of the Organizational Structure

The Simple Structure of Mintzberg’s design more aptly fits a small organization.
· For HSOs, this could be a physician’s practice or a small ambulatory center.
· The middle line technostructure and support staff are typically missing.

The Machine Bureaucracy is an example of the classic organizational structure.
· This organization places emphasis on work standardization and has a large focus on marketing and financial and operational control systems.
· Major decisions are made at the strategic apex, and there is usually rigid pattern of authority.
· Span of control is narrow
· Decision making is centralized
· And the organization is departmentalized.
· Examples of this type of organization might be found in large manufacturing plants or large government agencies.

The Professional Bureaucracy is a much flatter organization.
· The operating core is primarily composed of professionals.  This core is the heart of the organization, and decisions are typically decentralized.
· The technostructure is undeveloped primarily because the operating core is comprised of professionals who neither need nor want assistance from the technocrats.

The Divisionalized Company is a group of independent units joined together by a shared administrative body.
· This organization has a well-developed middle line because division manager are responsible for their own units.  They have a lot of discretion as to how their units operate.
· This type of organization has the advantage of decentralized decision making, but these units require more coordination which can be difficult.
· Examples of Divisionalized companies can be found in large corporations such as General Motors, multi-organizational HSO systems, and many progressive state and federal agencies.

The Adhocracy, which Mintzberg describes as the most difficult of the organizational units because of its complexity and nonstandardization.

· This is a fluid structure where power is constantly shifting.
· Two types of adhocracy are described

• The operating adhocracy - work blends into a single effort - the organization doesn’t easily separate the planning and design of the work.  The organization emerges as an organic mass with ever-shifting relationships.
• The administrative adhocracy is depicted by a dashed line under the organizational mass where administrative work is shaped separated from the operating work.
• This organizational design is where one might expect to find matrix systems and project teams.

Most large HCOs whether a private proprietorship, or a non-profit corporation has a governing body.
The first role of the GB is to establish a set of objectives and create policies that enable the HCO to meet its mission within the context of its organizational philosophies.
The next step is to monitor the organization to see how well it has met the objectives.

 The Governing Board
 Major Functions
· The responsibility for organizing itself effectively, setting policies and procedures, and adopt a set of by-laws in accordance with legal requirements (the By-Laws set the parameters by which the GB operates).
· The responsibility for selecting a qualified CEO and for delegating the CEO the necessary authority to manage effectively.
· Authority for ensuring proper organization of the staff, and for monitoring the quality of care provided.
· Has the authority and responsibility to monitor and influence public policies concerning the establishment and maintenance of external relationships.
· Has the responsibility for developing a strategic plan, goals, objectives, and policies to achieve the mission.
· Entrusted with resources and the proper development, utilization, and maintenance of those resources.
· Has responsibility and authority for the protection, and enhancement of human resources.
· Is responsible for the provision of health care education and research programs....
· As mentioned, most GB members are drawn from the community and typically represent community leadership.
· Proprietary GB members are frequently investors in the HCO, physicians taken from the Professional Clinical Organization, and community leaders.
· Not for Profit HCOs have no investors on the Board, and usually exclude physicians who are on the staff from serving on the GB.  This group is usually larger than the proprietary HCO.

 The GB performs its functions through committee meetings, much as all Boards operate.  Committees may include:
· Executive Committee (Officers of the GB)
· Strategic Planning Committee
· Human Resources Planning Committee
· Finance Committee
· Quality Assurance, and several others.
 

The CEO and Executive Management

The CEO usually serves under a contractual relationship with the GB.
In private HCOs, it is not uncommon for the CEO to serve on the GB - this relates to the profit driven organization found in other large management firms.  Although this can often lead to conflict.

 It is up to the CEO to try to run the firm effectively so as to keep the GB out of the day-to-day operations of the organization.  GB’s that allow employees to go over the head of the CEO or who get into micro-management of the HCO typically have a sick HCO.

 Primary Functions of CEO and Executive Management
· Implement policy
· Develop a strategic plan
· Report to the GB through the CEO the progress being made in achieving the HCOs goals and objectives
· Advise the GB though the CEO as to potential new policies and organization direction
· Specifically monitor quality of care and implement CQI activities
· Prepare and monitor budgets
· Manage departments and activities to attain HCO objectives
· Provide liaison between the GB and the Professional Staff Organization

The GB must evaluate the CEO to make sure that the contractual obligations are being met and that the mission, goals and objectives, and financial status of the HCO is sound.

The CEOs primary job is to assure that its management team is managing its inputs effectively to make sure that the outputs being produced achieve the organizations goals and objectives.

 The CEO is the person within the organization who is responsible for working with the GB on a regular basis.  Moreover, the CEO is chiefly responsible for the external obligations of the org.

 For example, the operation of the management of a large hospital falls under the role of the Chief Operating Officer (COO).
 The COO is responsible for the day-to-day operations of the facility.

 In addition, the Chief Financial Officer (CFO) is responsible for the financial matters of the organization.
 The CFO is monitors the income and expenditures of the organization through the financial department.  This individual must communicate regularly, not only with the CEO, but also the COO to assure that the HCOs financial needs are being met.
 These individuals report directly to the CEO.

The Professional Staff Organization

The PSO is the engine that drives the HCO.  This is because without the independent contractors -primarily physicians, the HCO would have no customers.
The PSO forms the third leg of RLD’s triad.

The PSO may have its own set of by-laws, which must be approved by the GB.
The PSO is directed by the Chief Medical Officer or the Medical Director of the institution.
The PSO may be open or closed.  Open means that any licensed practitioner may be allowed clinical privileges within the organization.
Closed requires that the GB approves the clinical privileges.

Think about this for a moment.  The hospital is, in effect, the only enterprise where a professional is not required to be employed in order to practice his/her trade.  At the same time, this individual may call the shots as to how best to manage a patient.  Usually the LIP practices within the clinical guidelines established by the hospital.  And while the organization may be open or closed, the LIP is still required to follow the rules and regulations of the organization.

In essence, the roles and activities of the PSO are:

• Has various degrees of self-governance through bylaws
• Monitors quality of care
• Develops and enforces rules and regulations for clinical services
• Participates with management and the Governing Board in long-range planning
• Is generally integrated into management and Governing Board activities

The triad of the Healthcare Organizations includes the governing board, CEO and upper management, and the professional staff organization (PSO).
Because of this triad to management, the organization differs from most all other institutional organizations:
· There is diffuse accountability which can be remedied only when clear lines of accountability are established, either through organizational bylaws, policies and procedures, or through contractual relationships.
· Without clear and accountable lines of authority, the organization can become inefficient.
· There can be a perception of a lack of leadership.  HCOs require strong leadership in order to survive.  Leadership must not only come from the GB and CEO, but from other members of management as well as the Chief Clinical Officers and Managers who share the mission of the organization.
· The triad also creates dual lines of accountability, which probably cannot be eliminated.
· Think about the nursing staff’s difficulty, they are not only accountable to the organization, but to the attending physician as well (not to mention the patient).
· Finally, there can be a failure of the GB to be adequately concerned about clinical matters.  The Board can be educated, but there are times when board members, especially in the politically related HCOs, are appointed to make a statement about how the organization is run (RE Thomason, Jeff Barber, Commissioner Fonseca:  How one political body took a well-managed organization and made it a political football).

How the Hospital Triad differs from other HCOs
All HCOs typically have some licensing standards which they are required to meet in order to operate.
The Hospital must meet accreditation of the Joint Commission on Accreditation of Health Organizations and the Commission on the Accreditation of Rehabilitation Facilities (CARF).  They must also meet Medicaid and Medicare guidelines and any number of other accrediting or licensing organizations including the DEA.

The Small HCO
Smaller HCOs, also have to meet standards. Nursing Homes, Substance Abuse Treatment Facilities, Institutions for the Mentally and Physically handicapped all have some regulations that they are required to meet.

One major problem that is being slowly overcome in the health care industry, though, deals with the operation of some of the smaller, typically non-profit organizations.  They are frequently forgotten as health care institutions, and the concern for the licensing of these facilities periodically is spurred by some catastrophic event. These are things that happen when accountability disappears.  The checks and balances that manage most acute care facilities are what has kept them out of the bad press over the years.  The relationships of the Board, the Management, and the Professional Staff keep order in these institutions.

Smaller HCOs don’t have these checks and balances.  Problems with governing bodies for smaller organizations can take 1 of 2 paths. Either the GB is not active in oversight of the facility or they become too active in their role, micro-managing the organization and creating circuituos paths of responsibilty.  Another difference in smaller organizations is that the medical staff, including physicians in many facilities are employees of the agency.  If they aren’t direct employees, they are contractual employees and provide care to individuals not selected by them. While the majority of these facilities operate professionally and under the same types of guidelines of hospital HCOs, there is the ability of the smaller HCO to be guided authoritatively by the director.

 Take the comparison of the Nursing Facility (NF).
 Compared to the hospital organization the NF is a flatter organization
 Sole proprietorship facilities don’t usually have a GB, at least not at the facility level
 A nursing facility is not likely to have a professional staff organization
 There are fewer departments
 There are fewer specialized staff.

 In conclusion, it is clear that there are different organizational designs and operating procedures between HCOs.  Hospitals are more bureaucratic and more formal in their structure.  Smaller HCOs are less bureaucratic, and do not appear to have the controls in place that the larger facilities have.

Smaller HCOs are also less likely to have administrators with the educational skills that large HCOs have.  The GB is not as involved in their responsibilities as the hospitals.

 The Roles and Activities of the PSO

· Has various degrees of self-governance through bylaws
· Monitors quality of care
· Develops and enforces rules and regulations for clinical services
· Participates with management and the Governing Board in long-range planning
· Is generally integrated into management and Governing Board activities

Differences in Organizational Structure Example: Nursing Facility - Hospital Comparisons (EXAMPLE)
 

Nursing Facility HCO Flat Organization Sole proprietorships/ partnerships not likely to have a governing board  Unlikely to have a Professional Staff Organization (PSO) Few Departments Few Specialized Staff

Hospital HcO Tall Organization Overwhelmingly organized as a corporation with a governing board Always has a PSO Many departments Many specialized staff of a wide variety  of types