Strategic Management of Health Services

Chapter 09

VALUE ADDING SUPPORT STRATEGIES

by Ahmed Farhan - 29934
 Learning Objectives

Appreciate the Understand how the

importance of aligning culture, structure, and Understand that the VASS
the VASS to ensure they strategic resources must provide guidance for the
point the organization be linked to strategies, development of
toward achieving its vision also as the value adding organizational objectives
and goals. service delivery strategies. and action plans.

1 3 5 7

2 4 6

Understand that the Link the results of Understand that through Create VASS that help
value adding support internal environmental VASS, the organization accomplish directional,
strategies (VASS) are analysis of the support itself is changed, adaptive, market entry
important elements in activities to the creating competitive and competitive
the implementation of implementation of value advantages to overcome strategies, as well as
strategy. adding support competitive value adding service
strategies. disadvantages. delivery strategies.
Strategic Thinking Map
Exhibit 8.1: The Value Chain
1 Organizational Culture
Shared Assumptions
Shared Values
Behavioral Norms
Organizational Culture
Organizational culture is defined as the “implicit, invisible, intrinsic, and informal
consciousness of the organization that guides the behavior of individuals and shapes
itself out of their behavior.

• Shared Assumptions
“Who We Are” (Mission) and “What We Are Trying
to Accomplish” (Vision and Goals) and the Belief in
the Values of the Organization.
• Shared Values
“The Way We Do Things” and may or may not
reflect the organization’s “Stated” Values – it is the
actual members’ values that create the
organization’s culture.
• Behavioral Norms
Its common among the members of a group are the
visible consequence resulting from the informal
consciousness
 Important Characteristics of Organizational Culture

ORGANIZATIONAL CULTURE IS LEARNED

It influences all aspects of what goes on in the organization

ORGANIZATIONAL CULTURE IS SHARED

Shared understandings and meanings help employees know how things are to
be done. The understood value system, even when a policy, procedure, or rule is
not available in a particular situation

CULTURE IS SUBJECTIVE AND OBJECTIVE

Shared assumptions, meanings, and values are subjective.
The objective aspect of organizational culture can be heard and witnessed

Cultures build group Cohesiveness. Cohesive cultures can discourage change, opportunities, new ideas, direction
Adaptive, Matching & Maintaining Culture

DEVELOPING CULTURES THAT ARE ADAPTIVE

The strength of an organization’s culture and its “fit” with the demands of the
external environment. It allows for reasonable risk taking, builds on trust and
a willingness to allow people to fail, and exhibits leadership at all levels.
Adaptive cultures are necessary for organizational excellence.

MATCHING CULTURE AND STRATEGY

Mission, vision, values, and strategic goals provide the linkage between
strategy and culture. Strategic mangers decide if the organizational culture can
help achieve the strategy.

MAINTAINING ORGANIZATIONAL CULTURE

Maintaining culture often requires a great deal of hard work. Maintaining
culture is particularly important because culture can be a source of short-term
or long-term competitive advantage. Culture can be a powerful weapon in
recruiting, efficiency, and innovation.
Changing Organizational Culture
Changing organizational culture can be difficult and requires a great deal of planning,
time, and energy.

When culture is viewed as a weakness (from internal environmental analysis) or the

requirements of the strategy call for a different culture, culture change strategies should
be initiated.

• Strategic managers keep people motivated and demonstrate patience and

persistence.
• Major culture change takes a long time (years not months).
• Willingness to persist in the face of obstacles and setbacks is critical.
2 Organizational Structure
Functional Structure
Divisional Structure
Matrix Structure
Organizational Structure Building Blocks
Organizational hierarchy remains the basic structure of most of the large organizations.
Hierarchies remain the best available mechanism for doing complex work.

There are three fundamental organizational hierarchical designs that form the basic
building blocks for organizations:

Functional Divisional Matrix

Structure Structure Structure
Functional Structure

Functional structure might include departments such

as clinical operations, marketing, finance,
information systems, and so on.

It builds a high degree of specialization and expertise

within the functions or processes and can foster
efficiency.

Major task of strategic management to keep

functional managers focused on the broader mission
and the organization’s vision to ensure coordination
and communication across the functions.
Functional Structure
Functional Structure

Strategic Strategic
Advantages Disadvantages

• Builds a high degree of • Foster “silo thinking” – narrow

specialization. specialization

• Foster efficiency • Slow down decision making

• Centralizes control and decision • Makes horizontal communication

making difficult

• Develops functional expertise. • Limit the development of General

Manager
Divisional Structure

As organizations grow and become more diverse,

divisional organizational structures are used to break
the organization down into more manageable and
focused parts.

This structure gives the product division managers

authority and responsibility to formulate and
implement a product / service strategy.

In addition, the structure allows functional areas to

specialize around each product / service, thus
increasing the coordination and communication and
a quick response to change.
Divisional Structure
Divisional Structure

Strategic Strategic
Advantages Disadvantages

• Forces decision making down the • Makes it difficult to maintain a

organization. consistent image / reputation

• Allows different strategies among • Add layers of management

divisions

• Foster improved local responsiveness • Duplicate services and functions

• Emphasis on geographic regions or • Requires careful development of

product / service policies and guidelines

• Improves functional coordination • Creates competition of resources

within division
Matrix Structure

A matrix structure is to organize around problems to

be solved rather than functions or products or
geography.

Appropriate when organizations have numerous

products or projects

Functional specialists may work on a number of

different projects and with a number of project
managers over time

The structure violates the “unity of command”

(people report to only one boss)
Matrix Structure
Matrix Structure

Strategic Strategic
Advantages Disadvantages

• Develops functional expertise • Causes difficulty in management

• Allows for a variety of product / • Violates the unity of command

project developments principle

• Encourage rapid product • Creates coordination and

development communication problems

• Foster creativity and innovation • Requires negotiation and shared

responsibility
Combination Structure
Most health care organizations are rarely organized using just a single structural building
block. Rather, health care organizations find it necessary to mix and often supplement the
basic design. These designs are combination structures.

• Project and Product Teams

• Cross-Functional Task Forces

• Venture Teams

• Reengineering Teams

• Executive and Standing Committees

Managerial Actions

MATCHING STRUCTURE AND STRATEGY

Managers should look into the advantages and disadvantages of each of the
structural building blocks & match them with the requirements of the strategy.

MAINTAINING THE STRUCTURE

If there is a good match between current organizational structure and the
requirements of the strategy, present basic structure should be maintained.
Structure is key implementation areas when coupled with effective culture

EVALUATE THE PRESENT STRUCTURE

Evaluate the management team to ensure that the leadership skills match their
Positions. Evaluate the present level of communication and coordination
 Strategic Resources
3 Financial
Human
Information
Technology
Strategic Resources as VASS
Effective development and use of key organizational resources are critical in carrying out
the selected strategies.

Key strategic resources includes:

Financial Human Information Technology

Financial Resources
The financial resources of the organization are evaluated during internal environmental
analysis and are an input to strategy formulation

All organizational strategies have financial implications and most likely will require an
assessment of needed capital and a method to access capital

Expansion of scope, such as Market Development, may be realized through acquisition

of a competitor
Organizations with sufficient financial resources may even act as Venture
Capitalists for new ideas
Financial Resources
In maintaining strategic resources, leaders must
• Evaluate whether current financial resources are being used efficiently.
• Seek ways to increase profitability without sacrificing other mission-critical factors.
• Determine whether asset activity can be improved.
• Assess cash-flow management.
• Consider investment opportunities for idle cash
Human Resources
It is clear that a successfully implemented strategy is connected to having committed,
high-performance employees.
Motivated employees are the key to any strategy.
Human resources requirements of the selected strategies will vary considerably
depending on whether the organization is expanding, contracting, or maintaining
scope.
In maintaining strategic resources, leaders must
• Develop training programs to maintain the current human expertise & capabilities.
• Develop a management succession plan.
• Develop a job market network.
Information Resources
Information systems (ISs) are an essential competitive resource for health care
organizations and are critical in supporting strategic decision making, administrative
operations, and patient care in an increasingly information intensive industry.

• Strategic Information System

• Administrative Information Systems
• Clinical Information Systems
Information Resources
Strategic Information System: Sometimes referred to as a decision support system,
attempts to take vast quantities of unorganized data and turn them into useful
information to enable managers to make better decisions.
Administrative Information Systems: Support areas other than direct patient care
and include financial information systems, human resources systems, payroll, billing,
purchasing, materials and facilities management, outpatient.
Clinical Information Systems: Support patient care and include computerized patient
records systems, automated medical instrumentation, patient monitoring systems,
nursing information systems, laboratory information systems, pharmacy information
systems, clinical decision support systems, and information systems that support
clinical research and education.
Developing Competitive Advantage
Important contributions of IS are to develop competitive advantage by lowering costs,
enhancing differentiation, changing competitive scope, and improving customer
service levels.
IS may be utilized to provide a competitive advantage in four general ways:

Support the Alteration

Leverage Enable Rapid and
Enable Product and of Overall
Organizational Accurate Provision of
Service Differentiation Organizational
Processes Critical Data
Characteristics
Improve strategic, Add value such as web
Faster, less expensive, Improve service quality,
administrative, and based information
more convenient communication
clinical information system
Facilities
Strategic facilities is the physical environment of the health care organization and
considered as a “Shell” in which health care is delivered.
One of the most important is the changing technology that has fostered tremendous
growth in the number and kind of alternative delivery systems requiring different
strategies for success.
Equipment
Strategic facilities is the choice of equipment and technology management. The
choice of the type and sophistication of equipment and effective technology
management is an integral part of strategic management.
The decision concerning the use of the latest technology must fit with the strategy.
Technology decisions involve technology assessment, planning, acquisition, and
management.
Maintaining Strategic Resources
• Plan for facilities and equipment maintenance.
• Replacement schedule.
• Periodically review the operating procedures, policies, and rules.
• Evaluate current security procedures, food service activities, operation and
maintenance procedures.
• Develop training programs to maintain the current human expertise and
capabilities
 Changing Strategic Resources

If there is a poor match between the present level of strategic resources and the requirements
of the strategy, the process should be to change the financial and human resources,
information systems, and strategic technologies to meet the needs of the strategy.
Strategic Thinking Map for Evaluation
Support Strategies
1. Is the organization’s culture appropriate for the overall strategy?
2. Are the organization’s values reflected in the service delivery?
3. Are the behavioral norms appropriate for the strategy?
4. Are the management processes appropriate for the strategy?
5. Does the organizational structure help facilitate the overall strategy?
6. Is there a balance between standardization and flexibility?
7. Does the organization have the financial resources to carry out the strategy?
8. Does the organization have the appropriate human resources, skills, policies, and
procedures for the strategy?
9. Is the management talent appropriate?
10. Do the information systems help facilitate the strategy?
11. Are the facilities and equipment up to date and appropriate to carry out the
overall strategy?
Conclusion

There are many ways to Decisions for The value adding support
add value in organization’s culture, strategies provide a
organizations structure, and resources powerful means to
are strategic in nature change the organization,
and should be made by create competitive
strategic thinkers advantage
 Regional Memorial’s Institutional
Case 17 Ethics Committee: WORK TO DO
Prologue
Blackwell was the CEO of this large, public health facility with 900 beds and serviced a
countywide population of over 1.2 million.

His concerns centered around several cases that plagued his medical and administrative
staffs for months.

The cases of Baby Boy-X and Annie O were not typical, and neither were the free baby
formula case and the vendor ethics case but they all raised ethical issues that were
troublesome, fairly common, and not easily managed
The Case of Baby Boy X
Baby Boy-X was born to a 37-year-old woman at 36 weeks’ gestation. The birth
was a spontaneous vaginal delivery and the patient’s medical history gave no clue
to the future difficulties associated with the birth of this child. The first indications of
fetal risk were revealed when the Apgar scores were computed. This child had scores
of 2 at one minute and 1 at five minutes.

The patient’s clinical, physical, and social histories supported the Apgar assessment.
These included:

Deformed right leg | Hydrocephalus | Nonfunctioning GI track | Irregular cessation of

breathing that required a ventilator | Chronic anemia, requiring transfusions and
nutritional supplements | Repeated seizures during the first two months | Probable
blindness | Lowered and malformed ears | Severe contraction of the limbs, including
fingers and toes | Cerebral shrinkage and degeneration caused by lack of oxygen to the
brain | Little brain activity except during seizures | Gastrostomy, colostomy, and
ileostomy tubes inserted surgically for proper nutrition and excretion.
The Case of Baby Boy X
Baby Boy-X was kept in NICU for four months. He was on a ventilator and given drugs
for his seizure disorder. His prognosis was poor and expected that the patient to die
from massive infection or following violent seizure activity. The cost at four months
was $182,265.

Staff members stated privately that costly medical resources were being wasted. This
patient would never leave the hospital alive and his life in the hospital was severely
compromised and painful. Resources expended here could be redirected to clients
whose chances for survival and normal lifestyles were markedly better.

Mothers stated that “She [the mother] does not identify her child as a person with
serious health problems. She does not understand the nature and extent of his high-risk
problems plus his levels of pain and discomfort. She feels the baby is alright and she
seems quite unrealistic about treatment outcomes. Because of car problems, she visits
only once each week and usually for about one hour. She holds the baby briefly and
combs his hair. The child’s father has yet to visit the patient. She continually insists that
everything medically possible should be done for her child.”
The Case of Annie O
The patient was a 41-year-old white female who was hospitalized 41 times over a
period of three years. The hospitalizations ranged from 4 to 21 days, and on several
occasions the patient signed herself out of the hospital against medical advice. She
was a wheelchair-bound paraplegic subsequent to a gunshot wound to the spine. Her
former husband was tried and convicted of the assault and was in prison. The patient’s
only child was placed in a foster home because the court deemed the patient “an unfit
mother.”

The patient presented to the emergency room with the following problems and history:

Fever >103°F | Insulin dependent diabetic | Chronic urinary track infection | Recurrent
depression | Allergies to most antibiotics | Recurrent vaginal infection and pelvic rash |
Intermittent alcohol and substance abuse | Multiple fractures due to osteoporosis
(hollowing of bones) | Poor nutrition and overweight (5′4″ and 197 pounds) | Deep and
pitting ulcers on both buttocks caused by poor hygiene/sanitation.
The Case of Annie O
The patient lived in an abandoned garage owned by a local farmer. There was no
electricity or running water, and the garage had a dirt floor.

There were no toilet facilities. The patient was well known to the local medical
community for her consistent non-compliance.

Over the years, many adjectives were used HCPs to describe her behavior. These
included: “rude,” “hostile,” “obstinate,” “uncooperative,” “cunning,” “mean,” and
“blatantly self-destructive.”

Although Annie had many serious medical problems, her uncooperative attitude and
risky lifestyle made her case extremely difficult to manage.

On her most recent admission, she spiked a fever of >103°F, had a urinary tract
infection, and one of her ulcers had become re-infected.

However, a new problem surfaced on this visit to the hospital, Annie O was also
pregnant
Free Baby Formula
HCPs belief that breast milk was best for infants. Evidence was overwhelming that
breast milk reduced a baby’s susceptibility to illnesses, such as ear infections and
stomach flu, and played a positive role in many other ways, such as mental and
hormonal development.

The reasons for choosing synthetic baby formula were many and varied, including
opposition to breast-feeding from family and friends, lack of good information,
unsympathetic work settings, and trends of custom and fashion.

At a joint meeting of the IECs of the three local hospitals, this issue of conflict of interest
between formula manufacturers and hospitals was raised. At the time, all three
hospitals accepted free baby formula. Discussion by IEC members at this joint meeting
resulted in four main options for dealing with the issue:

Accept no free formula at all despite its availability | Give no free formula to those who
breast-feed | Charge patients a nominal fee for the free formula, so families considered
the cost of formula when making the breast-feeding decision | Continue to issue free
formula but also distribute information about the benefits of breast-feeding.
Vendor Ethics
Hospitals were not self-sustaining, independent entities. They depended on the
goods and services provided by others

A current label among health care managers to describe this operation was
“outsourcing.”

Conflicts of interest involving vendors occurred when the self-interest of employees of

the hospital led them to carry out their duties in ways that might not be in the best
interest of the patients, health care providers, or the hospital itself.

A leading cause of conflict of interest between hospitals and vendors was the perk.
Promotional perks were marketing incentives provided by vendors to influence the
decisions of hospital purchasing agents
Vendor Ethics
The specific issue that Mr. Blackwell brought to the IEC was a rumor he heard and later
confirmed. It involved a purchasing agent employed by the hospital.

She was responsible for overseeing a fairly extensive landscaping project. The work cost
over $100,000 and took a full year to complete.

One part of the project involved the purchase and installation of 24 Japanese cherry
trees with a minimum height of 20 ft. The price for the trees was reported by the agent
to be $600 per tree

On visiting the purchasing agent’s home, Blackwell saw three 20-ft Japanese cherry
trees in the front yard. Somewhat embarrassed by the surprise visit, the agent explained
to her CEO that when the nursery learned the agent was landscaping her property they
provided the trees. “It was merely a gesture of goodwill. That’s all,” the agent explained.
Asked if she felt the free trees influenced her choice of nursery for the hospital, she
replied: “Absolutely not, I would have chosen Green Thumb Nursery even if they had not
given me the trees. I decided objectively. Mr. Blackwell, I know my job and I am always
impartial.”
The Meeting
At Mr. Blackwell’s request, the IEC of Regional Memorial Hospital was to meet to advise
him on a morally justifiable course of action on

1. Hospital’s free baby formula practice

2. Handling of the employee who received “free” trees.

3. Offer advice on what to do about Baby Boy-X and Annie O.

4. It would be a full agenda.