Click for next page ( 228


The National Academies | 500 Fifth St. N.W. | Washington, D.C. 20001
Copyright © National Academy of Sciences. All rights reserved.
Terms of Use and Privacy Statement



Below are the first 10 and last 10 pages of uncorrected machine-read text (when available) of this chapter, followed by the top 30 algorithmically extracted key phrases from the chapter as a whole.
Intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text on the opening pages of each chapter. Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.

Do not use for reproduction, copying, pasting, or reading; exclusively for search engines.

OCR for page 227
Appendix D Collaboration Among Health Care Organizations: A Review of Outcomes and Best Practices for Effective Performance1,2 ABSTRACT Despite the prevalence of collaborative ventures among health care organizations, including mergers, alliances, and joint ventures, the majority of these ventures fail to significantly improve the overall performance of the organizations involved. There is a great deal of variation in the outcomes of collaborative ventures, but results from several studies indicate that key practices, including effective leadership before, during, and after these ventures are implemented, may promote their effectiveness. This paper identifies these best practices for policy makers and managers concerned with improving the outcomes of collaboration among health care organi- zations. To this end, I (1) review evidence on the context and outcomes of collaboration among health care provider organizations and (2) examine results concerning the processes of change and implementation practices involved in efforts to collaborate (to what extent, and how, these factors affect the outcomes of collaboration). I conclude by presenting a checklist of best practices for improving the outcomes of collaboration and discuss leadership approaches for putting these practices into effect. 1  Prepared by Thomas D’Aunno, Ph.D., Columbia University, Department of Health Policy and Management, Mailman School of Public Health, with the assistance of Yi-Ting Chiang, M.P.H., and Mattia Gilmartin, Ph.D. 2  The authors are responsible for the content of this article, which does not necessarily represent the views of the Institute of Medicine. 227

OCR for page 227
228 LOVELL FEDERAL HEALTH CARE CENTER MERGER INTRODUCTION Hospitals and other health care organizations across the United States are engaging in collaborative ventures—including alliances, joint ventures, and mergers and acquisitions—at an increasing rate. Modern Healthcare’s (2012) annual mergers-and-acquisitions reports show, for example, a 3.5 and 3.4 percent increase in the number of mergers-and-acquisitions deals in 2010 and 2011, respectively, and a 73 percent increase in the number of hospitals involved in these deals from 2009 to 2010, the greatest increase in the past decade. Health care providers may be increasing their efforts to collaborate in response to the new risks and opportunities they face, stemming primarily from the Patient Protection and Affordable Care Act (ACA) and the service delivery models it promotes, as well as related pay- for-performance reforms that aim to improve quality of care. Unfortunately, the majority of collaborative ventures among health care organizations fail to significantly improve the overall performance of participants; there is a great deal of variation in outcomes (Bazzoli et al., 2004; Cartwright and Schoenberg, 2006; King et al., 2004). However, sev- eral study results indicate that key practices, including effective leadership before, during, and after these ventures are implemented, may promote their effectiveness (Hansen, 2009; Marks et al., 2001). The purpose of this paper is to identify these best practices for policy makers and managers concerned with improving the outcomes of collabora- tion among health care organizations. I organize the paper as follows. First, I briefly define and distinguish major forms of collaboration, focusing on relationships among hospitals and physicians as the key organized provid- ers of health care; this section also presents the conceptual framework that guided my work. Second, I review evidence on the context and outcomes of collaboration among health care provider organizations. Next, I examine results concerning the processes of change and implementation practices involved in efforts to collaborate—To what extent, and how, do these fac- tors affect the outcomes of collaboration? I present a checklist of best prac- tices for improving the outcomes of collaboration and discuss leadership approaches that can help put these practices into effect. I conclude with a discussion of observations about best practices for effective collaboration (Hansen, 2009). COLLABORATION AMONG HEALTH CARE ORGANIZATIONS: DEFINITIONS AND DISTINCTIONS This paper examines key forms of collaboration among health care providers who aim to coproduce services. I focus primarily on three ma- jor forms of collaboration among health care organizations: mergers and

OCR for page 227
APPENDIX D 229 acquisitions, alliances, and joint ventures. Further, following Bazzoli et al. (2004), I focus on these forms of collaboration among hospitals and physi- cian groups—the two most important organized providers of health care services. A merger is the consolidation of two or more firms, including the pooling of their assets, into a single legal entity. The terms merger and acquisition often are used interchangeably, but there is a technical differ- ence between them: mergers are consolidations of equal partners, while in acquisitions one organization buys the assets of another. In contrast to mergers are alliances, which are voluntary, formal ar- rangements among two or more organizations for the purposes of ongoing cooperation and mutual sharing of gains and risks (Zajac et al., 2010). Alliances are similar to mergers in that often they are formed for strategic purposes; that is, they aim to promote an organization’s mission and en- hance organizational performance. Yet, members of alliances retain their legal independence; indeed, some alliance agreements are more informal than formal, and may involve little commitment of partners’ resources. A joint venture is a formal agreement in which parties unite to develop, for a finite time, a new legal entity by contributing funds or resources of some kind (e.g., labor). The partners exercise control over the new organi- zation and consequently share revenues, expenses, and assets. Because the cost of starting new projects is generally high, a joint venture allows both parties to share the burden of the project, as well as any resulting profits. In sum, I focus on mergers, alliances, and joint ventures because they represent a continuum of approaches to collaboration among health care organizations, ranging from those that change the legal status of organiza- tions (e.g., mergers and acquisitions) to those that involve the pooling of only limited resources among partners (e.g., joint ventures) to those that are less formal and involve commitments of fewer resources than either mergers or joint ventures (e.g., alliances) (Zajac et al., 2010). Figure D-1 shows the conceptual framework that guides this review and discussion. Content of Collaboration: Context: Mergers, Processes of Organizational, Alliances, and Change, Outcomes of Local, and Joint Ventures Implementation Collaboration National Among Hospitals Practices and Physician Groups FIGURE D-1  Conceptual framework of collaboration among health care organizations. Figure D-1, BW

OCR for page 227
230 LOVELL FEDERAL HEALTH CARE CENTER MERGER Here, based on prior research on organizational change (Pettigrew et al., 2001; Weick and Quinn, 1999), I aim to examine factors internal to health care organizations, as well as their local and national contexts, that can promote or hinder interest in collaboration and, importantly, affect the processes and outcomes of collaboration. In response to these internal and contextual factors, organizations may seek to collaborate with other health care providers. If so, they may select among major alternative forms of col- laboration (i.e., mergers, alliances, and joint ventures), which, following Bazzoli et al. (2004), I term the content of collaboration. Next, processes of organizational change and implementation unfold as organizations aim to achieve their desired ends. Finally, these change processes result in a variety of outcomes. Table D-1 elaborates the framework in Figure D-1 by indicating key variables in each stage of the model. As Table D-1 shows, I define the out- comes of interest broadly to include measures of quality, cost, and access to care; financial performance; productivity; and patient and stakeholder satisfaction. To achieve the objectives for this paper, I reviewed relevant empirical studies in both the health care and non-health care sectors. I focused heavily on studies published in top-tier journals in the past decade, in part because useful reviews of prior work were available. Though I focused primarily on studies in the health care sector, researchers have studied collaborative strat- egy in non-health care industries for decades, and I also draw on this work. COLLABORATION AMONG HOSPITALS Collaboration among hospitals, through either mergers or alliances, has been relatively substantial for many years. The Premier hospital alliance, for example, spans the nation and now includes 2,300 hospitals; Premier makes $33 billion worth of purchases per year (Zajac et al., 2010). Current interest in hospital mergers was preceded by a large national wave of merg- ers that occurred between 1990 and 2003, resulting in an average reduction of competitors in metropolitan areas from 6 to 4 (Vogt and Town, 2006). By the mid-2000s, at least 88 percent of metropolitan residents lived in highly concentrated hospital markets, with even greater concentration in more rural areas. Prior work indicates that hospitals have pursued mergers and alliances primarily to maintain or improve their financial performance (Bazzoli et al., 2004). Results from studies in the 1980s (e.g., Alexander and Morrisey, 1988) show that hospitals with weak financial performance were more likely to merge or join multihospital arrangements. In contrast, studies of hospital mergers and alliances in the 1990s suggest that these efforts were

OCR for page 227
APPENDIX D 231 TABLE D-1  Key Variables in Collaboration Among Health Care Organizations Change Organizational, Processes and Local, and Implementation Intermediate National Contexts Practices Outcomes Long-Term Impact • Number and • Early planning • Staff • Operating location of to manage both satisfaction efficiencies, facilities technical and • Meeting productivity • Size and people-focused quality-of-care • Overall financial number of tasks benchmark performance people served • Careful measures • Patient functional • Local health attention • Patient health status; care market— to roles of satisfaction patient satisfaction public and leadership, • Progress toward • Increased market private sectors culture partners’ stated share in local area • Community • Use of goals and • Employee and support and comprehensive, objectives other stakeholder needs evidence-based • Changes in satisfaction checklist for service mix • Progress on implementation and operations: partners’ stated • Effective combining goals and communications departments objectives for the strategy— and services; collaboration educating and transferring orienting staff; personnel mobilizing • Developing support shared • Adequate information resources for technology/ transition electronic management health records team more a response to external market pressure than to internal weaknesses; that is, strong hospitals anticipated that managed care would have nega- tive effects on their financial performance, and sought mergers to protect themselves (Bazzoli et al., 2003, 2004). The potential financial benefits from hospital mergers may stem from (1) price increases facilitated by increased market power; (2) cost reduction through economies of scope, scale, and monopsony power; and (3) favor- able adjustments in service and product mix (Krishnan et al., 2004). To date, Bazzoli et al. (2004) and Vogt and Town (2006) have provided the most comprehensive analyses of research that addresses these issues; their

OCR for page 227
232 LOVELL FEDERAL HEALTH CARE CENTER MERGER TABLE D-2  Summary of Empirical Studies of the Effects of Hospital Mergers, Systems, and Alliances on Hospital Financial Performance and Quality of Care Form of Collaboration Multihospital Outcome Mergers Systems Alliances Hospital prices Mergers in Some evidence Some evidence for metropolitan for higher prices higher prices areas raised (Dranove et al., hospital prices by 1996; Young et al., at least 5 percent 2000) and probably significantly more; studies of mergers among geographically- proximate hospitals show price increases of 40 percent or more Cost savings Mixed results, Little or no cost Little or no cost but balance of savings (Dranove savings evidence indicates and Lindrooth, that mergers result 2003) in cost savings for participating hospitals Revenue, profit Mergers are Higher revenues Some evidence for consistently and profits higher revenues per associated with patient discharge higher revenue and (Clement et al., 1997) profits Quality of care Results are mixed, No quality No quality but evidence from improvement, with improvement, with the best studies some evidence of some evidence of indicates that decreased quality decreased quality (Ho mergers likely (Ho and Hamilton, and Hamilton, 2000) decrease quality 2000) of care (Hayford, 2011) reviews cover dozens of empirical studies. Table D-2 provides a summary of their analyses. In addition to examining the effects of hospital mergers and alliances, Bazzoli et al. (2004) reviewed studies of the effects of mem- bership in multihospital systems; Table D-2 presents these results as a point of comparison.

OCR for page 227
APPENDIX D 233 Conclusions About Collaboration Among Hospitals I draw several important conclusions from empirical studies of collabo- ration among hospitals. First, there is sound evidence that hospital mergers are linked to better financial performance for the participating hospitals: they have higher prices, revenues, and profits. Second, hospital mergers lead to some cost savings, which, combined with charging higher prices, probably accounts for higher profits. Yet, the evidence on cost savings from mergers may be changing. Harrison (2011) recently reported results from a careful study of two hospital mergers that showed significant cost savings through economy of scale in the first year following a merger, but these cost savings decreased by the third year post- merger, and were no longer significant. Third, in contrast to the results for mergers, there are fewer improve- ments in the financial performance of hospitals that join multihospital sys- tems. Results from well-executed studies by Dranove and colleagues (1996; Dranove and Lindrooth, 2003) show increased prices and higher revenues for members of multihospital systems, but no cost savings. Fourth, alliances do not seem to boost the financial performance of their member hospitals as much as mergers or multihospital systems. Fifth, results show few quality-of-care benefits from collaboration among hospitals, and indeed there is some evidence for decreased quality of care following mergers. Some studies show no statistically significant postmerger changes in quality of care (Capps, 2005; Cuellar and Gertler, 2005), while others show a negative association. Hayford (2011), for ex- ample, analyzed 40 mergers among California hospitals from 1990 to 2006 and found that these mergers were associated with higher inpatient mortal- ity rates among heart disease patients. Similarly, Ho and Hamilton (2000) found some evidence for decreased quality of care for heart disease patients in a study that compares hospitals’ premerger to postmerger performance using measures of inpatient mortality for heart attack and stroke patients and 90-day readmission rates for heart attack patients. Discrepancies in results may be due to the difficulty in isolating the effect of mergers per se on quality of care (Gaynor, 2006). Finally, there is some evidence that the organizational structure of hos- pital systems and alliances can account for variation in their financial per- formance (Bazzoli et al., 2004). In a national study, Bazzoli and colleagues (1999, 2000) found some systems and alliances that exercised centralized control over a variety of decisions and others in which control was decen- tralized. Further, Bazzoli et al. (1999, 2000) showed that members of mul- tihospital systems generally had better financial performance than hospitals in alliances. Hospitals that belonged to highly centralized alliances had better financial performance than those belonging to more decentralized

OCR for page 227
234 LOVELL FEDERAL HEALTH CARE CENTER MERGER alliances. However, hospitals in moderately centralized systems performed better than those in highly centralized systems. Finally, hospitals in systems and alliances with little centralization experienced the poorest financial performance (Bazzoli et al., 2000). In short, these results suggest that more centralized decision making in hospital systems and alliances leads to better financial performance for their members. This result may provide at least a partial explanation for the observation that “mergers among equals” seem difficult to implement (Kastor, 2001). That is, in mergers among hospitals that view themselves as equals, it may be more difficult to establish a centralized decision-making body because each party seeks to maintain its control over key decisions. Well-known examples include the failed “mergers of equals” between major teaching hospitals, in particular the Stanford University and the University of California, San Francisco, hospitals, and the Mount Sinai and the New York University hospitals (Kastor, 2001). More work is needed, however, to understand the effects of organizational characteristics, including the structure of decision making, on the financial performance of hospital sys- tems and alliances (see Bazzoli et al., 2006; Luke, 2006; Trinh et al., 2010). COLLABORATION AMONG PHYSICIAN GROUPS Collaboration among physicians has occurred primarily through three types of organizations: group practices, independent practice associations (IPAs), and physician practice management companies (PPMCs) (Bazzoli et al., 2004). The number of IPAs and PPMCs has fluctuated, but the trend toward physicians working in groups has remained steady, resulting in an increased number of group practices (Boukus et al., 2009). Studies of the relative benefits of collaboration among physician groups show results similar to those for hospitals. Identified benefits include oppor- tunities for efficiencies in clinical care and management and greater power in negotiating contracts with insurers (Burns, 1997). Studies also show some unique benefits for physician groups: compared with the alternative of small, independent practices, mergers and alliances among physicians can increase their access to capital and management expertise (Robinson, 1998). Most studies of collaboration among physicians have examined group practices that formed or grew through mergers or acquisitions. Summariz- ing results from several studies that examined the effects of collaboration among physicians, Bazzoli et al. (2004) draw three conclusions. First, there are limited cost savings; this result is similar to that reported for hospitals in multihospital systems and alliances (see Table D-2). Second, there can be important effects on physician use of resources, but these effects vary greatly and depend on the mechanisms used to monitor physician practice.

OCR for page 227
APPENDIX D 235 In a study of 94 physician organizations in California, for example, Kerr et al. (1995, 1996) reported the extensive use of quality assurance activi- ties and a variety of utilization management techniques to control resource use. Yet, on balance, results from studies of physician resource use in group practices are mixed. For example, in contrast to Kerr and colleagues, Kralewski and colleagues (1996, 1998, 1999, 2000) found relatively few controls on physician resource use in the Minnesota group practices they studied. Finally, results are mixed for patient satisfaction in group medical practices. COLLABORATION AMONG PHYSICIAN GROUPS AND HOSPITALS Research suggests that physician groups and hospitals seek to col- laborate for many reasons, only some of which overlap (Burns and Muller, 2008). Hospitals pursue closer relationships with physicians to • capture outpatient markets; • increase revenues and margins; • improve care processes and outcomes; • increase the loyalty of their physicians; • bolster physicians’ practices and incomes; and • address weaknesses in existing hospital medical staff. Physicians likewise enter these relationships to increase practice incomes and improve the quality of service to patients, but, otherwise, their goals diverge from those of hospitals. Physicians want to increase their access to capital and technology and increase their control in care delivery. Although physician-hospital collaboration takes many forms, the two most prominent are physician-hospital organizations (PHOs) and integrated salary models (ISMs) (Burns and Muller, 2008). PHOs are joint ventures designed to develop new services (e.g., ambulatory care clinics) or, more commonly, to attract managed care contracts. ISMs are arrangements in which a hospital acquires a physician’s practice, establishes an employment contract with the physician for a defined period, and negotiates a guaran- teed base salary with a variable component based on office productivity, with some expectation that the physician will refer or admit patients to the hospital. Within PHOs and ISMs, there are diverse relationships among physi- cians and hospitals that fall into three broad categories: noneconomic inte- gration, economic integration, and clinical integration (Burns and Muller, 2008). Noneconomic integration includes hospital marketing of physicians’ practices, physician use of medical office buildings, physician liaison pro- grams, physician leadership development, and hospital support for physi-

OCR for page 227
236 LOVELL FEDERAL HEALTH CARE CENTER MERGER cian technology requests. Economic integration includes the PHO and ISM models above, as well as physician recruitment, part-time compensation, leases and participating bond transactions, service-line development, and equity joint ventures. Clinical integration encompasses practice profiling, performance feedback, medical/demand/disease management programs, continuous quality-improvement programs, and linkages via clinical infor- mation systems. If success were gauged by interest among hospitals and physicians, these collaborations are doing quite well. Other evidence, however, is mixed. On one hand, there is a wealth of evidence that suggests that physi- cians are satisfied with these relationships to the extent that they receive valued services (e.g., management of their practices) and are shielded from financial risk (Bazzoli et al., 2004). On the other hand, evidence is incon- clusive that hospitals value these relationships. In particular, a review of the empirical literature suggests that collaboration based on economic integration yields few consistent effects on cost, quality, or clinical integra- tion. Alliances based on noneconomic integration are widespread, but have not been subjected to rigorous academic study. Finally, alliances based on clinical integration have had positive, but weaker-than-expected, impacts on quality of care (Burns and Muller, 2008). There may be several reasons for the varied and relatively weak per- formance of hospital-physician ventures. One reason is the structural form used to implement them. These ventures are typically organized, financed, and controlled by the hospital, with little physician participation. Not sur- prisingly, physicians balk at partnerships in which they have little power. A second, related explanation is the lack of infrastructure in many alliances. Hospitals often develop alliances as external contracting vehicles to ap- proach the managed care market but fail to develop the internal mecha- nisms that will help the alliance partners to manage risk (Kale and Singh, 2009). Such mechanisms include physician compensation and productivity systems, quality monitoring and measurement, and physician selection (Burns and Thorpe, 1997). Finally, alliances often focus on taking advan- tage of fee-for-service reimbursement systems and seek to increase numbers of patients and procedures rather than deliver more appropriate care. These findings suggest that careful attention to infrastructure is critical for the success of physician-hospital alliances (Zajac et al., 1991). In the absence of the mechanisms discussed above, one would expect alliances to yield little impact on quality and cost of care. In fact, two recent studies have addressed this issue directly. Cuellar and Gertler (2005) and Madison (2004) report that PHO alliances do not lower the cost of care. Indeed, they may lead to higher prices due to the combined bargaining power of the parties.

OCR for page 227
APPENDIX D 237 TABLE D-3 Summary of Empirical Studies of Outcomes of Collaboration Among Health Care Organizations Hospital Physician Group Hospital-Physician Outcomes Collaboration Collaboration Collaboration Financial Higher prices; Limited cost Few consistent effects Performance increased savings revenues and profit; little or no cost savings Quality of Care Few effects or No evidence Positive effects, but decreased in weaker than expected; quality inconsistent effects for clinical integration per se Other Outcomes The financial Mixed results Physician satisfaction performance of for patient increases with support two-hospital satisfaction; services; inconclusive mergers is better decreases in evidence for hospital than that of physician resource satisfaction with systems, which, use depend hospital–physician in turn, have on control collaboration better financial mechanisms performance than alliances SUMMARY Table D-3 summarizes the major results from studies of the outcomes associated with the three major forms of collaboration I examined. As in- dicated, the strongest outcome seems to be that the financial performance of hospitals benefits from collaboration with other hospitals. Results for other outcomes are mixed and, importantly, there is substantial variation in the performance of collaborative ventures. MAKING COLLABORATION WORK: IMPLEMENTATION AND ORGANIZATIONAL CHANGE Researchers and practitioners have proposed several explanations to account for the substantial variation observed in the performance of col- laborative ventures in health care and non-health care fields. The explana- tions themselves vary considerably and include, for example, a focus on improving

OCR for page 227
248 LOVELL FEDERAL HEALTH CARE CENTER MERGER TABLE D-4  Application of Best Practices to Collaboration Among Health Care Organizations: Technical and People-Focused Leadership Tasks Technical Leadership Tasks Best Practices Plans and protocols for change Blueprints are needed to manage complexity and are needed (see Box 5-2 in promote due diligence and effective decision making Chapter 5) by leaders of change (e.g., conducting thorough premerger assessment of potential partners) Technical capacity building Investment (time, money) is needed to build capacity for improved performance Structures and systems to support Structures (especially incentives) and systems change (especially information systems) are needed to promote change and to improve organizational performance People-Focused Leadership Tasks External pressure In most cases, external pressure/support for change increases both its speed and likelihood of success Buy-in from all levels; critical role Support from top managers and leaders is essential, of central authority and shared but buy-in is also needed from lower-level staff; a vision centralized group with authority for implementation of changes is critical, especially to develop a shared vision and goals for change Communication Communication is needed at all levels: What is the vision; why change is needed; what progress has been achieved Role of physician leaders Involvement of physician leaders, both formal and informal, in key decisions is critical to success Managing tensions, trade-offs Involving physicians versus respecting their time inherent in change for patient care; time needed to build trust versus frustration with slow progress; building stakeholder buy-in versus building technical capacity (especially when buy-in and trust are enhanced by demonstrated technical capacity and improved performance) Core versus peripheral Change in peripheral features of organizations, organizational features including management and support services, is easier to achieve than change in either core clinical services or organizational culture

OCR for page 227
APPENDIX D 249 values and vision with which the partner organizations learn to identify (Bazzoli et al., 2004). Further, support from top managers is critical, but should be complemented by buy-in from lower levels. This requires a great deal of communication within and across levels of hierarchy. Finally, at least one study identified strong and continuous external pressure on the partner organizations as a key to promoting the integration of clinical services. Lessons from Collaboration Among Physician Groups Coddington et al. (1998) provide a useful case study of the early stages of change that focus on bringing physician partners together. The key phases are (1) establishing trust, (2) assessing the fit between the relative strengths of the organizations, (3) assessing the ability to deliver a high- quality product, (4) developing a business strategy, and (5) considering effects on competitive position. Similarly, Robinson (1998) emphasized the importance of fit and relative strengths of partners in bringing them together. In general, results from studies of collaboration among physician groups emphasize the importance of managing trade-offs and tensions involved in organizational change, for example, • involving physicians versus respecting their time for patient care; • slowly building trust versus frustration with slow progress; and • building stakeholder buy-in versus building technical capacity (es- pecially when buy-in and trust are enhanced by demonstrated technical capacity and improved performance). Lessons from Hospital-Physician Collaboration Given the importance of hospital-physician collaboration and the obvi- ous potential for complications, a relatively large number of process studies have focused on these relationships. A major observation is the importance of developing a climate for change within the partner organizations. In turn, the role of physician leadership is universally noted as critical in developing a supportive climate for change; physician involvement is needed in both gov- ernance and management decisions. Results also highlight the importance of putting in place structures (such as incentives) and systems (especially information systems) to support changes in organizational processes and culture. As noted above, investment in management, clinical technologies, and core competencies matters, as do shared vision and values. The work of Devers and colleagues (1994) stands out for its develop- ment of a three-part framework for assessing the extent to which con- solidations achieve (1) functional integration (business and management

OCR for page 227
250 LOVELL FEDERAL HEALTH CARE CENTER MERGER activities, noted above), (2) physician-system integration (alignment of incentives and physician involvement in decision making), and (3) clinical integration (e.g., common protocols). They find much functional integra- tion but little integration in the other areas—a result similar to that for collaboration among hospitals. The results are discouraging, but it appears that external context can promote change—pressure from capitation and regulation, in particular, are related to more effective integration. CONCLUDING OBSERVATIONS I have several concluding observations about the outcomes associated with collaboration among health care organizations and best practices for improving these outcomes. First, there is considerable variation in the outcomes of collaborative ventures, regardless of the criteria one uses to assess their performance. Many, if not most, of these ventures fail to meet expectations in either the health care or the non–health care fields. An exception to this result is hospital mergers, which seem to improve mem- bers’ financial performance, though not necessarily to societal advantage; available evidence indicates that improved performance comes mainly from increased market power rather than efficiency from gains. Second, the financial performance of hospital mergers appears to be stronger than results obtained from other forms of collaboration. Mergers typically involve more centralization of authority compared with other col- laborative ventures, such as alliances, and this may be an important factor in their relative success. Third, mergers are more costly than alternatives for the organizations (and communities) involved, at least in terms of initial time and money needed to launch and implement them. Yet, one could argue that the risk in- volved in mergers seems to pay off for the hospitals themselves, though not uniformly, given the variation that researchers observe in their performance. Fourth, given substantial variation in their performance and relatively weak overall outcomes for many collaborative ventures, researchers and practitioners have begun to identify best practices for leading the processes involved in their implementation. Though results to date are useful, there is much more work to be done; for example, though I presented a relatively thorough checklist of best practices for implementing collaborative ventures (see Box D-1), few studies have examined the use of many of these practices in combination. Fifth, the best available evidence indicates that it is useful to conceive of these practices from the perspective of three phases or stages: (1) precol- laboration activities, (2) transition work, and (3) follow-up efforts. Further, these practices focus primarily on either technical tasks (e.g., due diligence with respect to antitrust issues, development of strategic plans, and devel-

OCR for page 227
APPENDIX D 251 opment of systems and incentives for change and improved performance) or people-oriented tasks (e.g., communicating effectively, involving key stakeholders, overcoming resistance to change) (see Box D-1). Prior stud- ies indicate that leaders need skills for both technical and people-oriented tasks and, importantly, that failure to address both sets of tasks hinders implementation and performance (Battilana et al., 2010). Sixth, in general, the literature on collaboration and change among health care organizations has not given as much attention to the role of leadership as it should. To be sure, the importance of involving physicians in leadership roles is typically noted, but more fine-grained analyses are lacking (Gilmartin and D’Aunno, 2007). I argue that effective leaders will communicate the need for change, mobilize others to accept changes, and evaluate implementation to make needed adjustments and promote optimal outcomes. Further, though leaders need skills in both technical and people- oriented tasks to be effective, many individuals lack this combination of skills, requiring the need for training or team approaches to leading change. Finally, relatively fragmented and narrow disciplinary approaches have hindered both research and practice in this area. For example, the vast ma- jority of studies of hospital mergers focus on financial performance (Vogt and Town, 2006), with little attention given to other key outcomes, such as access to care, and, similarly, with little attention to leadership using the concepts and principles discussed above. Promoting more effective col- laboration in health care will require a broader, interdisciplinary approach. Indeed, it is likely that current collaborative ventures among health care organizations may face greater challenges than in the past due to the in- creased complexity of the organizations themselves, including, for example, the difficulty of integrating their information technologies. The current state of practice does not augur well for implementation of the ACA in general or accountable care organizations in particular—a type of organization that depends heavily on collaboration across organizational boundaries. REFERENCES Alexander, J. A., and M. A. Morrisey. 1988. Hospital-physician integration and hospital costs. Inquiry 25(3):388–401. Anand, B. N., and T. Khanna. 2000. Do firms learn to create value? The case of alliances. Strategic Management Journal 21(3):295–315. Argyres, N. S., and K. J. Mayer. 2007. Contract design as a firm capability: An integra- tion of learning and transaction cost perspectives. Academy of Management Review 32(4):1060–1077. Armenakis, A. A., and A. G. Bedeian. 1999. Organizational change: A review of theory and research in the 1990s. Journal of Management 25(3):293–315. Armenakis, A., S. Harris, and H. Field. 1999. Paradigms in organizational change: Change agent and change target perspectives. In Handbook of organizational behavior, edited by R. Golembiewski. New York: Marcel Dekker. Pp. 631–658.

OCR for page 227
252 LOVELL FEDERAL HEALTH CARE CENTER MERGER Bacharach, S., P. Bamberger, and W. Sonnenstuhl. 1996. The organizational transformation process: The micropolitics of dissonance reduction and the alignment of logics of action. Administrative Science Quarterly 41(3):477–506. Bass, B. M. 1985. Leadership and performance beyond expectations. New York: Free Press. Bass, B. M. 1990. Bass and Stogdill’s handbook of leadership. New York: Free Press. Bass, B. M. 1999. Two decades of research and development in transformational leadership. European Journal of Work and Organizational Psychology 8(1):9–32. Battilana, J., M. J. Gilmartin, M. Sengul, A.-C. Pache, and J. Alexander. 2010. Leadership competencies for planned organizational change. Leadership Quarterly 21(3):422–438. Bazzoli, G. J., S. M. Shortell, N. Dubbs, C. Chan, and P. Kralovec. 1999. A taxonomy of health networks and systems: Bringing order out of chaos. Health Services Research 33(6):1683–1717. Bazzoli, G. J., C. Chan, S. M. Shortell, and T. D’Aunno. 2000. The financial performance of hospitals belonging to health networks and systems. Inquiry 37(3):234–252. Bazzoli, G. J., L. M. Manheim, and T. M. Waters. 2003. U.S. hospital industry restructuring and the hospital safety net. Inquiry 40(1):6–24. Bazzoli, G. J., L. Dynan, L. R. Burns, and C. Yap. 2004. Two decades of organizational change in health care: What have we learned? Medical Care Research and Review 61(3):247–331. Bazzoli, G. J., S. M. Shortell, and N. L. Dubbs. 2006. Rejoinder to taxonomy of health networks and systems: A reassessment. Health Services Research 41(3 Pt 1):629–639. Berson, Y., and B. J. Avolio. 2004. Transformational leadership and the dissemination of organizational goals: A case study of a telecommunication firm. Leadership Quarterly 15(5):625–646. Blau, P. M., and W. R. Scott. 1962. Formal organizations. San Francisco: Chandler. Bommer, W. H., G. A. Rich, and R. S. Rubin. 2005. Changing attitudes about change: Longi- tudinal effects of transformational leader behavior on employee cynicism about organi- zational change. Journal of Organizational Behavior 26(7):733–753. Boukus, E., A. Cassil, and A. S. O’Malley. 2009. A snapshot of U.S. physicians: Key findings from the 2008 Health Tracking Physician Survey. Data Bulletin No. 35, Center for Study- ing Health System Change, Washington, DC. Bourne, L., and D. Walker. 2005. Visualizing and mapping stakeholder influence. Management Decision 43(5):649–660. Burke, W., and G. Litwin. 1992. A causal model of organizational performance and change. Journal of Management 18:523–545. Burns, L. R. 1997. Physician practice management companies. Health Care Management Review 22(4):32–46. Burns, L. R., and R. W. Muller. 2008. Hospital-physician collaboration: Landscape of eco- nomic integration and impact on clinical integration. Milbank Quarterly 86(3):375–434. Burns, L., and D. Thorpe. 1997. Physician-hospital organizations: Strategy, structure and conduct. In The organization and management of physician services: Evolving trends, edited by R. Conners. Chicago, IL: American Hospital Publishing. Capps, C. 2005. The quality effects of hospital mergers. Unpublished manuscript. Cartwright, S., and R. Schoenberg. 2006. Thirty years of mergers and acquisition research: Recent advances and future opportunities. British Journal of Management 17(S1):S1–S5. Casalino, L. P. 2006. The Federal Trade Commission, clinical integration, and the organiza- tion of physician practice. Journal of Health Politics, Policy and Law 31(3):569–585. Chemers, M. M. 2001. Leadership effectiveness: An integrative review. In Blackwell handbook of social psychology: Group processes, edited by M. A. Hogg and R. S. Tindale. Oxford, UK: Blackwell.

OCR for page 227
APPENDIX D 253 Clement, J. P., M. J. McCue, R. D. Luke, J. D. Bramble, L. F. Rossiter, Y. A. Ozcan, and C. W. Pai. 1997. Strategic hospital alliances: Impact on financial performance. Health Af- fairs 16(6):193–203. Coddington, D. C., K. D. Moore, and R. L. Clarke. 1998. Capitalizing medical groups: Posi- tioning physicians for the future. New York: McGraw-Hill. Conger, J. A., and R. N. Kanungo. 1998. Charismatic leadership in organizations. Thousand Oaks, CA: Sage. Cuellar, A. E., and P. J. Gertler. 2005. How the expansion of hospital systems has affected consumers. Health Affairs 24(1):213–219. Damschroder, L. J., D. C. Aron, R. E. Keith, S. R. Kirsh, J. A. Alexander, and J. C. Lowery. 2009. Fostering implementation of health services research findings into practice: A consolidated framework for advancing implementation science. Implementation Science 4:50. D’Aunno, T., and H. S. Zuckerman. 1987. A life cycle model of organizational federations: The case of hospitals. Academy of Management Review 12(3):534–545. Devers, K. J., S. M. Shortell, R. R. Gillies, D. A. Anderson, J. B. Mitchell, and K. L. Erickson. 1994. Implementing organized delivery systems: An integration scorecard. Health Care Management Review 19(3):7–20. Dranove, D., and R. Lindrooth. 2003. Hospital consolidation and costs: Another look at the evidence. Journal of Health Economics 22(6):983–997. Dranove, D., A. Durkac, and M. Shanley. 1996. Are multihospital systems more efficient? Health Affairs 15(Spring):100–103. Eberhardt, J. L. 2001. Merger failure: A five year journey examined. Healthcare Financial Management 55(4):37–39. Egri, C. P., and S. Herman. 2000. Leadership in the North American environmental sector: Values, leadership styles and contexts of environmental leaders and their organizations. Academy of Management Journal 43:571–604. Eisenbach, R., K. Watson, and R. Pillai. 1999. Transformational leadership in the context of organizational change. Journal of Organizational Change Management 12(2):80–89. Fiol, C. M., D. Harris, and R. House. 1999. Charismatic leadership: Strategies for effecting social change. Leadership Quarterly 10(3):449–482. Ford, M., and B. Greer. 2005. The relationship between management control system usage and planned change achievement: An exploratory study. Journal of Change Management 5(1):29–46. Galpin, T. 1996. The human side of change: A practical guide to organization redesign. San Francisco: Jossey-Bass. Gaynor, M. 2006. What do we know about competition and quality in health care markets? Foundations and Trends in Microeconomics 2(6):441–508. Gentry, W. A., and J. B. Leslie. 2007. Competencies for leadership development: What’s hot and what’s not when assessing leadership-implications for organizational development. Organizational Development Journal 25(1):37–46. Gerstner, C., and D. Day. 1997. Meta-analytic review of leader member exchange theory: Cor- relates and construct issues. Journal of Applied Psychology 82(6):827–844. Gilmartin, M. J., and T. D’Aunno. 2007. Leadership research in health care: A review and roadmap. Academy of Management Annals 1:387–438. Goleman, D. 1998. Working with emotional intelligence. London: Bloomsbury. Graen, G., and M. Uhl-Bien. 1995. Relationship-based approach to leadership: Development of leader-member exchange (LMX) theory of leadership over 25 years: Applying a multi- level multi-domain perspective. Leadership Quarterly 6(2):219–247.

OCR for page 227
254 LOVELL FEDERAL HEALTH CARE CENTER MERGER Greenwood, R., and C. R. Hinings. 1996. Understanding radical organizational change: Bringing together the old and the new institutionalism. Academy of Management Review 21(4):1022–1054. Hansen, M. T. 2009. Collaboration: How leaders avoid the traps, create unity, and reap big results. Boston: Harvard Business School Publishing. Harrison, T. D. 2011. Do mergers really reduce costs? Evidence from hospitals. Economic Inquiry 49(4):1054–1069. Hawley, A. H. 1950. Human ecology. New York: Ronald Press. Hayford, T. B. 2011. The impact of hospital mergers on treatment intensity and health out- comes. Health Services Research 47(3 Pt 1):1008–1029. Heimeriks, K. H., and G. Duysters. 2007. Alliance capabilities as a mediator between experi- ence and alliance performance: An empirical investigation into the alliance capability development process. Journal of Management Studies 44(1):25–49. Higgs, M., and D. Rowland. 2000. Building change leadership capability: The quest for change competence. Journal of Change Management 1(2):116–130. Higgs, M., and D. Rowland. 2005. All changes great and small: Exploring approaches to change and its leadership. Journal of Change Management 5(2):121–151. Ho, V., and B. H. Hamilton. 2000. Hospital mergers and acquisitions: Does market consolida- tion harm patients? Journal of Health Economics 19(5):767–791. Hoang, H., and F. T. Rothaermel. 2005. The effect of general and partner-specific alli- ance experience on joint R&D project performance. Academy of Management Journal 48(2):332–345. Hoffmann, W. H. 2007. Strategies for managing a portfolio of alliances. Strategic Management Journal 28(8):827–856. House, R. J., and R. N. Aditya. 1997. The social scientific study of leadership: Quo vadis? Journal of Management 23(3):409–473. House, R., and M. L. Baetz. 1979. Leadership: Some empirical generalizations and new re- search directions. Research in Organizational Behavior 1:341–423. House, R. J., W. D. Spangler, and J. Woycke. 1991. Personality and charisma in the U.S. presi- dency: A psychological theory of leader effectiveness. Administrative Science Quarterly 36(3):364–396. Howell, J. M., and C. A. Higgins. 1990. Champions of technological innovation. Administra- tive Science Quarterly 35(2):317–341. Huy, Q. 1999. Emotional capability, emotional intelligence and radical change. Academy of Management Review 24(2):325–345. Huy, Q. 2002. Emotional balancing of organizational continuity and change: The contribution of middle managers. Administrative Science Quarterly 47:31–69. Judge, T. A., R. F. Piccolo, and R. Ilies. 2004. The forgotten ones? The validity of consideration and initiating structure in leadership research. Journal of Applied Psychology 89:36–51. Judge, W. Q., and R. Dooley. 2006. Strategic alliance outcomes: A transaction-cost economics perspective. British Journal of Management 17(1):23–37. Judson, A. 1991. Changing behavior in organization: Minimizing resistance to change. Cambridge, MA: Basil Blackwell. Kale, P., and H. Singh. 2007. Building firm capabilities through learning: The role of the alliance learning process in alliance capability and firm-level alliance success. Strategic Management Journal 28(10):981–1000. Kale, P., and H. Singh. 2009. Management strategic alliances: What do we know now, and where do we go from here? Academy of Management Perspectives 23(3):45–62. Kanter, R. M. 1983. The change masters. New York: Simon & Schuster. Kastor, J. A. 2001. Mergers of teaching hospitals in Boston, New York, and Northern Cali- fornia. Ann Arbor: University of Michigan Press.

OCR for page 227
APPENDIX D 255 Kerr, E. A., B. S. Mittman, R. D. Hays, A. L. Siu, B. Leake, and R. H. Brook. 1995. Managed care and capitation in California: How do physicians at financial risk control their own utilization? Annals of Internal Medicine 123(7):500–504. Kerr, E. A., B. S. Mittman, R. D. Hays, B. Leake, and R. H. Brook. 1996. Quality as- surance in capitated physician groups. Journal of the American Medical Association 276(15):1236–1239. King, D., D. Dalton, C. Daily, and J. Covin. 2004. Meta-analyses of post acquisition perfor- mance indications of unidentified moderators. Strategic Management Journal 25:187–200. Kotter, J. 1985. Power and influence. New York: Free Press. Kotter, J. 1995. Leading change: Why transformation efforts fail. Harvard Business Review 73(2):59–67. Kralewski, J. E., T. D. Wingert, and M. H. Barbouche. 1996. Assessing the culture of medical group practices. Medical Care 34(5):377–388. Kralewski, J. E., E. C. Rich, T. Bernhardt, B. Dowd, R. Feldman, and C. Johnson. 1998. The organizational structure of medical group practices in a managed care environment. Health Care Management Review 23(2):76–96. Kralewski, J. E., W. Wallace, T. D. Wingert, D. J. Knutson, and C. E. Johnson. 1999. The effects of medical group practice organizational factors on physicians’ use of resources. Journal of Healthcare Management 44(3):167–183. Kralewski, J. E., E. C. Rich, R. Feldman, B. E. Dowd, T. Bernhardt, C. Johnson, and W. Gold. 2000. The effects of medical group practice and physician payment methods on costs of care. Health Services Research 35(3):591–613. Krishnan, R. A., S. Joshi, and H. Krishnan. 2004. The influence of mergers on firms’ product- mix strategies. Strategic Management Journal 25(6):587–611. Lewin, K. 1947. Frontiers in group dynamics. Human Relations 1:5–41. Luke, R. D. 2006. Taxonomy of health networks and systems: A reassessment. Health Services Research 41(3 Pt 1):618–628. Macneil, I. R. 1983. Values in contract: Internal and external. Northwestern University Law Review 78(2):340–418. Madison, K. 2004. Hospital-physician affiliations and patient treatments, expenditures, and outcomes. Health Services Research 39(2):257–278. Marks, M. L., P. H. Mirvis, and L. F. Brajkovich. 2001. Making mergers and acquisitions work: Strategic and psychological preparation. Academy of Management Executive 15(2):80–94. Modern Healthcare. 2012. 18th annual hospital mergers and acquisitions report. January 28. http://www.modernhealthcare.com/article/20120128/DATA/120129989# (accessed April 2, 2012). Nadler, D. A. 1982. Managing transitions to uncertain future states. Organizational Dynam- ics 11:37–45. Nadler, D. A., and M. L. Tushman. 1990. Beyond the charismatic leader: Leadership and organizational change. California Management Review 32(2):77–97. Nadler, D. A., and M. L. Tushman. 1999. The organization of the future: Strategic imperati- ves and core competencies for the 21st century. Organizational Dynamics 28(1):45–60. Olson, D. A., and L. E. Tetrick. 1988. Organizational restructuring: The impact of role per- ceptions, work relationships and satisfaction. Group and Organization Studies 13(3): 374–389. Oreg, S. 2003. Resistance to change: Developing an individual differences measure. Journal of Applied Psychology 88(4):680–693. Pettigrew, A. M., R. Woodman, and K. Cameron. 2001. Studying organizational change and development: Challenges for future research. Academy of Management Journal 44(4):697–713.

OCR for page 227
256 LOVELL FEDERAL HEALTH CARE CENTER MERGER Pfeffer, J., and G. R. Salancik. 1978. The external control of organizations. New York: Harper and Row. Puranam, P., and B. S. Vanneste. 2009. Trust and governance: Untangling a tangled web. Academy of Management Review 34(1):11–31. Reuer, J. J., and A. Arino. 2007. Strategic alliance contracts: Dimensions and determinants of contractual complexity. Strategic Management Journal 28(3):313–330. Robinson, J. C. 1998. Consolidation of medical groups into physician practice management organizations. Journal of the American Medical Association 279(2):144–149. Rogers, E. M. 1962. Diffusion of innovations. New York: Free Press. Salovey, P., and J. D. Mayer. 1990. Emotional intelligence. Imagination, Cognition and Per- sonality 9:185–211. Schilke, O., and A. Goerzen. 2010. Alliance management capability: An investigation of the construct and its measurement. Journal of Management 36(5):1192–1219. Schreiner, M., P. Kale, and D. Corsten. 2009. What really is alliance management capability and how does it impact alliance outcomes and success? Strategic Management Journal 30(13):1395–1419. Seltzer, J., and B. M. Bass. 1990. Transformational leadership: Beyond initiation and consid- ���������������������������������������������������������� eration. Journal of Management 16(4):693–704. Shah, R. H., and V. Swaminathan. 2008. Factors influencing partner selection in strate- gic alliances: The moderating role of alliance context. Strategic Management Journal 29(5):471–494. Steers, R. M., and J. S. Black. 1994. Organizational behavior. New York: Harper Collins. Stodgill, R., and A. E. Coons. 1957. Leader behavior: Its description and measurement. Co- lumbus: Ohio University, Bureau of Business Research. Struckman, C. H., and F. J. Yammarino. 2003. Organizational change: A categorization scheme and response model with readiness factors. In Research in Organizational Change and Development, edited by R. W. Woodman and W. A. Pasmore. Greenwich, CT: JAI Press. Trinh, H. Q., J. W. Begun, and R. D. Luke. 2010. Better to receive than to give? Interorga- nizational service arrangements and hospital performance. Health Care Management Review 35(1):88–97. Tushman, M. L., and C. O’Reilly. 1997. Winning through innovation: A practical guide to leading organizational change and renewal. Cambridge, MA: Harvard Business School Press. Vakola, M., I. Tsaousis, and I. Nikolaou. 2004. The role of emotional intelligence and per- sonality variables on attitudes towards organizational change. Journal of Managerial Psychology 19(2):88–110. Van de Ven, A. H., and M. S. Poole. 1995. Explaining development and change in organiza- tions. Academy of Management Review 20(3):510–540. van Knippenberg, D., and M. A. Hogg. 2003. A social identity model of leadership effective- ������������������������������������������������ ness in organizations. Research in Organizational Behavior 25:243–295. Vera, D., and M. Crossan. 2004. Strategic leadership and organizational learning. Academy of Management Review 29(2):222–240. Vogt, W. B., and R. Town. 2006. How has hospital consolidation affected the price and quality of hospital care? Research Synthesis Report No. 9. Princeton, NJ: Robert Wood Johnson Foundation, The Synthesis Project. Waldman, D. A., M. Javidan, and P. Varella. 2004. Charismatic leadership at the strategic level: A new application of upper echelons theory. Leadership Quarterly 15(3):355–380. Weick, K. E., and R. E. Quinn. 1999. Organizational change and development. Annual Review of Psychology 50:361–386.

OCR for page 227
APPENDIX D 257 Young, G. J., K. R. Desai, and F. J. Hellinger. 2000. Community control and pricing patterns of nonprofit hospitals: An antitrust analysis. Journal of Health Politics, Policy and Law 25(6):1051–1081. Yukl, G. A. 1999. An evaluation of conceptual weaknesses in transformational and charis- matic leadership theories. Leadership Quarterly 10(2):285–305. Yukl, G. A. 2006. Leadership in organizations. 6th ed. Upper Saddle River, NJ: Prentice-Hall. Zajac, E., B. R. Golden, and S. M. Shortell. 1991. New organizational forms for enhanc- ing innovation: The case of internal corporate joint ventures. Management Science 37(2):170–184. Zajac, E., T. D’Aunno, and L. R. Burns. 2010. Managing strategic alliances. In Health care management: Organization design and behavior. 6th ed. Albany, NY: Delmar.

OCR for page 227