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Physician Evolvement in Hospital
Decision Making
Stephen M. Shorten
People in the future will need to learn organization the way their
forefathers learned farming.
Peter Drucker
Medical decision making is an organizational process. Even at the
level of individual clinical judgment, a myriad of prior "organiza-
tional" decisions have been made that affect what appears to be an
autonomous clinical judgment made by a trained professional. For
example, a surgeon's choice of a given technique for a particular op-
eration has been conditioned by prior decisions, such as the number
and types of operating rooms available, types of equipment purchased,
the quality and mix of surgical assistants and nursing staff, and the
organization of the operating room schedule itself. The surgeon's de-
cision may also be influenced by prior decisions made by the hospital's
quality assurance committee. In brief, "micro" decisions involving
individual clinical judgment and "macro" decisions involving larger
organization-wide resource allocation and policy issues are highly in-
terrelated. The nature of physician involvement in hospital decision
making must be understood within this context.
There are five major themes to this paper. The first is that the major
hospital decision makers- trustees; administrators; voluntary staff
physicians; hospital-compensated physicians; and, increasingly, nurses
- will view the decision-making process primarily as a function of
their actual degree of involvement in the organization, the degree of
involvement that they fee} they should have, and the nature of the
issue at stake. Physicians and nurses typically will be most concerned
about decisions affecting patient care the ultimate goal. Adminis-
73
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STEPHEN M. SHORTELL
trators and trustees, although also concerned about patient care, will
focus most of their energies on resource acquisition and management
issues the instrumental goals for facilitating cost-e~ective patient
care.
The second theme of this paper is that the distinction between "clin-
ical" and "administrative" decision making is becoming blurred. New
technology, regulation, and competitive forces are giving rise to a
number of decisions in which no single professional group has con-
trolling interest and participation by all groups is required.
~~ ~ ~ . , ~ ~ . ~ ~ ~ ~ . . . ~ ~ . ~ . ~ ~ ~
the tulro theme IS that physician involvement in Hospital cleclslon
making is affected by whether the hospital is voluntary or investor-
owned, a freestanding hospital or a member of a multi-unit system.*
For example, a hospital that becomes part of an investor-owned chain
may find its physicians more actively involved in hospital governing
board activities than previously.
The fourth theme is that decision making may be moving away
from the "dual authority" model of split administrative and clinical
decisions to a more "shared authority" model based on increasing
collaboration between administrators and physicians. This is partly
because of the blurring of decisions noted above but is also due to a
number of other factors that will be discussed.
The fifth theme is organized around some evidence that suggests
that greater physician involvement in hospital-wide decision making
is associated with lower costs and higher-quality care. In this context
the relationship between cost containment and quality of care also is
examined.
Where relevant, these themes are specifically considered for their
implications regarding for-profit ownership of hospitals. This is par-
ticularly true in regard to the types of decisions faced, dual authority
and shared authority decision-making models, and specific forms of
physician involvement in decision making. At the same time it is
important to recognize that the differences in economic orientation
between for-profit and nonprofit hospitals may be narrowing, with
some interesting implications for hospital behavior.
For brevity's sake, this paper will not describe the historical evo-
lution of physician involvement in hospital decision making. The main
concern here is with current developments and implications for the
immediate future. The paper will not serve as an exhaustive review
* It is recognized that there are also important differences between teaching and non-
teaching hospitals, but the primary focus of this paper is on ownership and system versus
nonsystem differences.
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Physician Involvement in Hospital Decision Making
75
of the literature. Rather, it will highlight some of the more significant
studies and major findings.
This paper is divided into five major sections. First, the major kinds
of decisions made by hospitals are described. Second, those individuals
primarily involved in hospital decisions are noted, and two models of
decision making are examined. Third, the nature of the involvement
is highlighted. Fourth, evidence bearing on the relationship between
physician/hospital decision making and the cost and quality of care
is summarized. Finally, a number of future issues influencing phy-
sician/hospital decision making are discussed.
A Typology of Hospital Decision Making
A simple typology of decision making is shown in Table I, which
suggests that decision-making strategies used by hospitals depend on
(1) the degree of agreement or certainty among the key parties as to
their preferences for specific outcomes and (2) the degree of confidence
or certainty in the cause-effect relationships involved i.e., whether
the decision will actually produce the desired results. For example,
in the first cell where all parties agree on preferences about outcomes
and the certainty of cause-effect relationships is relatively straight-
forward, decisions can be made on a fairly routine "computational"
basis. Decisions involving the amount of standard supplies to keep in
inventory in the hospital's central supply department serves as an
example of a computational decision strategy. For the most part, phy-
sicians do not get involved in such decisions, which are primarily made
by hospital support department heads and increasingly are being com-
puterized or otherwise automated.
TABLE 1 A Typology of Physician/Hospital Decisions
Certainty of
Preferences about Outcomes
Certain Uncertain
Certainty Of Certain
Cause-Effect
Relationships
Uncertain
2
Computational Compromise
4
Judgmental Inspirational
SOURCE: Adapted from Thompson, J. D. Organizations in Action. New York: McGraw-
Hill, 1967.
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STEPHEN M. SHORTELL
The second cell involves situations in which there is certainty about
cause-e~ect relationships but in which the parties involved disagree
about desired outcomes. These decisions are labeled "compromise"
decisions. For example, a hospital may be faced with the decision of
whether to purchase a CT scanner or expand the laboratory depart-
ment's capabilities. In either case the cause-effect relationships are
known (the decision will most likely result in improved patient care),
but the parties disagree as to the areas of hospital operation (radiology
or lab) in which they wish to see the improvement. It is important to
note that general economic forces, external regulation, and competi-
tive pressures are increasing the number of compromise decisions that
hospitals must make. These are situations where the efficacies of
decisions are known but where there are insufficient funds to imple-
ment all of them. Compromise decisions are a major area of physician
involvement in hospital decision making, as each specialty group strives
to maintain or expand its scope of responsibility. Thus, for the most
part, physicians become involved in these decisions in order to protect
their interests.
The third cell involves situations in which preferences about out-
comes are known and agreed upon but where there is uncertainty
about the cause-effect relationships. These situations constitute "judg-
mental" decisions. For example, the decision to improve a hospital's
financial position may be agreed upon by all parties, but uncertainty
may exist about the best strategy or combination of strategies to ac-
complish this. Physicians are becoming increasingly involved in judg-
mental decisions but for a different reason than their involvement in
compromise decisions. In compromise decisions they become involved
primarily to protect their interests, but in judgmental decisions they
become involved because their expertise as physicians is needed. For
example, many administrators have relied heavily on physician advice
in justifying major capital purchases or expansion projects to health
systems agencies.
The fourth cell describes situations in which uncertainty exists about
both preferences for outcomes and cause-effect relationships. These
decisions are labeled "inspirational." For example, a rural hospital
with low occupancy may be pondering whether to develop an ambu-
latory care program or affiliate with an urban medical center. In terms
of cause and erect it is not clear that either option will increase
admissions. Furthermore, with either option the parties involved may
disagree about likely outcomes. To reduce the uncertainty surround-
ing such decisions, hospitals are increasingly adopting methods of
formal environmental assessment and long-run strategic planning.
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Physician Involvement in Hospital Decision Making
77
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STEPHEN M. SHORTELL
issues are raised by such a decision. They include cost considerations,
likely impact on turnover, absenteeism, job satisfaction, ability to
recruit nurses, relationship with other departments, continuity of care,
and quality of care. These issues are interrelated and difficult to sep-
arate, even though each group will approach the question from its
particular area of concern nurses from the perspective of job satis-
faction and quality of patient care, physicians from their perspective
of quality of care and how the change will affect nurse/physician re-
lationships, and administrators from the perspective of costs and ad-
equacy of staffing in addition to concerns about quality of care.
Other examples could be used to illustrate the blurring of admin-
istrative and clinical decision making. Some additional examples are
provided in Table 2, categorized according to the computational, com-
promise, judgmental, and inspirational frameworks.
Although it provides some insight, the typology described above is
oversimplified. At least two other sources of complexity appear to be
important in understanding the nature of the hospital decision-mak-
TABLE 2 Examples of Physician/Hospital Decisions
1. Computational
Maintaining inventory levels.
Hiring ancillary staff.
Hiring additional nurses to increase coverage.
2. Compromise
Suspending privileges of a popular physician.
Admitting a new physician in a specialty that is already well supplied.
Purchasing a CT scanner or a major piece of lab equipment.
Developing a new compensation arrangement for the director of the laboratory.
3. Judgmental
Expanding physician continuing education efforts to improve quality of care.
Hiring a full-time director of medical education to improve quality of care.
Changing to computerized billing system.
Establishing a long-range planning department.
4. Inspirational
Adding a new clinical service.
Developing a hospital-sponsored group practice.
Affiliating with a medical school.
Merging with another hospital.
NOTE: The examples are not necessarily mutally exclusive. They will obviously vary de-
pending on people's perceptions of the cause-effect relationships and preferences for out-
comes. They also depend on the stage of the decision-making process. For example, as more
information becomes available, some inspirational examples may become compromise or
judgmental decisions.
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Physician Involvement in Hospital Decision Making
79
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STEPHEN M. SHORTELL
serve. They also tend to have high turnover in upper administrative
ranks, and, therefore, many lack strong continuous managerial di-
rection. In brief, there are likely to be more debates about the pref-
erences for different kinds of outcomes in voluntary community hospitals
than in investor-owned hospitals. As such, in voluntary hospitals the
decision-making process may be somewhat more complex and inde-
terminate than in investor-owned hospitals.
In general, hospitals belonging to a multi-unit system seem likely
to be more involved in computational and judgmental decisions than
are freestanding individual hospitals. This is due in part to the influ-
ence of a corporate headquarters office with greater managerial staff
expertise, which can reduce the uncertainty of cause-effect relation-
ships surrounding given decisions. Also, the presence of an overall
corporate mission and value system can help orient individual hos-
pitals toward achievement of more common objectives, resulting in
less disagreement regarding desired outcomes. In contrast, individual
hospitals, often lacking such expertise and direction, may become
involved in more compromise and inspirational decisions. These sug-
gested differences, however, also depend on other factors, including
the maturity of the multi-unit system and its emphasis on innovation.
For example, a multi-unit system in the early years of existence may
face a greater number of compromise decisions as it attempts to gain
agreement among member hospitals regarding overall directions. Fur-
thermore, a system at the cutting edge is experimenting with new
programs, services, and organizational arrangements and may thus
face a high number of inspirational decisions. Decision-making strat-
egies will also be influenced by the degree of centralization that exists
between the corporate headquarters office and individual member
hospitals. The suggested differences by ownership and system status
are summarized in Table 3.
TABLE 3 Most Prevalent Types of Decision-Making Strategies, by
Type of Hospital
Decision-Making Voluntary Investor-Owned Single
Strategy Hospital Hospital Hospital
Multi-Unit
System Hospital
Computational
Compromise
Judgmental
Inspirational +
+
+
+
+
+
+
+
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Physician Involvement in Hospital Decision Making
Convergence versus Divergence of Interests
81
Determining where physician and hospital interests overlap and where
they diverge is difficult because the relationship is subject to complex
and rapidly changing forces. In general, hospital and physician in-
terests coincide most often in areas involving expansion of hospital
programs and services that are complementary rather than substi-
tutable with physician services. Examples include increasing the
number of beds; acquiring sophisticated technology, such as nuclear
magnetic resonance scanners; and adding selected support services,
such as occupational therapy, physical therapy, and social work, which
are uneconomical for most physicians to incorporate into their private
practices. Interests also coincide when physicians and hospitals can
assist each other in responding to external regulation or changes in
payment. A noteworthy example is the development of quality assur-
ance committees in response to the establishment of Professional Stan-
dards Review Organizations (PSROs).
Conversely, hospital/physician interests diverge when physicians
perceive the hospital to be in direct competition or when the hospital
believes physicians are acting counter to the Tong-run objective of the
hospital. Thus, as previously noted, hospitals' efforts to expand their
ambulatory care activities may meet medical staff opposition because
of fear of direct competition for patients and hospital beds.2 Opposition
may also be based on philosophical objections to the "corporate practice
of medicine." Regulations or changes in payment also can create con-
flict rather than representing the "common enemy" against which
hospitals and physicians can unite. For example, limiting hospital
revenues by reimbursing on a case-mix basis may create conflict be-
tween a hospital's economic interests and the physicians' economic
and professional interests.
It is important to note that there is frequently more disagreement
among physicians than between physicians and hospitals. Physicians
are not a unitary group and seldom act in concert on a given issue.
Differences exist by specialty, years in practice, and geographical lo-
cation, in addition to individual differences in personality and phi-
losophy. For example, surgeons and other specialists are typically
strong supporters of hospital ambulatory care programs because they
usually benefit directly from increased referrals. Primary care phy-
sicians, in contrast, are likely to be the most vocal critics because of
perceived competition. Even here, differences exist depending on the
patients to be served. For example, if the primary purpose of an ex-
panded ambulatory care program is to serve more Medicaid patients,
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STEPHEN M. SHORTELL
private practice physicians may be supportive because of their desire
to limit the number of Medicaid patients in their practice.
The diversity among physicians is important to recognize in con-
sidering decisions involving almost any new program, service, tech-
nology, or reorganization. In brief, each physician and specialty group
will be concerned if the decision is likely to benefit other groups or
interests more than their own. As Harris3 notes, in the extreme, this
results in
. . . each clinical service of the medical staff . . . striving to maintain and expand
the magnitude of its own defensive position.... Each service gets its own intensive
care unit. Each intensive care unit gets its own laboratory. The idea behind all
of these arrangements is to insure the exclusive availability of a set of inputs to
a small group of demanders. In that way no one is going to get bumped.
Although this often creates problems for hospital administrators
and trustees, it also is to their advantage in that it facilitates "divide
and conquer" strategies and adores administrators some flexibility in
playing off the interests of one group of physicians against another.
How these relationships are influenced by competition, regulation,
and related factors is described in a subsequent section.
The Decision Makers
The most important point to understand about decision making in
hospitals is that there is no single decision maker. Rather, decision
making is a complex and often diffuse process involving multiple co-
alitions of key people, including physicians; administrators; trustees;
and, increasingly, nurses. These coalitions exert different degrees of
influence depending primarily on the topic. Typically, physicians exert
the most influence over clinical matters, such as determining staff
privileges, establishing practice protocols, reviewing quality of care,
and determining patient admission and discharge. Executive-leve]
administrators exert the most influence over hospital policy and plan-
ning activities particularly as they relate to the organization's exter-
nal environment. Middle-level executives and department heads
typically exert the most influence over matters related to daily staff-
ing, budgeting, and procurement of supplies. The influence of trustees
is primarily felt in the areas of Tong-run strategic planning and ar-
ticulating the overall mission and direction of the hospital. Nurses
are striving to become more involved in all of these areas. From this
general description, it is possible to highlight two general "models"
of decision making in hospitals: the dual authority mode} and the
shared authority model.
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Physician Involvement in Hospital Decision Making
83
The Dual Authority Mode!
The dual authority mode} is best developed by Pauly and Redisch4
and Harris5 and was first described by Smith.6 In the Pauly/Redisch
version the hospital is seen as a physicians' cooperative in which
physicians' decisions largely determine the nature of hospital opera-
tions. The administration largely exists to provide the equipment,
supplies, and facilities for physician use. Although two distinct lines
of authority (administrative and clinical) are recognized, administra-
tors seldom oppose physicians because the hospital's success and the
administrator's own job security are closely tied to satisfying the de-
mands of the physician staff.
In the Harris version the administrative and medical split is con-
ceptualized as two different "firms." The medical staff constitutes a
"demand division" and the administration a "supply division." Each
division has its own managers, decision-making strategies, operating
rules, and policies. Third-party payers recognize this separation in
the form of separate payment policies for ambulatory care versus
inpatient care. In brief, although hospitals and physicians are in fact
involved in a joint production process, they are largely organized as
separate entities; therein lies much of the difficulty in hospital deci-
sion making as it pertains to the allocation of scarce resources. Until
recently, the "expert" power of the physician as legitimated by the
state has dominated the decision-making process over the "legitimate"
power (i.e., formal position authority) of the administration. Further-
more, physicians control both their own and the hospital's inputs. As
Harris notes:
Doctors are in a position to deem all sorts of demands as necessary for their
patients. This is not the same thing as saying doctors order useless tests to satisfy
some ulterior motives. Additional demands for inputs above the hypothetical
scientific minimum are going to be regarded by doctors as improvements in qual-
ity.7
The issues suggested by the dual authority mode] of decision making
are more complex for voluntary hospitals than for investor-owned
hospitals. If one assumes that the goals of investor-owned hospitals
are somewhat more homogeneous and targeted than are the goals of
voluntary hospitals, the interests of physicians and the hospital may
be more closely aligned. In contrast, voluntary hospitals may pursue
a variety of community objectives, not all of which may contribute to
financial viability and which may in fact detract from or even compete
with physician interests. But as cost containment pressures continue,
voluntary and investor-owned hospitals are becoming more alike in
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STEPHEN M. SHORTELL
chusetts revealed that higher cost per case was associated with higher
medical/surgical death rates, even when differences in case mix were
taken into account.30 Other studies have generally found similar re-
sults.3i However, Flood et al. found that hospitals that provide a greater
number of certain specific medical services that increase cost also had
better than expected patient care outcomes.32 In this study the rela-
tionship between overall cost and measures of quality of care was not
examined.
It is important to note that the above results are preliminary and
suggestive at best, and they must be viewed with caution. Nonetheless,
existing evidence offers little support for the argument or expectation
that efficiency or cost containment goals are inherently incompatible
with effectiveness or quality of care. It may be that greater physician
involvement in hospital-wide administrative decision making facili-
tates cost containment decisions that protect or even enhance the
quality of care provided. For example, changes to improve the turn-
around time for laboratory tests not only improve hospital efficiency
but may also improve quality of care by expediting the physician's
diagnostic and treatment plans for the patient. Clearly, this is a major
area for future research and public policy development. The effects of
physician involvement in hospital-wide decision making on the overall
use of hospital services is another important area for further inves-
tigation.
Future Issues
It should be evident from the above discussion that physician involve-
ment in hospital decision making is in flux. As indicated, this is pri-
marily due to changes in the external environment of health care
delivery, which is causing physicians and hospitals to view themselves
and each other in a different light. As a clue to the future it is useful
to consider the changing context of both clinical decision making and
institutional decision making. The possible demise of the traditional
voluntary medical staff organization can be foreseen. It then becomes
possible to consider the factors that either promote or constrain the
movement toward more shared, collaborative decision-making models.
The Changing Context of Clinical Decision Making
Pellegrino has commented that:
The process of making clinical decisions is the balance wheel of hospital operation.
It is central to all the patient-oriented functions of the hospital, and it has remote
effects on all major elements of hospital organization the patient, the health
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Physician Involvement in Hospital Decision Making
93
care professional, administrators, trustees, and the community. It is also the
process least accessible to organizational control, the most in need of freedom,
and yet the most potent of hospital processes for good and evil. The clinical decision
is the most zealously guarded of the physician's prerogatives and at the same
time the most in need of some kind of surveillance for individual and public good.
It is, moreover, the most difficult process to evaluate in a definitive way.33
Five factors are redefining the context of clinical decision making:
(~) the realization that resources are scarce- a "logic of scarcity," (2)
the continued impact of new technology, (3) changes in the mix of
diseases being seen, (4) the increased institutionalization of all aspects
of medical care, and (5) the ejects of the consumer movement.
The concern over the cost of health care has resulted in a logic of
scarcity that is beginning to permeate medical practice. There exists
a subtle and still-developing change from the norm of"doing every-
thing possible for the patient at all costs" to one of"doing only those
things that might reasonably yield positive outcomes" and choosing
the most cost-effective ways of doing those procedures. In the extreme
this is resulting in the use of cost-benefit assessments in making
decisions to treat some patients and not others. This is a profound
and very important change. Never before has such a logic been a part
of the "micro-level" of the health care system, the level of individual
clinical decision making.
Continued advances in technology require continual rethinking of
diagnostic and treatment protocols and clinical decision-making rules.
This increases the rate of change and uncertainty, which in turn leads
to greater specialization of function and greater competition among
specialties. One example is the recent dispute among pathologists,
radiologists, and internists over developments in nuclear medicine.
Specifically, pathologists claim they have the facilities, space, and
personnel to handle large-scale procedures; radiologists maintain they
have the techniques; and internists, of course, note that they have the
patients. A partial solution appears to have been worked out in the
development of a conjoint board that is sponsored by all three spe-
cialties and that allows access to certification in nuclear medicine
from each of them.
There have also been appreciable changes in the mix of diseases
being seen specifically in the chronic, complex conditions associated
with aging. One implication of this change is that teams of different
kinds of specialists and providers are needed to provide effective care.
This further complicates the clinical decision-making process and raises
a number of issues involving who should be the team leader and who
should assume various roles and responsibilities.
As previously noted, medical care is increasingly an organizational
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STEPHEN M. SHORTELL
process, subject to organizational forms of social control. The Darling
decision, which held hospitals and their governing boards ultimately
responsible for quality of care, helped give rise to PSROs and related
institutionalized forms of review.
Finally, there is continued interest by the public in having more
control over their own lives, and, as previously noted, this has affected
the health care professions. The public has a desire to know more and
to be given more choices, including the choice not to seek or comply
with medical advice. Manifestations are emerging both in collective
bodies such as health planning agencies and at the level of the indi-
vidual provider-patient relationship. As such, they have affected clin-
ical decision making, if only as a sensitizing factor that further
complicates the decision-making process.
The effect of these five factors has been to transform the context in
which clinical decisions are made. In brief, such decisions are no longer
within the exclusive domain of the medical profession; the boundaries
have become more permeable, allowing participation by other provid-
ers, health care organizations, regulatory groups, consumers, and oth-
ers. The issue is whether the continued prevalence of dual authority
decision-making structures or the continuing emergence of shared
decision-making authority structures provides a better forum for deal-
ing with the increased complexity and diffuseness of clinical decision
making.
The Changing Context of Institutional Decision Making
Not only are hospitals under increased public scrutiny because of the
continuing rise in costs, but it also seems likely that hospitals will
remain under such scrutiny permanently. This is not only because of
the continued concern regarding the cost-effectiveness of patient care
but also because hospitals, individually and collectively, have taken
on more characteristics of industrial enterprises central to the Amer-
ican economy. Many individual hospitals are joining multi-unit sys-
tems to gain greater economic and political clout. Approximately 26
percent of all hospitals belong to a multi-unit system now, and esti-
mates suggest that close to 80 percent may belong to such systems by
i990.34 Even among individual hospitals there has been growth in
professional managerial staff specialists, marketing specialists, long-
range planning departments, and health services research units.
Regulation of capital and operating expenses plus an inflationary
economy have forced hospitals to compete more with each other for
patients, physicians, and nurses. In many areas of the country, vol-
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Physician Involvement in Hospital Decision Making
95
untary hospitals are competing directly with investor-owned hospi-
tals, and teaching hospitals are competing with nonteaching hospitals.
The result is that voluntary and investor-owned hospitals are becom-
ing more alike, ironically as a result of trying to differentiate their
services in an attempt to find new markets for growth. Thus, some
voluntary hospitals are entering into management contract relation-
ships with other voluntary hospitals and are forming systems that are
similar to those of investor-owned hospitals, and some investor-owned
hospitals are beginning to offer outreach and satellite services similar
to those offered by voluntary hospitals. Teaching hospitals are becom-
ing more like their community hospital counterparts in offering more
general primary care services and community outreach services, and
community hospitals are striving to expand their markets by adding
the more sophisticated technology found in teaching hospitals.
American hospitals are no longer a cottage industry; they are part
of an industry that is becoming more highly concentrated, more com-
petitive, and more heavily interdependent with other organizations.
It is also an industry that is extremely vulnerable to economic, reg-
ulatory, and technological changes. As such, decision making, partic-
ularly at the upper policymaking levels of the organization, has become
a very complex and difficult process. The number of inspirational
decisions relative to computational decisions has increased. There is
an increased need to turn more of these inspirational decisions into
judgmental or compromise decisions.
There also is a greater need for clinical participation in the admin-
istrative decision-making process and consideration of more admin-
istrative and economic matters in the clinical decision-making process.
The following question may be raised: Is the current relationship of
physicians to hospitals, in the form of the voluntary medical staff,
able to meet the challenge of the new decision-making environment?
In brief, is the voluntary medical staff organization structure rapidly
becoming an anachronism?
The Demise of the Voluntary Medical Staff
Fundamental changes in the structure of medical staff organization
may be taking place already. A growing number of physicians are
affiliating with hospitals as a cost-effective way of starting practices,
a growing number of speciality-trained physicians are contracting
with one or more hospitals to deliver secondary and tertiary care
services, and a growing number of hospital medical staffs are entering
into HMO arrangements of various forms.35 As the predicted physician
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STEPHEN M. SHORTELL
surplus materializes over the next decade, competition among phy-
sicians will grow, and many will look to the above kinds of arrange-
ments to gain competitive advantages. But what effect wait these trends
have on physician/hospital decision-making relationships? Although
it is safe to say that the dual authority mode} will continue to prevail
in most settings, it is likely that shifts toward more shared models
will become more prevalent, depending on a number of factors, high-
lighted below, that may facilitate or constrain such a movement.
Factors Promoting or Impeding Shared Decision-Making Models
Expectations of more shared decision making between physicians and
hospitals can be based on several arguments. The first is that the
physician surplus will make physicians more dependent on hospitals
for privileges and services to build and maintain their practices; thus,
their economic well-being will become more closely identified with
that of the hospital. This will provide a stimulus for more joint phy-
sician/hospital involvement in decision making. Second, as regulation
(at any governmental level) continues, physicians and hospitals may
perceive increased incentives to unite against the "common enemy."
Consistent with the "capture" theory of regulation (whereby the in-
dustry itself desires the regulation so as to protect its own interest),
physicians and hospitals will work together to make sure their mutual
interests are protected. Hospital reimbursement based on case mix
also may require more collaborative decision making as such reim-
bursement requires administrative and cost data to be integrated with
clinical data.
Third, as physicians become more closely aligned to hospitals, they
may demand greater participation in hospital-wide decision making
than they currently have through traditional medical staff organi-
zation channels. In brief, they may seek to have greater influence
with an organization that is gaining greater importance in their
professional lives.
Finally, shared decision-making models may be facilitated by more
sophisticated and enlightened physicians and professionally trained
hospital administrators. More physicians are being exposed to the
importance of cost-effective medical care and associated cost-e~ec-
tiveness and cost-benefit methodologies. Some, such as graduates of
the Robert Wood Johnson Foundation's Clinical Scholars Program,
have received broad exposure to health services and health policy
issues. Thus, there may be emerging a new cadre of medical leadership
with a broader understanding of the hospital both as an economic and
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Physician Involvement in Hospital Decision Making
97
a social institution, which overrides the notion of the hospital as sim-
ply the "doctor's workshop." As noted by the Hospital Association of
Pennsylvania:
The hospital-medical staff relationship is currently the weakest link in the
hospital corporate management structure. It is this weakness, together with the
rising cost issue, which will force a new relationship between physicians and
hospitals in the very near future.
Joint decision-making involving medical staffs will need to be developed to gain
their participation in an acceptance of change in institutional procedures.36
On the other hand, several factors could impede the development
of shared decision-making models. First, increased physician compe-
tition, resulting from the developing surplus of physicians, could result
in more physicians offering services in direct competition with hos-
pitals. Emerging examples include emergency care, sports medicine,
and health promotion. Under increasing competition, primary care
physicians in particular may seek to develop special services. Whether
they choose to compete directly with hospitals will depend on a number
of local market factors and customs, including the power of local hos-
pitals, the demographic composition of the community, and the or-
ganization of the medical practice community itself. For example, it
would be difficult for a new solo practitioner to compete with a hos-
pital, but it would be easier if new physicians could join well-estab-
lished group practices and develop new programs and services from
that base.
A second factor that may cause physicians to keep an arm's-length
relationship with hospitals is the physician's desire to escape the reg-
ulation and reimbursement controls imposed on hospitals. If physi-
cians see little opportunity to change the regulatory or payment climate
by working with hospitals, some will move to distance themselves
from its consequences by becoming as autonomous as possible. This
will have essentially the same effect as noted above in regard to com-
petition, i.e., the provision of more services in the physician's offices.
For such services as radiology and pathology this has already resulted
in the purchase of more sophisticated equipment for physician's offices
(e.g., computed tomographic scanners), as opposed to locating them in
the hospital.
A third deterrent to the development of more shared decision-mak-
ing models may be the unwillingness of hospital administrators to
open up the decision-making process to physicians. This is likely to
be a significant issue in many areas and is understandable given the
historical evolution of administrator-physician relationships in U.S.
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STEPHEN M. SHORTELL
hospitals. Essentially, administrators have used informal and per-
suasive skills (in addition to the legitimate authority derived from
their positions) to gain influence over medical staffs. In particular,
they have used their role as intermediary between the medical staff
and the board of trustees to control communication and information
flow and thus to keep some control over the medical staff's influence
on the board. The idea of involving physicians more systematically in
hospital-wide policymaking presents a major challenge for adminis-
trators and physicians alike.
Summary
This paper has attempted to capture some of the complexity and dy-
namics of changing physician/hospital decision-making relationships.
A typology and a number of examples of physician/hospital decision
making were developed to provide a framework for considering current
developments. Some differences were suggested in decision-making
strategies by hospital ownership and whether the hospital belonged
to a multi-unit system. Two major models of physician/hospital re-
lationships were described the dual authority mode] and the shared
authority model. The implications of each of these along with the
forces influencing their continued development were examined. Evi-
dence regarding the association of more shared decision-making mod-
els and the cost and quality of care was summarized. A number of
issues pertaining to the changing context of clinical and institutional
decision making were presented, suggesting that some fundamental
changes may take place in the structure of hospital medical staffs.
These points have a number of possible implications for for-profit
hospitals. First, they are likely to continue to be somewhat more
selective than voluntary hospitals in their choice of services to offer
the community. Specifically, they will tend to offer services that en-
hance the return on the overall portfolio or mix of services provided.
Because of the greater involvement of physicians in hospital gover-
nance, for-profit hospitals may be more reluctant to compete directly
with their medical staffs and more likely to offer services that are
complementary to rather than substitutable for physician services in
the community.
Second, for-profit hospitals, particularly those owned by investor-
owned chains, may be better able than voluntary hospitals to deal
with "compromise" or "judgmental" decisions. This is because they
have a more clearly defined and homogenous group of constituents
(stockholders) and generally more overall centralized direction from
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Physician Involvement in Hospital Decision Making
99
the corporate headquarters office. As a result, preferences regarding
desired outcomes may be more clear. Investor-owned hospitals may,
therefore, be more able to make rapid adjustment to external changes
(e.g., changes in third-party reimbursement or changes in competi-
tion) than most voluntary hospitals can.
Third, because the interests of physicians and the hospital may be
more closely aligned in for-profit hospitals, the dual authority mode}
of decision making is less problematic. Perhaps the lesser degree of
physician involvement in daily committee work that characterizes for-
profit hospitals reflects a higher degree of agreement on a more ho-
mogenous and targeted set of goals and greater physician involvement
in the governance process. In contrast, voluntary hospitals deal with
the issues created by the dual authority mode] through a rather elab-
orate system of committees attempting to achieve increased physician
participation and involvement. Although both types of hospitals may
be shifting toward a more shared authority model, investor-owned
hospitals may be able to make the adjustment more quickly and easily
because of the greater degree of agreement on overall goals and the
history of physician involvement in decision making at the governance
level of the organization.
But it is also important to note that the above differences and their
implications may be attenuated by some growing similarities between
for-profit and voluntary hospitals in their economic orientations. Un-
der pressures for cost containment, plus increased competition, vol-
untary hospitals have had to give more concerted thought both~to
their short-run operational needs and to longer-run capital formation
requirements. A number of voluntary hospitals have corporately re-
organized, in many instances creating for-profit subsidiaries to expand
the hospital's sources of revenue. Some of the above differences may
also be attenuated by the continued growth of multi-unit systems
among not-for-profit hospitals. Through their corporate office exper-
tise and structure, such systems may be able to offer the same kinds
of advantages as the investor-owned systems. In brief, although im-
portant differences still exist between the mission, philosophy, struc-
ture, and decision making of for-profit and not-for-profit hospitals,
forces are currently in motion that over time may diminish some of
these differences.
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STEPHEN M. SHORTELL
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Representative terms from entire chapter:
hospital decision
