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Management and the Healthcare Industry Chapter Objectives After reading this chapter, you should be able to 1. Describe the nature of healthcare organizations. 2. Outline the general environment in which healthcare is delivered. 3. Explain the five management functions as they relate to healthcare management. 4. Apply concepts regarding management roles to the healthcare industry. 1 © Image Source/SuperStock Healthcare Organizations Defined Chapter 1 The term management inspires a variety of descriptions and interpretations. Some people view management as supervising employees. Others see it as a set of practices employed by cor - porate experts in high-level positions within an organization. In many ways, describing manage - ment is similar to a well-known fable about a wise man and his blind followers. The man asks each follower to examine an elephant and report his findings. The first follower runs into the side of the elephant and states that the animal is like a wall. The second finds the elephant’s tail and suggests it is similar to a rope. The third grasps the elephant’s leg and argues it most resembles a tree trunk. The fourth discovers the elephant’s trunk and says it feels like a snake. The moral of the story: Each is wrong, and each is partially correct.
The same dilemma emerges when applying the concept of management to the field of health - care. Individual doctors manage private practices, supported by nurses, technicians, and a cleri - cal staff. Others work in conglomerations of specialists or groups of physicians that require a more sophisticated management program. Other physicians, nurses, and employees report to healthcare operations, such as nursing homes, walk-in clinics, and hospitals, featuring even more dynamic management hierarchies. Each management scenario plays an important part of a large industry, and no one-size-fits-all description regarding the nature of management concisely applies to all of them.
At the most fundamental level, the management discipline consists of five operational functions:
planning, organizing, staffing, leading, and controlling (Fayol, 1916; Robbins & Coulter, 2012, p.
9). These functions are part of a body of practices that relate to the direction of healthcare facili - ties. Understanding these five functions and the underlying premises that support them repre- sents the starting point of learning to be an effective manager in the healthcare industry. As such, the five functions represent the building blocks of this book.
In general, management may be defined as “coordinating the work activities of others so that their activities are completed efficiently and effectively” (Robbins & Coulter, 2012, p. 8). Management consists of all the techniques that are used to facilitate productivity by allocating and overseeing the use of the organization’s resources. Effective managers help an organization carry out the primary operational functions, thereby achieving the organization’s goals and obtaining desired future outcomes.
Before learning about the specifics of the five functions and various forms of management, it is important to understand the basic concepts of management within the healthcare industry.
Chapter 1 provides an overview of the different types of healthcare organizations, an exploration of the basic nature of the healthcare field and its environment, and a summary of the five func - tions. The chapter ends with an explanation of the many forms and functions that management takes within healthcare organizations.
1 .1 Healthcare Organizations Defined To understand management within the healthcare industry, it is first necessary to recognize what constitutes a healthcare organization and what differentiates it from other business entities. An organization is a collection of people who work together and coordinate their actions to achieve a variety of goals or desired future outcomes. All organizations share the following characteris - tics (Trewatha, Newport, & Johnson, 1997):
• The organization consists of more than two people.
• People within the organization routinely interact.
• Tasks are divided among an organization’s members (division of labor). Healthcare Organizations Defined Chapter 1 • Someone is in charge (a hierarchy of authority).
• Activities are coordinated among members.
• Members share a common purpose or goal.
There are various forms of organizations, depending on an organization’s goals. For-Profit, Nonprofit, and Government Organizations Organizations take the forms of for-profit, nonprofit, or government agencies. Each type of orga - nization is driven by a mission to accomplish a set of agreed-upon goals:
• An economic goal (for-profit entity) • A social good (nonprofit entity) • The general public’s welfare (government entity) For-profit organizations deliver goods and services that offer value to consumers in exchange for money, normally expressed as sales and other revenues. Some hospitals, nursing homes, and collectives of physicians are for-profit organizations. Nonprofit organizations emerge to meet an expressed social need. Typically, nonprofit organizations solicit donations to maintain their operations. Nonprofit hospitals garner resources from donors and through charges to patients receiving care.
The primary difference between a for-profit organization and a nonprofit organization lies within the U.S. tax code. Although both entities are organizations with boards of directors, chief execu - tive officers (CEOs), and so forth, nonprofit organizations are exempt from paying income taxes on the revenues they accrue as long as no portion of those revenues are paid out to stockholders.
Thus, although nonprofit organizations certainly strive to ensure that their revenues exceed their expenses, this excess must be reinvested into the organization (or given as free care to the needy). In addition, donations made to these organizations are tax deductible to the donors.
Government organizations meet different needs, including main - tenance of order, providing universal services such as roads and fire protection, and regulating commerce. Government organi - zations receive revenues through taxes and fees. For example, the Veterans Health Administration (VA), a government organi - zation, offers healthcare and hospital services to those who have previously served in the military.
Entities That Shape the Healthcare Industry The healthcare industry consists of a series of entities that shape its operation. Many publics and stakeholders are involved in the system. ( Publics are communities that a have a common interest in an industry or organization but that are not necessarily stake - holders. Stakeholders , such as consumers or investors, have a vested interested in an organization. Their relationship with the organization involves something significant that can be gained or lost, such as profits or care.) These publics and stakehold - ers include suppliers, buyers, regulators, public health agencies, © Keith Srakocic/Associated Press ▲ ▲ Veterans Health Administration hos- pitals are government organizations within the U.S. healthcare system. Healthcare Organizations Defined Chapter 1 insurance providers, and consumers or patients. All of these entities interact with healthcare providers, including individual physicians, groups of doctors, and various forms of hospitals (see Figure 1.1).• Suppliers include pharmaceutical companies, medical equipment providers, medical supply services, office equipment providers, computer companies, and biotechnical and biomedical organizations. Supplies are sold to health providers in a variety of ways, includ - ing through intermediaries (wholesalers, retailers) or directly marketed to individuals and healthcare organizations.
• Buyers include governmental agencies that consume healthcare services, including the Veterans Health Administration, Medicare, Medicaid, and smaller departments, such as the Indian Health Service program.
• Numerous regulators influence the delivery of healthcare. Among the more critical are the Food and Drug Administration, state licensing boards, state insurance commissions, the U.S. Justice Department, the Federal Trade Commission, the Office of Inspector General, and the Occupational Safety and Health Administration.
• Several public health agencies play key roles in the healthcare system. These include the National Institutes of Health, the Veterans Health Administration, the Centers for Disease Control and Prevention, the Department of Health and Human Services, the Health Resources and Services Administration, and the U.S. Public Health Service.
• Insurance providers include insurers and insurance brokers, managed-care organizations, consumer-directed plans, and pharmacy benefit managers.
• The final ingredient in the healthcare system, patients (consumers) , affects the nature and delivery of healthcare as individuals receive care from the system.
As shown at the center of the system in Figure 1.1, various healthcare providers are influenced by and influence the other publics and stakeholders. Healthcare providers include the following:
Figure 1.1 The healthcare industry: A macro view Healthcare provider Insuranceproviders Regulators Suppliers Buyers Public health agencies Patients (consumers) f01.01_HCA340.ai Healthcare Organizations Defined Chapter 1 • Individual physicians • Physician groups • Clinics • Hospitals • Diagnostic centers • Outpatient care facilities • Surgical centers • Nursing homes • Dental services • Home health agencies • Alternative medicine and healthcare providers • Pharmacies These publics and stakeholders and their roles within the healthcare industry are explored in more detail throughout this book.
In some ways, the healthcare industry is like many others—for example, it is subject to gov - ernment regulation, just as many other industries are. In many other ways, however, the healthcare industry is unique. A primary difference between the healthcare industry and other industries is how healthcare organizations are funded. Table 1.1 compares the health - care industry with industries with which most consumers are familiar—the manufacturing and service industries. Table 1.1 Comparison of the healthcare industry with other industries Healthcare industry Manufacturing industryService industry Financial goal For-profit NonprofitFor-profit For-profit Funding sources Patients Insurance Government DonationsCustomer s Customer s Customers Mostly patients Some businessesPurchase agents Customer s Occasionally purchase agents Who makes purchase decision Patients Providers Insurance GovernmentCustomer Customer Government influence Many laws and regulators in all areasHeavy (aircraft) Minimal (clothing)Heavy (airlines) Minimal (hotels) Professional requirements Extensive throughout Common (e.g., in design and research and development)Minimal Some in special areas (e.g., pilots) The Healthcare Environment Chapter 1 In addition to being influenced by publics and stakeholders, all organizations are influenced by and must adapt to external and internal forces. Let’s take a look at the unique and rapidly chang- ing environment facing healthcare today.
1. 2 The Healthcare Environment An organization’s external environment consists of the total set of forces that influence opera - tions that are not within the organization’s boundaries. A standard analysis of the external envi - ronment divides it into semicontrollable and noncontrollable forces.
Semicontrollable Forces Semicontrollable forces are forces that act on an organization but that managers can mitigate by using their influence, thus rendering the forces somewhat controllable. What follows are examples of semicontrollable forces that have an impact on healthcare organizations, along with the means of influence a management team can employ to help mitigate those forces (Ramundo, 1994).
Force Means of influence Patients (customers) Quality of healthcare services (product) Pricing Methods of delivery (place or distribution) Promotional efforts Suppliers Pharmaceutical companies Medical equipment providers Medical care suppliers (e.g., bandages) Information technology equipment providers Purchasing procedures Bargaining/negotiation tactics Local community Advertising Public relations activities Human resource practices Financial institutions Quality of financial record keeping Types of assistance sought Unions Human resource practices Negotiation/bargaining tactics Stockholders Dividend policies Quality of financial record keeping Communications with shareholders Source: Based on Ramundo, B.A. (1994). The bargaining manager. Westport, CT: Praeger Publishing. The Healthcare Environment Chapter 1 As shown, managers throughout an organization can influence the various forces as part of a healthcare facility’s daily, weekly, and long-term operations. Patients, who are in essence a hospital’s customers, can be influenced through effective marketing activities and through the quality of care they receive. The local community may be receptive to various public relations actions and may respond favorably to the methods employed by the human resource (HR) department for hiring, firing, layoffs, pay raises, promotions, and other actions. The finance department plays a key role in maintaining quality associations with financial institutions and shareholders. Top management, working in conjunction with the HR department, shapes the nature of the relationship with any union, including a union that represents key personnel, such as nurses.
Noncontrollable Forces Noncontrollable forces are those forces that act on an organization and that managers are unable to mitigate through their influence. Noncontrollable forces include the political, social, economic, technological, and competitive factors that influence the operations of a healthcare practitioner and healthcare organizations. In each circumstance, managers monitor and adjust to the impacts of these forces.
The Political Environment Political forces exhibit a major impact on the strategic, tactical, and operational direction of healthcare organizations. Government actions can affect the nature of the healthcare industry in five main ways:
• Laws, regulations, and regulatory agencies • Courts and court decisions • Taxation and tax policies • Government subsidies and loans • Government competition with private enterprise Healthcare managers consider and respond to these activities, adapting operations to help effec - tively navigate the challenges and opportunities that emerge.
Laws, Regulations, and Regulatory Agencies Beyond the Patient Protection and Affordable Care Act of 2010, numerous laws and agencies are part of the healthcare environment. Table 1.2 provides a list of some of these regulations and the agencies that oversee them as they apply to healthcare. The Healthcare Environment Chapter 1 Table 1.2 Laws and agencies affecting healthcare Laws and agenciesAffect on healthcare Medical malpractice/liability laws Patient protection Quality of medical services U.S. Social Security Administration Medicare Disability payments Medicaid/Children’s Health Insurance Program Access to healthcare Payments to providers Food and Drug Administration Legality and delivery of medical products Fair labor practices Equal Opportunity Employment Commission Civil Rights Act of 1964 Equal Pay Act of 1963 Americans with Disabilities Act of 1990 Rehabilitation Act of 1973 Hiring, pay, and promotion discrimination National Labor Relations Board Other national labor laws (e.g., Taft-Hartley Act) Union activities, include bargaining and grievances Environmental Protection Agency Disposal of medical waste Oversight of use of radioactive material Health Insurance Portability and Accountability Act of 1996 Patient privacy Patient safety Occupational Safety and Health Administration Safe work practices for all employees Genetic Information Nondiscrimination Act of 2008 Employee protection Patient protection Family and Medical Leave Act of 1993 Employee assistance Responding to the many issues related to these and other healthcare regulations requires the attention of managers at all levels in healthcare organizations. Many of the laws affect the domain of the HR department, though they are not limited to that area. Physicians, nurses, information technology specialists, and others must also carefully guard against violating any of these provi - sions. Top-level executives should expect to monitor each legislative session to ensure that their organizations can adapt to any newly enacted laws.
Courts and Court Decisions The court system has a direct impact on the delivery of healthcare services. Two primary areas in which the courts become involved are the legality of medical actions and issues related to liability.
In the first area, courts determine what is legal or illegal with regard to various medical actions.
Among the most controversial, the 1973 Roe vs. Wade decision created legal protection for women to receive abortion services. However, many states have created statutes that limit the nature of this service, including establishing conditions under which an abortion can be performed The Healthcare Environment Chapter 1 with regard to the stage of a pregnancy, as well as requiring counseling prior to the actual surgery, parental consent for minors, and mandatory waiting periods. Clinics in some states have encountered regula- tions that make providing abortions nearly impossible.
Another example of the courts determin - ing the legality of medical actions is the 2012 landmark decision in which the U.S.
Supreme Court upheld many of the provi - sions of the Affordable Care Act. Although some state legislatures continue to seek ways to limit implementation of this act by cutting funding for various provisions within the statute, healthcare institutions are required to honor the court’s decision.
The second area includes medical malpractice laws, which vary by state and which may include provisions that limit the amount of damages that medical providers must pay in cases of malprac - tice. Such provisions have been implemented because, in the past, payments for medical liability decisions had begun to grow at exponential rates. Physicians and healthcare organizations sought to respond with medical malpractice insurance coverage and by changing their practice patterns.
In many instances, however, the costs of such policies have become prohibitive.
Healthcare managers remain acutely aware of the court system’s impact. Providers have been forced to respond to regulation of various services, decisions regarding patient privacy, and the costs of liability insurance and payment in which lawsuits have affected the physician or health - care provider.
Taxation and Tax Policies Taxation is another noncontrollable factor that affects physicians, patients, and healthcare organi - zations. Income taxes are paid by physicians, many of whom incorporate in order to take advantage of various provisions related to liability and tax deductions. Patients pay taxes related to healthcare in the form of payroll deductions for Medicare, Social Security, and disability coverage. In addi - tion, for-profit healthcare organizations face taxes on income earned by the organization.
Tax policies influence the amount of money a person has available to pay for healthcare services, including health insurance and preventive care. For example, in 2012 the “Bush tax cuts” from early in the new century were allowed to continue for all individuals earning $400,000 or less and for couples earning $450,000 or less. Some of these benefits may have assisted in paying for healthcare. Another example is the provision in the Affordable Care Act that stipulates that, as of 2014, individuals and families who do not purchase health insurance will be taxed. Additional tax policies regarding high-income individuals and Medicare payments were part of the national legislative agenda in early 2013.
Managers in healthcare settings monitor each legislative session in order to understand the effects on any new tax policies. As the policies occur, these organizations must implement any required changes. © iStockphoto/Thinkstock ▲ ▲ U.S. Supreme Court decisions have resulted in major changes in the healthcare profession. The Healthcare Environment Chapter 1 Government Subsidies and Loans The federal government subsidizes the healthcare industry through Social Security, Medicare, and Medicaid payments. Many practicing physicians have begun to reject Medicare and Medicaid patients, because the reimbursement levels are low enough to increase concerns about covering costs. Individual doctors and various types of healthcare practices remain aware of the challenges associated with governmental actions in these programs (Walsh, 2012).
Government Competition with Private Enterprise The primary example of governmental “competition” with private enterprise would be the VA, which offers healthcare coverage to military veterans. Because many veterans are unable to afford health insurance, the VA provides their only access to healthcare. In this sense, the VA “takes away” customers from private health insurers, although the VA encourages veterans to supplement their VA benefits with other forms of private insurance (U.S. Department of Veterans Affairs, n.d.).
The VA also competes with private enterprise to attract and retain a qualified workforce. A key issue that managers in any organization face when recruiting talent is compensation. According to a 2012 study conducted by the U.S. Congressional Budget Office, the total compensation (wages and benefits) for federal workers whose highest level of education was a high school degree or some college averaged 36% higher than the compensation of comparable workers in private enterprise.
By contrast, the compensation for federal workers who had earned a professional degree or a doctorate averaged 18% lower than comparable private-sector workers. Factors influencing these differences include the government funding of certain benefits, such as pension plans, which are available to most federal employees but not to private-sector employees. Managers within federal agencies such as the VA must consider these sorts of differences, especially when competing with the private sector to attract highly skilled and experienced workers.
Government funding also affects other issues related to recruiting and retaining qualified talent within the VA, including the quality of patient care and facilities. For many years, critics of the VA have argued that waiting periods for care are too long, that the facilities in many places are in poor repair, and that many veterans have become so discouraged with the VA that they no longer seek treatment there. Recently, however, the VA has begun receiving greater government funding, making it able to provide enhanced services to veterans.
The Social Environment The social environment surrounding healthcare delivery and management may be divided into two main factors: (1) changing demographics and (2) emerging cultural and subcultural trends.
Both employees and managers must understand these forces and then adapt to them at the indi- vidual, unit or team, and organization levels.
Demographics Demographics are population characteristics. The U.S. population has recently experienced some important shifts in demographic features—the nation’s population has increased, life expectan - cies are increasing, the overall population is aging, and significant shifts in population location have occurred. Each change creates a new environment in which healthcare officials operate.
The increasing population within the borders of the United States leads to one obvious new chal - lenge: the need for a greater number of physicians and medical care providers. The enticement for people to enter the healthcare field may lessen as the costs associated with obtaining a medi - cal degree rise. Shortages of physicians and nurses have been experienced in many parts of the c ou nt r y. The Healthcare Environment Chapter 1 An increase in life expectancies, combined with the aging of the population, generates several nuances. New areas of medicine, such as the delivery of services to the elderly and the demand for hospice care, have grown in importance. The medical community has long recognized that for many people, the greatest demands on the healthcare system occur in the final five years of life. The larger percentage of the U.S. populous that is 65 or older has placed a strain on nursing homes, emergency rooms, and elderly care specialists. Even standard programs, such as com- puted tomography (CT) scan and magnetic resonance imaging (MRI) facilities, find that many patients are senior citizens (Wiener & Tilly, 2002).
Population shifts occur in two areas. First, increasing urbanization has left many small towns and communities with diminished populations. The result is a disincentive for a physician to build a practice in a rural setting. Citizens in many locales find that they must travel longer distances to receive basic services and access to specialists, unless a hospital has opened a satellite clinic in the area. Second, populations have begun to move from some areas, such as the “rust belt” of the Northeast, and relocate to other parts of the country, such as the South and Southwest. This transfer of location often corresponds with life events such as retirement. Thus, even as some cities encounter a reduced need for healthcare providers, demand continues to grow in others.
Cultural and Subcultural Trends Numerous cultural and subcultural trends influence the demand for and delivery of healthcare services. One of the most highly visible trends is the AIDS epidemic that began in the 1980s, which has forever altered the healthcare industry. Some of the many changes include greater pre - caution when handling blood and bodily fluids, the use of gloves and masks when making contact with patients, and the reporting by hospital administrators of cases of infection.
Cultural attitudes about certain behaviors and activities can also influence the efficacy of health - care services. For example, the development and administering of new medicines and vaccines intended to prevent the spread of other sexually transmitted diseases, such as the human papillo - mavirus virus, met with controversy when some school administrators suggested giving the vac - cine to all students (Stein, 2008). Although there has been growing acceptance of other programs, such as distributing condoms to high-risk individuals and offering free hypodermic needles in areas of high drug use, the challenges remain as some view these activities in moral and religious, rather than medical, terms.
Another trend that poses new challenges within the healthcare community is the onset of puberty at a younger age by an increasing number of children. Well aware of the increased sexual desire and experimentation that accompany puberty, companies have responded with “age compression marketing” programs, designed to target children aged 10 through 12 with more sexually provoc - ative advertisements and products (Clow & Baack, 2012). Many leaders in the healthcare industry, such as the American Academy of Pediatrics, have tried to respond in ways that acknowledge the precarious situation this type of marketing creates.
Popular culture continuously evolves and creates new trends that affect the healthcare industry.
Shifting attitudes about sexuality, casual drug use (most notably marijuana), and same-sex mar - riage keep healthcare organizations in a constant state of flux as they attempt to adapt to meet the needs of the population. For example, given changing attitudes toward, as well as a dramatic increase in, same-sex marriages during the past decade, same-sex couples now seek access to health insurance policies and extension of family visitation and healthcare decision policies to partners.
Lifestyle choices also influence the medical community. The general trend in many communities throughout the United States has been to make healthier lifestyle choices by quitting smoking, The Healthcare Environment Chapter 1 improving dietary intake, and lowering consumption of alcohol. In response, many health- care organizations offer treatment programs to assist individuals seeking to live healthier lives.
Similarly, to combat drug use, some communities now require a prescription to obtain certain allergy medicines containing ephedrine, which can be used in the production of methamphet - amine, a popular street drug. Pharmacies and physicians now deal with this new requirement.
Economic Environment Economic conditions influence the healthcare system in many ways. When an economy encoun - ters a recessionary period, those who lose jobs may also lose health insurance. Choices are made regarding which medicines to buy, which to ration, and which not to take. This, in turn, can lead to greater medical problems in the future. Another economic factor that influences who receives care is the inflation rate. The medical community has, over the years, experienced increases in costs at a rate higher than the national inflation rate. Once again, the result can be limited access to the best medical care.
Technological Environment Technology has a tremendous impact on most facets of daily life, and healthcare is no excep - tion. Five major trends are associated with the technological environment surrounding health - care: (1) the presence of new industries, (2) new products and services, (3) product and service improvements, (4) improvement in methods of production, and (5) a dynamic impact on employ - ees in the healthcare community.
New industries associated with healthcare include those associated with “biomed” and “bio - te ch .” Biomedical engineering is the application of engineering principles and design concepts to medicine and biology. This field seeks to close the gap between engineering and medicine by combining the design and problem-solving skills of engineering with medical and biologi - cal sciences to advance healthcare treatment, including diagnosis, monitoring , treatment, and therapy . Biotechnology involves the use of living systems and organisms to develop or make use - ful products—or any technological application that uses biological systems, living organisms, or derivatives thereof—to make or modify products or processes for specific use ( http://www.
biomedcentral.com ; http://w w w.bio.org ).
New products and services emerge in a variety of medical circumstances. As an example, recent improvements in digital technology make it possible to transmit and view digital X-rays and other images over long distances. As a result, emergency workers can, in some circumstances, provide valuable information to hospitals from remote locations ( http://www.digitalimaginginstitute.
com ). Each year, new medicines and vaccines also become available. Physicians and other health - care workers try to make sure they understand the uses of these new products in comparison with those that already exist.
Improvements in products, services, and production methods continually change the landscape of healthcare. For example, an MRI device has been improved by becoming more “open,” thus creating less stress for patients who may be dealing with claustrophobia issues. Even something as simple as a nasal spray has taken the place of injections for some vaccines.
Improvements in production methods occur when healthcare organizations and physicians iden - tify more cost-efficient and effective methods of maintaining an office or practice. In many areas of healthcare, certain tasks, including various forms of rehabilitation, have been specialized, such as into physical, psychological, and vocational rehabilitation programs. The Healthcare Environment Chapter 1 Technology has generated a profound impact on workers and jobs. At the most basic level, an increasing need for various types of computer skills affects nearly every healthcare vocation.
Furthermore, different skill sets are now required in order to operate some forms of medical equipment. More recently, the use of social media and instant messaging have begun to influence the medical community in new ways, including Internet-posted reviews of medical care provided by individual physicians and medical institutions (http://w w w.healthgrades.com).
Competitive Environment Healthcare managers, for better or for worse, must cope with a dynamic competitive envi - ronment. Individual doctors, practices, and institutions face at least three levels of competi - tion—service versus service, organization versus organization, and industry versus industry.
The nature of the competition includes vying for customers, suppliers, financial resources, and human resources.
A doctor in an individual practice must maintain a sufficient base of patients for the operation to remain viable. Specialists face the prospect that others may offer the same services within a given region or community. Hospitals encounter competition not only with each other but also with evolving clinical venues that deliver cancer treatments, heart procedures, and other specialized services. Organizations that offer physical rehabilitation experience competition from individu - als and groups providing chiropractic services.
The entire healthcare industry must also cope with the challenges of various closely related industries, including unregulated herbs and vitamins, alternative medical practices that are not regulated by the federal government, and treatment programs provided in other countries. U.S.
pharmacies near the Canadian and Mexican border may lose customers who travel to those nations to purchase prescriptions at lower prices, even though the quality and correct dosage may not be guaranteed in any way.
Managers in healthcare institutions understand that the organization must have a sufficient level of “customers” (patients), that the best medicines and technologies are needed, and that they must be able to obtain access to all relevant sources of financing and funding. Most important, competition occurs as various major medical practices seek to lure physicians, nurses, and other key employees from each other.
Organizational Stakeholders Recently, management theorists have reexamined the concepts of semicontrollable and noncon - trollable forces and have recast them as all constituting various organizational stakeholders. As discussed earlier in this chapter, a stakeholder is a person, group, or organization holding a vested interest in an organization’s well-being and activities (Bedeian, 1993; Freeman, 1984). For instance, any pharmaceutical company that uses animals as part of its research and product test - ing will likely encounter a group such as People for the Ethical Treatment of Animals (PETA), which is opposed to such practices. PETA would not be considered as either a semicontrollable or noncontrollable force in the environment, yet the organization might exhibit some influence on the company. Figure 1.2 provides a visual depiction of the interactions between various stake - holders and managers in a healthcare unit.
The various stakeholders in the healthcare industry and the effect of each will be discussed in more detail throughout this book. The Healthcare Environment Chapter 1 As you’ve learned in this chapter, healthcare management requires not only the understanding and overseeing of a variety of functions within an organization, it also requires the ability to respond to and anticipate myriad forces and influences from outside the organization. It is man- agement’s responsibility to balance the interests of all of these factors and groups. This may seem like an impossible task, but when broken down into the five functions—planning, organizing, staffing, leading, and controlling—the management process becomes much more accessible. As we explore each function in the chapters that follow, we will examine in depth the challenges that face healthcare management in striving to adapt to the constantly evolving internal and external environments. Before delving into the details of each function, a brief look at the fundamentals of the management process may be useful.
Figure 1.2 Organization stakeholders Executive management team Employees Interestgroups Local community Customers Government Retail outlets Suppliers Unions Media Shareholders Financial institutions Educational institutions f01.02_HCA340.ai The Healthcare Environment Chapter 1 CASE Family Pharmacy Local family-owned pharmacies may be found in small towns and large cities throughout the United States. Family Pharmacy, which is operated by Sissy and John Mulvaney, has filled prescriptions for local customers for the past two decades. To support the store, Sissy and John sell additional prod- ucts, such as household cleaners, greeting cards, candy, and keepsakes.
Small pharmacies face unique circumstances. Owners must cope with a variety of challenges from numerous sources. First, they maintain constant contact with physicians and other medical practices in the community. In the past decade, doctors have ordered an increasing number of prescriptions over email and the Internet. Store employees must monitor the website, watching for new requests while still taking care of walk-in traffic and prescriptions sent by phone and fax. The pharmacy staff also contacts physician offices for renewals when patient prescriptions have expired.
Sissy and John have developed contracts and arrangements with various prescription drug plans.
Some of these plans are part of standard health insurance policies, while others are run by indepen - dent companies. The pharmacy adapts to the prices and conditions dictated by each company.
Drug laws constantly change. One of the more volatile areas involves pain medications. State gov - ernments have become increasingly wary of “doctor shopping,” in which a patient obtains excess amounts of pain medicine to resell or to use personally at levels higher than the physician intended.
In addition, some medicines have moved from requiring a prescription to a version that can be offered over the counter. Others, such as some allergy medicines, now require prescriptions where none used to be necessary.
The Family Pharmacy has also experienced shifts in consumer needs. Working customers want to be able to fill prescriptions late at night, even on the weekends. Convenience has become an impor - tant part of serving the public. Customers become highly agitated when they have to wait for pre - scriptions to be filled.
Several big box stores, notably Walmart, provide pharmaceutical services in a way that is attractive to consumers. These organizations can bargain for better prices on certain medicines with drug companies, because they can place volume orders. In addition, potential customers can shop for many other types of items while their prescriptions are being filled. Sissy and John try to counter this challenge by providing personal care and careful advice regarding drug interactions for both prescription medications and over-the-counter products.
Pricing continues to create challenges. High drug prices for new medicines anger many clients.
When a drug reaches the point at which a generic version may be offered, the price drops signifi - cantly. When recessions occur, the staff is sometimes asked to partially fill orders by customers trying to cut costs or to spread them out by customers buying smaller amounts of the medications over time.
Sissy and John must make sure they fill out all required government forms. They collect and pay sales taxes on nonprescription items. They also must comply with all dictates from state health agencies. The many challenges of operating the business keep them constantly monitoring all that takes place in the world of healthcare.
1. What semicontrollable forces influence the Family Pharmacy? 2. What political forces are present in this situation? 3. What social forces might influence the Family Pharmacy? 4. What economic conditions might influence this situation? 5. What competitive forces are present? 6. Describe the key stakeholders in this situation. The Five Management Functions Chapter 1 1.3 The Five Management Functions The five management functions are planning, organizing, staffing, leading, and controlling human and other resources to achieve organizational goals. Each function applies to healthcare organizations, and each is adapted to the specific circumstances that the organizations encounter.
Planning Managers use planning to choose appropriate organizational goals and to identify courses of action to best reach those goals. There are four steps of the planning process:
1. Assess the company’s internal and external environments to discover company strengths and weaknesses and emerging opportunities and threats. 2. Determine the goals that the organization will pursue. 3. Create strategies, tactics, and operational plans to achieve company goals. 4. Allocate organizational resources to pursue the company’s goals.
Assessing the Environment Planning begins when managers understand the contexts in which they operate. The planning process begins with an assessment of the company’s operations. A typical assessment examines a combination of internal and external forces and is known as a SWOT analysis, which stands for strengths, weaknesses, opportunities, and threats (David, 1993).
The overall assessment of the organization’s internal environment identifies its strengths and weaknesses in the minds of the management team. Strengths may include a high-quality heart health facility or a well-known record of quality medical research. Weaknesses include any poorly managed operations, such as billing procedures, preventive care activities, or information tech - nology efforts.
The assessment of the organization’s external environment identifies opportunities and threats.
Opportunities arise from such factors as political and legal forces, social trends, economic con - ditions, technological changes, and competition. For example, a new medical treatment pro - gram might offer an opportunity for a hospital to deliver a specific type of service. Social trends, such as an increasing emphasis on quitting smoking, result in lifestyle changes in the general populace. Economic conditions shift access to healthcare. Technological changes create new or improved medical products and techniques. Competing healthcare organizations may seek to merge in an effort to build a more powerful alliance. Threats may result from poor economic conditions, new competitors, bad publicity, or medical treatments that have proven to be inef - fective. New laws, such as the Affordable Care Act, create advantages for some organizations and threats to others.
Additional information about environmental analyses will be provided in Chapters 4 and 5.
Determining Organizational Goals Organizational leaders, regardless of the entity’s size, should establish goals and objectives on at least three levels: strategic, tactical, and operational. Strategic goals are the long-term, sweeping targets a company seeks to pursue. Peter Drucker (1972) identified a set of strategic goals that would apply to healthcare organizations:
• Market share (patients for a physician or a hospital in a community) The Five Management Functions Chapter 1 • Innovation (new or improved medical services) • Productivity (patients treated per doctor, nurse, or department) • Physical and financial resources (funds for the most modern, advanced equipment) • Profitability (profits in for-profit organizations; funds for nonprofits) • Manager performance and development (improved line and staff management) • Employee performance and attitudes (satisfaction with the organization, pay, benefits, coworkers, and the job itself ) • Social responsibility (ethical medical and financial practices) These more general performance outcomes can be subdivided into tactical goals. Tactical goals are set in the following functional areas:
• Various medical services • Quality control • Marketing • Sales • Accounting • Finance • Information technology • Research and development • Human resources All of these goals guide managers in the various areas of the organization. It is the responsibility of the top management team to make sure that tactical goals mesh with strategic goals.
Finally, the company identifies operational goals, or the performance targets for everyday activi - ties, such as visiting patients, finalizing medical tests and analyses, completing daily reports and paperwork, and processing insurance and billing information.
At each level of goals, two common denominators are efficiency and effectiveness. Efficiency measures how productively resources are used to achieve a goal. An organization’s efficiency, or performance level, is based on how well managers plan and develop strategies to meet goals.
Efficiency has been described as “doing things right” with little wasted motion or resources, such as unnecessary medical tests or treatments. Effectiveness , in contrast, is “doing the right things,” which include patient well-being, recovery rates, and other activities, such as end-of-life services. Effectiveness means that the organization’s efforts help it achieve the goals that will lead to growth, survival, and continued success over time (Drucker, 1972).
Creating Plans The development of strategic, tactical, and operational goals leads to the creation of plans to achieve those outcomes. A strategy provides the general direction that an organization will pur - sue, along with methods to obtain and use the resources needed to achieve long-term goals. An example of a strategy would be expanding a skin-rejuvenation practice into a medical spa organi - zation in order to increase revenues and widen a physician’s patient base.
Ta c t i c s are the plans that support strategies. An example of a tactic would be to increase adver - tising in order to reach potential customers for a medical spa. Another tactic would be to expand recruiting efforts to ensure a high-quality nursing staff for a nursing home. The Five Management Functions Chapter 1 Operational plans direct an organization’s daily activities, such as work schedules, ordering inventory, and routinely complet - ing patient charts. Operational plans help ensure that supervisors and employees are clear about their everyday responsibilities, including setting schedules for the upcom - ing work week and managing inventories through reordering systems.
Allocating Resources The final part of the planning process involves deciding how to obtain the neces - sary labor (human resources), equipment, and supplies (general resources) to create the product or service. Managers identify the level of resources needed to meet com - pany goals, including the necessary revenue. A budget outlines the sources of revenue an orga - nization will acquire in the coming year, along with expected expenses, and, in some cases, the profit target to be achieved. Organizing The organizing process establishes the task and authority relationships that allow people to work together to achieve an organization’s goals. Organizing consists of three primary tasks— job design, departmentalization, and creating an organizational structure (Baack & Wisdom, 1995)—all of which will be explored in detail in Chapters 7 and 9.
Job design occurs when managers determine the tasks that need to be done, who will perform them, and what selection criteria will be used to choose employees and place them on the job.
Departmentalization involves organizing people into different departments or divisions in which collections of tasks are placed together, such as accounting, marketing, and production. Creating an organizational structure occurs as managers identify the amount of influence and responsi - bility each individual and group should have. Drucker (1972) pointed out that organizing often requires designing and evaluating organizational processes and systems to initiate work and to determine whether any changes need to be made.
The organizing process specifies an organizational structure , or the formal system of task and reporting relationships that coordinates the activities of members, so that employees can work together to achieve organizational goals. Organizational design is the process by which managers make specific organizing choices that result in the particular kind of organizational structure they will use.
Staffing Staffing includes the recruiting, selecting, training, evaluating, compensating, and disciplining of employees within the organization. Staffing has become a preeminent function of contempo - rary managers in the healthcare industry. For organizations to succeed, providers require quality teams. In an industry that increasingly experiences shortages, such as in the area of nursing and general practice physicians, staffing remains a key element in achieving success. For example, physician services are crucial to a hospital’s success, though hospitals are unique in that doctors © moodboard/SuperStock ▲ ▲ Operational plans include creating the menu for a hospital’s food service program. The Five Management Functions Chapter 1 are often not employed by them. Consequently, HR offices in hospitals actively recruit doctors to become part of the medical staff. (Staffing will be discussed in detail in Chapter 9.) Leading Leading includes motivating, coordinating, and energizing individuals and groups to work together to achieve organiza- tional goals. For many years, conventional wisdom stated that managers plan, whereas leaders inspire. Today, however, man - agers are expected not only to plan and organize but also to motivate and develop employees. Effective managers lead by using their authority, personality, influence, and persuasion and communication skills to create harmony among all employees within the organization or its divisions.
An effective leader maintains a motivated and committed workforce. A quality leader remains open to suggestions from colleagues and takes the time to listen to and mentor employ - ees. Furthermore, leaders prepare employees for change and provide a guide to the future by setting goals, motivating employees, and determining employee growth. Theorist Mary Parker Follett (1868–1933), who was a trailblazer in research - ing theories of organizational behavior, wrote, “Managers often influence others to get things done” (Parker Follett, 1949).
(Leadership will be discussed further in Chapters 11 and 12.
Controlling Controlling establishes accurate measuring and monitoring systems to evaluate how well the organization has achieved its goals. Control systems provide standards for assessing and moni - toring the use of resources and the quality and quantity of productivity. Control systems assess effectiveness at the strategic, tactical, and operational levels. These systems, found throughout the organization, include financial controls, budgets, authority structures, production planning, and quality control. The standard control process consists of four steps:
1. Establish and review standards set in the planning process. 2. Measure performance at the strategic, tactical, and operational levels. 3. Compare performance outcomes with the standards that were set. 4. Make a decision:
• Successful performance should be rewarded.
• Unsuccessful performance should be corrected.
The controlling function allows managers to ensure that goals are met. When goals are not met, managers seek ways to improve performance in order to meet those standards.
The ability to measure performance accurately and to regulate organizational effectiveness is the outcome of the control process. To exercise control, managers must decide which goals to moni - tor. Goals pertaining to wellness, recovery rates, financial well-being, and patient satisfaction © Comstock/Thinkstock ▲ ▲ The control process helps ensure that an organization will meet its strategic, tactical, and operational objectives. Management in Healthcare Organizations Chapter 1 require control systems that deliver the information necessary to determine whether perfor- mance targets have been met.
Control systems will be discussed further in Chapters 13 and 14.
1.4 Management in Healthcare Organizations Now let’s take a look at the managerial roles that are played at various levels of healthcare orga - nizations. Like most companies, healthcare organizations operate across a variety of functional activities. Among them are healthcare services, marketing programs, finance and accounting departments, HR activities, and information technology. As noted in the fable at the beginning of this chapter, these functional activities resemble the many parts of an elephant, and managing them requires unique skills combined with standard management tactics.
Marketing programs consist of traditional methods, such as advertising and public relations.
Newer marketing trends include combining medical services with other activities and respond - ing to the opportunities and challenges created by the Internet and social media. Finance and accounting departments are charged with raising funds to continue operations, creating budgets to allocate resources, filing all legally required financial documents, and tending to other opera - tions, such as payroll, accounts payable, and accounts receivable. Managers in these departments respond to unique issues associated with healthcare.
Human resource departments seek to hire, train, and retain employees for positions as routine as janitorial services and as sophisticated as heart transplant experts. Many distinctive issues influ - ence the healthcare environment, and HR managers are expected to respond in the appropriate fashion. Information technology includes a rapidly changing world influenced by digital signals, connectivity challenges, privacy concerns, and a variety of additional innovations that hospitals and healthcare facilities must adopt in order to remain competitive.
Note that management functions and operations differ in for-profit, non-profit, and government organizations, primarily because of differences in strategic objectives and goals. Yet, managerial roles and functions are often similar, despite different contexts. Therefore, this chapter focuses on the similarities that can be found across organizations.
Line and Staff Managers Two types of managers appear universally in organizations: line managers and staff managers (Reilly, Minnick, & Baack, 2011).
Line Managers Line managers are directly responsible for a product line or delivery of a service by the orga - nization. They have the authority to make decisions and usually have people reporting to them.
In healthcare, line managers supervise nurses, hospital employees, and those who provide addi - tional services, such as radiology, pathology, and psychiatric care.
Staff Managers Staff managers lead departments that serve in supporting roles, including accounting, human resources, procurement, marketing, and logistics. Although critical to the organization’s success, these functions are not involved in the direct delivery of healthcare services and do not directly produce revenue. Management in Healthcare Organizations Chapter 1 Figure 1.3 An organization chart f01.03_HCA340.ai Board of DirectorsPresident/CEO Board of directors member Medical executive committee Medical staff Department chair, departments, committees of medical staff VP mission integration VP planning & business development VP operations CFO/VP nance Director human resources CNO/VP Patient care Acute rehab, ICU, surgical unit HR businesspartner Corporate responsibility Information systems Pastoralservices Behavioral health, physician practice management Inpatient care HR representative Accounting/ supply chain Heart center Volunteer services Occupational health anesthesiology Peri-operative services Recruiter Decisionsupport Cancer center Ethics/mission services Marketing, PR,communityoutreach, emergency preparedness House supervision Admissions/ registration Engineering Home health/ home medical Education Care management Environmental services Performance & quality improvement & infection control Professional billing Nutritionalservices Pharmacy Laboratory Respiratory care, sleep lab Radiology/ diagnostic imaging services Therapy services Risk management Women’s services Medical staff services Hospital Organizational Chart One of the easiest ways to see the distinctions among the varieties, levels, and types of manage - ment is through an organization chart. An organization chart uses box-and-line illustrations to represent the formal relationships of positions of authority and the organization’s official divi - sions of labor. Figure 1.3 provides an example of an organization chart. Management in Healthcare Organizations Chapter 1 Managerial Levels and Roles Even though managers function in similar ways, each performs different tasks and operates on different levels within the organization. Organizations typically include three levels of manage- ment: front-line supervisors, middle managers, and top-level managers or executives. All three types of managers oversee both line and staff organizational activities.
Front-Line Management Front-line supervisors (also called first-line supervisors ) are the first level of managers above nonmanagerial, or front-line, staff. These supervisors report to middle- and executive-level man - agement about the organization’s daily activities as carried out by the front-line staff they manage.
Front-line supervisors work in the various divisions, operating units, or departments to ensure that the organization’s short-term goals are achieved. An example is the supervisor of the insur - ance claims department, who is responsible for making sure employees properly file insurance claims and then ensuring that patients receive correct bills with up-to-date information. Other front-line supervisor titles within healthcare include the following:
• Office manager • Head nurse • Director of community relations • Claims and adjustments director • Director of accounts payable/receivable • Procurement manager/supply officer Often, being a front-line supervisor constitutes the first step of a managerial career. When a supervisor effectively carries out the tasks involved, the person demonstrates the potential to move through the ranks of the organization to middle manager and some day executive manager.
The important function of the front-line supervisor is to provide direction, technical support, and training of personnel. Front-line supervisors carry out the plans of the middle and executive managers.
Middle Management Middle managers supervise the activities of front-line supervisors, while also interpreting the general, long-range objectives set down by the executive management team (Steers, Ungson, & Mowday, 1985). Middle managers look for ways to increase efficiencies within the organization.
For example, they determine how to help front-line supervisors and nonmanagerial employees use resources to reduce manufacturing costs or improve customer service.
Middle managers evaluate whether the functional goals and activities they supervise are appro - priate and make suggestions to executive managers regarding the functionality of their operating divisions. The suggestions that middle managers make to executive managers can sometimes increase organizational performance. An effective middle manager consults with the executive management team, offering comments and suggesting improvements.
Whereas front-line supervisors occasionally are promoted to become middle managers, many middle managers are professionals with academic credentials and additional corporate-level training. In the healthcare industry, a middle manager may have received training in the basics of both management and medical services. Due to their respective levels of learning and experience, individuals at the middle-management level may be hired without first having served as front-line supervisors. Management in Healthcare Organizations Chapter 1 WEB FIELD TRIP How are your management skills? Imagine you are the director of nursing at your local hospital. In this role, one of your primary functions is to act as a liaison between the nursing staff and the phy- sicians and hospital management. Take the quiz at http://w w w.mindtools.com to find out how you might perform in this role.
Under the “Toolkit” tab, select “Team Management.” On this page, click on the “How Good Are Your Management Skills?” link to access the quiz.
What did the quiz identify as your managerial strengths? In what areas could you use improvement? Top-Level or Executive Management Executives, not to be confused with the board of directors, establish organizational goals, decide how departments should interact, and monitor the performance of the entire operation. To p - level managers , or executive managers , seek to fulfill the organization’s overall mission. They also plan for and implement strategic goals, which form the basis for functional goals and specific operational objectives.
Top-level managers are held accountable by the various organizational stakeholders, including the board of directors for many healthcare organizations or any stockholders in for-profit hospi - tals. These managers are expected to achieve fiscal and operational success for the organization.
The CEO is an organization’s most senior manager. All other managers report to the CEO. In some organizations, the executive or top-level management team includes the CEO, the chief operating officer (COO), the president of the organization, and heads of the most important departments within the organization. At the core of the executive manager’s job is the task of planning and organizing to determine the organization’s long-term success (Mintzberg, 2009).
Managerial Competencies and Skills In the healthcare industry, to practice effectively, managers must possess a set of key competen - cies and skills, including technical knowledge, human relations skills, and conceptual skills (Katz, 1974). These competencies apply at the self, unit or team, and organization levels.
Technical Knowledge Technical knowledge is having the job-specific knowledge and techniques required to perform an organizational role. Supervisors need knowledge appropriate to the areas they oversee. For example, the accounting manager should have high-level accounting expertise with sufficient background in the field to manage the organization’s accounts. Likewise, a supervising radiologist should have sufficient experience and education in both running and maintaining the equipment, as well as the ability to lead a team to provide this essential activity.
Human Relations Skills Human relations skills are the ability to understand, alter, lead, and influence the behaviors of other individuals and groups. Supervisors and managers need to be able not only to lead and motivate others to complete the department’s ordinary operations but also to energize the team to high levels of activity when business demands it. Building trust constitutes an important ele - ment of human relations. Management in Healthcare Organizations Chapter 1 Conceptual Skills Critical thinking abilities, or conceptual skills, are the ability of managers to analyze and diag- nose a situation and to distinguish between cause and effect. Managers must be problem solvers and must have a variety of skills (operational, technical, mathematical, etc.) to draw on as prob - lems present themselves in the business.
Such knowledge, skills, and abilities are critical to managers as they engage the five functions of management during the workday. Table 1.3 suggests the relative emphasis on technical, human relations, and conceptual skills at various organizational ranks.
Table 1.3 Managerial focus Rank Skill emphasis Strategic: Top-level executives High conceptual Lower technical High human relations Tactical: Middle managers Moderate conceptual Moderate technical High human relations Operational: Front line supervisors Low conceptual High technical High human relations Self, Unit or Team, and Organization Skills The ability to apply technical skills applies to every aspect of the medical practice. Even a high- ranking executive in a hospital may become involved in patient care by providing hands-on services to patients. Therefore, technical skills are requisites at the personal, group, and orga - nizational levels. The same holds true for human relations skills. Conceptual skills remain most important at the strategic organization level. CASE Managing Diagnostics Suzanne Nelson faced a new assignment. Her responsibility, as director of internal operations, was to analyze the functioning of the Patient Diagnostics division of Memorial Hospital. The final prod - uct of her efforts was to write a report regarding the level of efficiency and effectiveness in that division.
The diagnostics division was subdivided into three departments: X-ray, CT Scan/MRI, and laboratory analysis. A supervisor was placed in charge of each operation. A common element of the depart - ments included a top priority of providing diagnostics in a timely fashion to physicians and medical personnel in the emergency room. Next, each unit completed nonemergency tests. The individual units were also charged with scheduling tests, compiling reports, and transmitting results to physi - cians in the hospital and to doctors in the community who had referred patients to the hospital for tests. The net result was a combination of activities that took place on a 24-hour basis for emergen - cies, along with the provision of services on a regular 8:00 a.m. to 5:00 p.m. schedule for nonemer - gency tests. (continued) Chapter Summary Chapter 1 Chapter Summary Management involves coordinating and overseeing the work activities of others so that activities are completed efficiently and effectively. Management processes apply to organizations, which are collections of people who work together and coordinate their actions to achieve a variety of goals or desired future outcomes. Healthcare organizations take the forms of for-profit, non- profit, and government agencies.
Organizations typically include three levels of management: front-line supervisors or manag - ers, middle managers, and top-level managers or executives. Two types of managers appear uni - versally in organizations: line managers and staff managers. Healthcare managers must possess technical knowledge, human relations skills, and conceptual skills to succeed. These competen - cies apply at the self, unit or team, and organization levels.
The five management functions include planning, organizing, staffing, leading, and controlling.
Managers coordinate these functions at the strategic, tactical, and operational levels.
An organization’s external environment consists of the total set of forces that influence opera - tions that are not with the organization’s boundaries, which includes semicontrollable and The immediate supervisors of the three departments reported to a middle-level manager charged with making sure that each unit functioned properly. The middle manager, titled director of patient diagnostics, is assigned the task of resolving any disputes between diagnostics and other depart - ments in the hospital. The director routinely meets with unit leaders to resolve issues and maintain the operations in each facility and attends meetings with middle managers from other functions, including emergency room care, accounting, patient care, and the head of the nursing team. The director also keeps in constant contact with medical providers in the community who send patients to Memorial Hospital for diagnostic services.
The director of internal operations serves as an intermediary between the hospital and other publics. The position’s responsibilities include creating contracts with providers of equipment and supplies, engaging in public relations activities on behalf of the hospital, investigating potential new uses for current services provided by departments, identifying new services that a depart - ment might offer, overseeing the budgeting process for the department, and interacting with the accounting department regarding billing amounts and insurance payments for various tests. The director functions as part of the top management team and is expected to provide input on activi - ties and strategies beyond the scope of the diagnostics department.
1. What managerial activities are performed by the X-ray, CT scan/MRI, and laboratory services department managers? How do these activities correspond with the materials presented in this chapter? 2. What managerial services does the director of patient diagnostics provide? How do these activi - ties correspond with the materials presented in this chapter? 3. What managerial activities does the director of internal operations provide? How do these activi - ties correspond with the materials presented in this chapter? 4. Describe the natures of the technical, conceptual, and human relations activities that these man - agers would perform. 5. How should Suzanne Nelson analyze the efficiencies and effectiveness of this division at the department and division levels? Key Terms Chapter 1 noncontrollable forces. Semicontrollable forces affecting healthcare consist of patients, suppliers, the local community, financial institutions, unions, and stockholders. Noncontrollable forces are the political, social, economic, technological, and competitive factors that healthcare manag- ers study and then create responses. The functional activities these forces affect include actual healthcare services, marketing programs, finance and accounting departments, human resource activities, and information technology.
Ke y Te r m s external environment the total set of forces that influences operations not within the organi - zation’s boundaries; consists of semicontrollable and noncontrollable forces front-line supervisor (or first-line supervisor ) a manager who manages front-line staff and reports to middle- and top-level managers about an organization’s daily activities of an organi - zation to ensure that the organization’s short-term goals are achieved line manager a manager who is directly responsible for a product line or delivery of a service by an organization management coordinating and overseeing the work activities of others so that their activities are completed efficiently and effectively management functions planning, organizing, staffing, leading, and controlling human and other resources to achieve organizational goals middle manager a manager who supervises the activities of front-line supervisors while also interpreting the general, long-range objectives set down by the executive management team operational plan a plan that guides and directs an organization’s daily activities organization a collection of people who work together and coordinate their actions to achieve goals and desired future outcomes organizational structure the formal system of task and reporting relationships that coordi - nates the activities of members within an organization staff manager a manager who leads a department that serves in a supporting role in an organi - zation, such as accounting or marketing stakeholder a person, group, or organization holding a vested interest in an organization’s well-being and activities strategy a plan that provides the general direction that an organization will pursue SWOT analysis a business analysis that assesses the strengths, weaknesses, opportunities, and threats within internal and external environments tactic a plan that supports an organization’s strategies top-level manager (or executive manager ) a manager who establishes organizational goals, decides how departments should interact, and monitors the performance of an entire operation Critical Thinking Chapter 1 Additional Resources American Academy of Nurse Practitioners www.aanp.org American Academy of Nursing www.aannet.org American College of Health Care Administrators w w w.achca.org American College of Healthcare Executives w w w.ache.org American Hospital Association www.aha.org American Organization of Nurse Executives www.aone.org Association of University Programs in Health Administration w w w.aupha.org Critical Thinking Review Questions 1. Explain how healthcare organizations differ from other organizations. 2. Define the term management. 3. Define the term organization and explain the three main forms of organizations. 4. What are the three main levels of management in organizations? What key functions does each one perform? 5. Explain the difference between a line manager and a staff manager. 6. What three key competencies and skills are required of healthcare managers? How do these competencies and skills apply at the self, unit or team, and organization levels? 7. What are the four steps of the planning process? What types of plans do managers prepare? 8. What three main tasks are associated with organizing? 9. Define staffing, leading, and controlling. 10. Define external environment. 11. What forces appear in the semicontrollable external environment? 12. What forces are present in the noncontrollable external environment? 13. What functional activities take place in the healthcare environment? Analytical Exercises 1. Describe what you believe would be the differences in the following activities for front-line supervisors, middle-level managers, and top-level executives in a healthcare setting:
• Amount of time spent planning • Planning time horizon (short versus long term; most important) • Carrying out specific or general duties on a daily basis • Amount of personal interactions with customers or patients in a healthcare setting 2. Explain how the following sets of functions are interrelated:
• Planning and organizing Critical Thinking Chapter 1 • Planning and staffing • Organizing and staffing • Staffing and leading • Planning and controlling 3. Using the list of strategic goals provided in this chapter, explain how they would apply to each of the three levels of management: front-line supervisors, middle managers, and top- level executives. What types of actions would each manager take to help achieve those goals? 4. For the following types of management positions, describe how each would interact with the forces present in the semicontrollable external environment. Then describe how each would experience and respond to the forces in the noncontrollable external environment.
• Line managers • Staff managers • Unit managers • Organization managers 5. Explain the interactions between the following sets of forces in the external environment, specifically regarding how they might affect healthcare management.
• Political forces and financial institutions • Economic conditions and suppliers • Social forces and stockholders • Technological forces and unions • Competitive forces and stockholders 6. In the next decade, which set of forces do you believe will have the greatest impact on the field of healthcare: the semicontrollable forces or the influence of one of the forces in the political, social, economic, technological, or competitive environment? Defend your answer.
