This article was written to examine and compare community verses system structure healthcare organizations. Our goal is to generate a discussion with health care industry thought leaders to better meet the needs of the communities we serve. The authors’ combined 72 years medical leadership experience was drawn upon to determine the impact of system (operating company model) and community (holding company model) on local health care delivery.
The evaluation criteria are the level of services required to provide excellent community care in a sustainable fashion. The support departments and operational leaders must manage in a just and respectful manner to recruit and maintain an excellent workforce. Rural communities face greater vulnerability than more populated areas since they frequently have only one hospital. A just delivery system can only be sustained when all people are treated fairly.
We will briefly explore service lines to effectively manage an integrated community focused health care delivery system. The list is not intended to be all inclusive but rather cover main services requiring administrative attention.
We conclude that both community and system models offer advantages and disadvantages suggesting a blended approach to optimize healthcare system performance.
- Holding company – limits system oversight and delegates significant control to market leaders to optimize market performance.
- Operating Company – consolidates power and control to optimize the entire system performance.
- Community based healthcare delivery – hospital and clinic in collaboration with independent, or owned/contracted services from nursing home, home care, subspecialties.
- System based healthcare organizations – integrated care delivery systems in multiple markets. While integrated systems vary in design, they typically are on a spectrum from a traditional holding company with few shared services to highly centralized control with many shared services.Analysis:
This study demonstrates that there is no superior way to provide administrative services since both models have strengths and weaknesses. For example, there are both advantages and disadvantages running a financial services line using a community/holding company model verses a system/operating driven model. Theoretically, financial services should have the same outcomes when basic financial principles are followed. In practice results deviate. The community model expects a local market to support capital investments but struggles when a system investment requires all markets to contribute their share. Local priorities can slow the investment in EMR or standardizing expensive radiology equipment that benefit the whole. The system model struggles when politics enter large capital decisions and deviate from a standard process to allocate a disproportionate share to one market over the remaining markets.
Information Services is an example where a system solution is superior to a community driven model. At this time, capital costs for EMRs are so large that they gain economies of scale when spread over many markets. The human talent is also a scarce resource and smaller markets typically cannot afford to employ all the necessary specialists to maintain these complex systems.
Most hospital and clinic organizations find themselves in tight labor markets (nurse and physician staff, for example). The community driven HR model is superior in its responsiveness to adjust hiring, retention strategies and compensation programs to meet the relevant market conditions. The system model with its relentless focus on standardization and inherent bureaucracy suboptimizes local operations. The case for system driven HR services is usually benefit administration providing economies of scale and making it easier to redeploy human resources. However, this advantage is also true for the holding company model. When independent organizations come together benefit plan administration tends to be a primary driver and is a common attribute of both models.
|Finance||Same as system with expectations for local capital funds generated from local performance.||Same assuming balance sheet remains for local markets. Easier to allocate capital for major system|
|initiatives that benefit all parts of the system. Challenges occur when capital is allocated in a disproportionate share to one market over other markets deviating from a standard process. Politics can lead to significant inequity of scarce resources.|
|Marketing/Communications||Responsive and local focused but lacks sophisticated web based systems. Typically multitasking reduces attention and skill, aka effectiveness.||Consolidates resources to offer alternative marketing and promotional tools. Responsive to broad regions and less responsive to local markets, (example: top billing web searches); primarily accomplished thru assigning tasks to dedicated individual(s).|
|Information Services (aka IT)||Expensive but responsive services||Better value and greater depth and breadth but slow response to market concerns.|
|Quality||Very responsive with modest expert knowledge struggling with relevant benchmarks.||Superior breadth and depth with excellent benchmarking opportunities to improve performance. Consistent approach to accreditation and licensure.|
|Facilities||Very responsive to local needs.||Best at developing and sharing best practices.|
|Nursing||Optimizes staffing, responsive to local labor needs and responds with creative solutions. Harder to spread best practices across markets.||Unresponsive to local delivery system and create conflicts between physicians and nurses through vertical silos. Best opportunities to|
spread best practices (clinical
management/inflectional control and operational – staffing).
|Medical Staff||Very responsive local solution focus that lacks||Performance improved if providers credentialed across|
|sharing scarce system resources.||markets so they can cover for absences/illnesses in other markets.|
|Legal||Expensive, lacking depth||High value with breadth and depth of services but can create bottlenecks with executing contracts.|
|Lacks leverage and expert knowledge to optimize contracts||Expert knowledge and value benefit all markets.|
|Clinical Support Service Lines|
|Excellent local support||Improved capital investment value. May improve local performance but with risk of pulling resources away from local markets to optimize larger markets.|
|Specialty Lines (examples)|
|Optimize local markets and value with innovative solutions.||Suboptimize local markets to enhance service volumes in large markets. Advantage to standardize|
equipment/supplies reducing variation and lowering cost.
|Optimize delivery systems to local market competitive forces but lacks economies of scale to provide lower cost.||May offer sophisticated online solutions not available at local markets and provide services at lower cost but typically suboptimizes local market competitive performance through slower appointment response times. Example – hold times 60 sec vs 30 sec.|
recruitment/retention but higher benefit costs. Scarce human resources are most vulnerable to local conditions.
|Great value for managing benefits and education but lacking market responsive recruitment solutions. Examples, Physician specialties typically market driven that system does not recognize.|
While an either-or solution is attractive in its simplicity both have significant issues that suboptimize the ability to deliver high quality and high value clinical services to the populations they serve. Since advantages and disadvantages vary depending upon service lines a blended approach is required to optimize healthcare system performance. Since a “both-and” approach is necessary the mandala symbol was chosen to reflect the complexity of this reality.
Our health care organizations must continue to evolve to improve outcomes to meet marketplace demands. The simplicity offered by embracing either the community/holding company or system/operating company models will not achieve optimal results.
The authors conclude a blended model, borrowing from the best of both, is required in today’s competitive consumer driven marketplace. This requires significant collaboration between operational and shared system service leaders.
This nuanced approach will continue to focus on driving greater economies of scale, lean responsive management structures, advancing culture (values and organizational mission) to improve leadership and staff engagement, and measurement of critical metrics to improve both local vs. system performance.
The authors realize that navigating competing priorities is difficult to administer and increases in complexity as organization increase in size. Since all organizational leaders must support both the community and system a servant leadership system is recommended. To create a framework to analyze ongoing performance and make improvements, service line agreements are also needed. When combined these approaches improve collaboration.
Topics for the future include in depth analysis of key service lines beyond the high-level approach used in this paper. While servant leadership is suggested, other models should be explored and their impact on culture and performance studied.