1.

Organizational Structure: The formal arrangement of jobs within an

organization.

2. Organizational Design: A process involving decisions about six key elements:

i. Work specialization ii. Departmentalization iii. Chain of command iv. Span of
control v. Centralization and decentralization vi. Formalization

3. Work Specialization: The degree to which tasks in the organization are divided
into separate jobs with each step completed by a different person.

4. Types of Departmentalization: Functional: Grouping jobs by functions

performed Product: Grouping jobs by product line Geographical: Grouping
jobs on the basis of territory or geography Process: Grouping jobs on the basis
of product or customer flow Customer: Grouping jobs by type of customer and
needs

5. Chain of Command: The continuous line of authority that extends from upper
levels of an organization to the lowest levels of the organization and clarifies
who reports to who.

6. Authority: The rights inherent (essential) in a managerial position to tell people

what to do and to expect them to do it.

7. Responsibility: The obligation (commitment) or expectation to perform.

8. Unity of Command: The concept that a person should have one boss and
should report only to that person.

9. Span of Control: The number of employees who can be effectively and

efficiently supervised by a manager.

10. Centralization: The degree to which decision-making is concentrated at a

single point in the organization. (Organizations in which top managers make all
the decisions and lower-level employees simply carry out those orders.)

11. Decentralization: Organizations in which decision-making is pushed down to

the managers who are closest to the action.

12. Employee Empowerment: Increasing the decision-making authority (power) of

employees.

13. Formalization: The degree to which jobs within the organization are
standardized and the extent to which employee behavior is guided by rules and
procedures. (Highly formalized jobs offer little discretion over what is to be done.
Low formalization means fewer constraints on how employees do their work.)
14. Mechanistic Organization: A rigid and tightly controlled structure

15. Organic Organization: Highly flexible and adaptable structure

16. Maslow’s Hierarchy of Human Needs - Abraham Harold Maslow. “According

to Maslow's theory, all needs have a certain priority. Needs of one level must at
least be partially fulfilled before a person can realize higher needs.”

17. Physical needs: These items are essential for good health and well-being, and
for the continuation of life.

18. Safety and Security Needs: Staying well, avoiding being ill - Avoiding danger -
Safe circumstances- Stability- Protection- Structure, for order, some limits

19. Love and Acceptance Needs: Friends, sweetheart, children, affectionate

relationships in general, even a sense of community

20. The Esteem needs: Self-esteem: The need for the respect of others, the need
for status, fame, glory, recognition, attention, reputation, appreciation, dignity,
even dominance. Self-respect: Confidence, competence, achievement, mastery,
independence, and freedom

21. Self-actualization: Knowledge and appreciation of beauty, goodness, freedom

and a realistic view and acceptance of self and others. Reality-
centered: Differentiate what is fake and dishonest from what is real and
genuine. Problem-centered: Treating life’s difficulties as problems demanding
solutions, not as personal troubles to be railed at or surrendered to. Different
perception of means and ends.

22. Ethics: - The study of moral obligation involving the distinction between right
and wrong. - Ethics involves a discipline that examines good or bad practices
within the context of moral duty. Moral conduct is behavior that is right or wrong

23. Business Ethics: Right or wrong in the workplace – value management.

Business ethics include practices and behaviors that are good or bad in an
organization.

24. Behavioral Management: The study of how managers should personally

behave to motivate employees and encourage them to perform at high levels
and be committed to the achievement of organizational goals.

25. Hawthorne effect — workers’ attitudes toward their managers affect the level
of workers’ performance

26. The Theory X approach…: Employees are naturally lazy/avoid work, don’t
want responsibility, and fear changes and challenges. - Theory X Managers:
Authoritarian, repressive, exert tight control, no employee involvement,
pessimistic
27. The Theory Y approach…: Employees like work, seek responsibility, show
initiative, and creativity, are excited by changes and challenges. Theory Y
Managers: Liberating, empowering, gives employees responsibility and freedom
to develop, optimistic

28. Management Science Theory: A contemporary approach to management that

focuses on the use of rigorous quantitative techniques to help managers make
maximum use of organizational resources to produce goods and services.

29. Operations management — techniques used to analyze any aspect of the

organization’s production system.

30. Total Quality Management (TQM) — focuses on analyzing input, conversion,

and output activities to increase product quality.

31. Management Information Systems (MIS) — provides information vital for

effective decision making.

32. Organizational Environment – The set of forces and conditions that operate
beyond an organization’s boundaries but affect a manager’s ability to acquire
and utilize resources.

33. Open System: A system that takes resources from its external environment,
transforms them into goods and services and then send them back to that
environment where they are bought by customers.

34. Closed System: A self-contained system that is not affected by changes in its
external environment.

35. Synergy – the performance gains that result from the combined actions of
individuals and departments

36. Contingency Theory: “There is no one best way to organize”.

37. Management: Management is the attainment of organizational goals in an

effective and efficient manner through planning, organizing, staffing, directing
and controlling organizational resources. Organizational resources include
men(human beings), money, machines, and materials. Louis E Boone & David L
Kurtz- “The use of people and other resources to accomplish objectives”. Mary
Parker Follet- “the art of getting things done through people”. Frederick Taylor
defines Management as the art of knowing what you want to do in the best and
cheapest way.

38. Planning: Planning is determining the objectives and formulating the methods
to achieve them.

39. Staffing: Definition 1 Selecting and training individuals for specific job functions,
and charging them with the associated responsibilities. Definition 2 The number
of employed personnel in an organization or program. Also called the workforce.
40. Feed Forward Control: Control that attempts to identify and prevent
deviations before they occur is called feed-forward control, sometimes called
preliminary or preventive control.

41. Concurrent Control: Control that monitors ongoing employee activities during
their progress, to ensure they are consistent with quality standards, is called
concurrent control.

42. Feedback Control: In this case, the control takes place after the action.
Sometimes called post-action or output control

43. Technical Skills: A persons’ knowledge and ability to make effective use of any
process or technique constitutes his technical skills. For eg: Engineer,
accountant, data entry operator, lawyer, doctor, etc.

44. Human Skills: An individuals’ ability to cooperate with other members of the
organization and work effectively in teams. For eg: Interpersonal relationships,
solving people’s problem and acceptance of other employees.

45. Conceptual Skills: The ability of an individual to analyze complex situations

and to rationally process and interpret available information. For eg: Idea
generation and analytical process of information.

46. Benchmarking: The search for the best practices among competitors and non-
competitors that lead to their superior performance. By analyzing and copying
these practices, firms can improve their performance.

47. Motivation: Is the process by which a person’s efforts are energized, directed,
and sustained towards attaining a goal. Energy: a measure of intensity or drive.
Direction: toward organizational goals Persistence: exerting effort to achieve
goals. Motivation works best when individual needs are compatible with
organizational goals.

48. Goal-Setting Theory: Proposes that setting goals that are accepted, specific,
and challenging yet achievable will result in higher performance than having no
or easy goals.

49. Herzberg’s Motivation-Hygiene Theory: Job satisfaction and job

dissatisfaction are created by different factors. Hygiene factors: Extrinsic
(environmental) factors that create job dissatisfaction. Motivators: Intrinsic
(psychological) factors that create job satisfaction.

50. The Hawthorne effect: (also referred to as the observer effect) is a type of
reactivity in which individuals modify or improve an aspect of their behavior in
response to their awareness of being observed.

51. Three-Needs Theory (McClelland): There are three major acquired needs
that are major motives in work. Need for achievement (nAch): The drive to excel
 and succeed. Need for power (nPow): The need to influence the behavior of
others. Need for affiliation (nAff): The desire for interpersonal relationships

52. Job enlargement: Increasing the job’s scope (number and frequency of tasks)

53. Job enrichment: Increasing responsibility and autonomy (depth) in a job.

54. Characteristics of professionals: Strong and long-term commitment to their

field of expertise. Loyalty is to their profession, not to the employer. Have the
need to regularly update their knowledge.

55. Motivators for professionals: Job challenge. Organizational support of their

work.

56. Marketing: Marketing is the delivery of customer satisfaction at a profit.

57. The Goal of Marketing: To attract new customers by promising superior value,
and to keep current customers by delivering satisfaction.

58. Exchange: The act of obtaining a desired object from someone by offering
something in return.

59. Transaction: A trade between two parties that involves at least two things of
value, agreed-upon conditions time of the agreement, and place of agreement.

60. Relationship marketing: The process of creating, maintaining, and enhancing

strong, value-laden relationships with customers and other stakeholders.

61. Marketing Management: The analysis, planning, implementation, and control

of programs designed to create, build, and maintain beneficial exchanges with
target buyers for the purpose of achieving organizational objectives.

62. Production Concept: The philosophy that consumers will favor products that
are available and highly affordable and that management should, therefore,
focus on improving production and distribution efficiency.

63. Product Concept: The philosophy that consumers will favor products that offer
the most quality, performance, and innovative features.

64. Selling Concept: The idea that consumers will not buy enough of the
organization’s products unless the organization undertakes a large – scale
selling and promotion effort.

65. Marketing Concepts: The marketing management philosophy that holds that
achieving organizational goals depends on determining the needs and wants of
target markets and delivering the desired satisfactions more effectively and
efficiently than competitors do.
66. Societal Marketing Concept: The idea that the organization should determine
the needs, wants, and interests of target markets and deliver the desired
satisfactions more effectively and efficiently than competitors in a way that
maintains or improves the consumer’s and society’s well – being.

67. Succession Planning can be defined as a purposeful and systematic effort

made by an organization to ensure leadership continuity, retain and develop
knowledge and intellectual capital for the future, and encourage individual
employee growth and development.

68. Job Analysis: According to Michael L. Jucius, “Job analysis refers to the process
of studying the operations, duties and organizational aspects of jobs in order to
derive specifications or as they called by some, job descriptions.” According
to De Cenzo and P. Robbins, “A job analysis is a systematic exploration of the
activities within a job. It is a basic technical procedure, one that is used to define
the duties, responsibilities, and accountabilities of a job.”

69. Creativity: The ability to combine ideas in a unique way or to make an unusual
association.

70. Innovation: Turning the outcomes of the creative process into useful products,
services, or work methods.

71. Idea Champion: Dynamic self-confident leaders who actively and

enthusiastically inspire support for new ideas, build support, overcome
resistance, and ensure that innovations are implemented.

72. Communication may be defined as a process concerning exchange of facts or

ideas between persons holding different positions in an organisation to achieve
mutual harmony.

73. Compressed workweek: Longer daily hours, but fewer days

74. Flexible work hours (flextime): Specific weekly hours with varying arrival,
departure, lunch, and break times around certain core hours during which all
employees must be present.

75. Job Sharing: Two or more people split a full-time job.

76. Telecommuting: Employees work from home using computer links.

77. Corporate Governance: The system used to govern a corporation so that the
interests of the corporate owners are protected.

78. Types of Plans:

 Objectives - It is the ultimate goal towards which the activities of the

organization are directed.
  Strategies - A general program of action and deployment of resources

 Policies - general statement or understanding which guide or channel thinking in

decision making

 Procedures - states a series of related steps or tasks to be performed in a

sequential way

 Rules - prescribes a course of action and explicitly states what is to be done

 Programs - comprehensive plan that includes future use of different resources.

 Budgets - statement of expected results expressed in numerical terms.

CHAPTER 7

Healthcare Organizations
 Mary E. Mancini

Objectives

• Identify and compare characteristics that are used to differentiate healthcare organizations.
• Classify healthcare organizations by major types.
• Analyze economic, social, and demographic forces that drive the development of healthcare organizations.
• Describe the impact of the evolution of healthcare organizations on nursing leadership and management roles.

Terms to Know

accreditation

consolidated systems

deeming authority

fee-for-service

for-profit organization

horizontal integration

managed care

networks

primary care

private non-profit (or not-for-profit) organization

public institution

secondary care

teaching institution

tertiary care

third-party payers

vertical integration
 This chapter presents an overview of existing and emerging healthcare organizations, their characteristics, and their
designs. Economic, social, and demographic factors that influence organizational development are discussed. A
major emphasis is placed on management and leadership responses that professional nurses must consider in
planning the delivery of nursing care in the changing environment. Leaders, managers, followers, and nursing
students engaged in active practice must be aware of the changing dynamics if they are to be effective healthcare
professionals and advocate for patients, families, and community.
The Challenge
Beth A. Smith, RN, MSN, MBA Director, Case Management, W.A. Foote Memorial Hospital, Jackson, Mississippi
Our hospital system is faced with the challenge of caring for a large number of uninsured patients who do not receive basic health care. When
they do seek health care, it is often because they have an advanced disease process that consequently requires high-cost treatment and support.
One such patient was a 42-year-old, uninsured, self-employed seasonal worker with no current income, assets, or support systems. He underwent
a partial laryngectomy for throat cancer. When he was ready to be discharged, he still required tube feedings, a tracheostomy with humidified air,
intravenous antibiotics, and speech therapy. I needed to balance virtually nonexistent resources with great needs.
What do you think you would you do if you were this nurse?

Introduction
Organizations are collections of individuals brought together in a defined environment to achieve a set of predetermined objectives. Economic,
social, and demographic factors affect the purpose and structuring of the system, which in turn interact with the mission, philosophy, and
structure of healthcare organizations.
Healthcare organizations provide two general types of services: illness care (restorative) and wellness care (preventive). Illness care services
help the sick and injured. Wellness care services promote better health as well as illness and accident prevention. In the past, most organizations
(e.g., hospitals, clinics, public health departments, community-based organizations, and physicians’ offices) focused their attention on illness
services. Recent economic, social, and demographic changes have placed emphasis on the development of organizations that focus on the full
spectrum of health, especially wellness and prevention, to meet consumers’ needs in more effective ways. Emphasis is being placed on the role of
the nurse as both a designer of these restructured organizations and a healthcare leader and manager within the organizations. For example, the
manner in which chronic and acute illnesses are managed is dramatically different from such a decade ago. Nurses take a much more active and
independent role in providing these services. Similarly, as population numbers increase and the demand for nurses exceeds the supply, we can
anticipate more changes in how nurses function within the healthcare system. An increased focus on continuous performance improvement and
benchmarking demands that organizations constantly consider their own practices and make appropriate changes, including those related to the
organization’s culture and the role of nurses within the organization.
Nurses practice in many different types of healthcare organizations. Nursing roles develop in response to the same social, cultural, economic,
legislative, and demographic factors that shape the organizations in which they work. As the largest group of healthcare professionals providing
direct and indirect care services to consumers, nurses have an obligation to be involved in the development of health care, social, and economic
policies that shape healthcare organizations.
Characteristics and Types of Organizations
Responding to the rapidly changing nature of the economic, social, and demographic environment at the national, state, and local level, the
United States healthcare system is in a continual state of flux as are the organizations within this system. Organizations either anticipate or
respond to these environmental changes.

Institutional Providers
Acute care hospitals, long-term care facilities, and rehabilitation facilities have traditionally been classified as institutional providers. Major
characteristics that differentiate institutional providers as well as other healthcare organizations are (1) types of services provided, (2) length of
direct care services provided, (3) ownership, (4) teaching status, and (5) accreditation status.

Types of Services Provided

The type of services offered is a characteristic used to differentiate institutional providers. Services can be classified as either general or special
care. Facilities that provide specialty care offer a limited scope of services, such as those targeted to specific disease entities or patient
populations. Examples of special care facilities are those providing psychiatric care, burn care, children’s care, women’s and infants’ care, and
oncology care. Alternatively, facilities such as general hospitals provide a wide range of services to multiple segments of the population.

Length of Direct Care Services Provided

Another characteristic that is used to differentiate healthcare organizations is the duration of the care provided. According to the American
Hospital Association (AHA) (2009), most hospitals are acute care facilities giving short-term, episodic care. The AHA defined an acute care
hospital as a facility in which the average length of stay is less than 30 days. Chronic care or long-term facilities provide services for patients who
require care for extended periods in excess of 30 days. In acute care institutions, patients are discharged as soon as their conditions are stabilized.
An example of a long-term care facility is a geriatric organization that provides care services from onset of impairment until death. Many
institutions have components of both short-term and long-term services. They may provide acute care, home care, hospice care, ambulatory clinic
care, day surgery, and an increasing number of other services, such as day care for dependent children and adults or focused services such as
Meals-on-Wheels. The term healthcare network refers to interconnected units that either are owned by the institution or have cooperative
agreements with other institutions to provide a full spectrum of wellness and illness services. The spectrum of care services provided are typically
described as primary care (first-access care), secondary care (disease-restorative care), and tertiary care (rehabilitative or long-term
care). Table 7-1 describes the continuum of care and the units of healthcare organizations that provide services in the three phases of the
continuum.
TABLE 7-1
CONTINUUM OF HEALTHCARE ORGANIZATIONS

TYPE OF CARE PURPOSE ORGANIZATION OR UNIT PROVIDING SERVICES

• Entry into system • Ambulatory care centers

• Health maintenance • Physicians’ offices
• Long-term care • Preferred provider organizations
Primary • Chronic care • Nursing centers
• Treatment of temporary nonincapacitating • Independent provider organizations
malfunction • Health maintenance organizations
• School health clinics

• Prevention of disease complications • Home health care

• Ambulatory care centers
• Nursing centers
Secondary

• Rehabilitation • Home health care

• Long-term care • Long-term care facilities
• Rehabilitation centers
Tertiary • Skilled nursing facilities
• Assisted living programs/retirement centers

Exercise 7-1
Using the local telephone directory, determine the types and numbers of primary care, secondary care, and tertiary care services available.
Table 7-2 provides an example of a format for collecting data.
TABLE 7-2
CHARACTERISTICS AND TYPES OF HEALTHCARE ORGANIZATIONS
HEALTHCARE
TYPE SERVICES OWN FIN TCHG MULTI
ORGANIZATION

Veterans Administration Institution General Federal NP Y Y

Academic Medical Center Institution General Private NP Y Y

Community General Institution General Private NP N Y

Public Hospital Institution General County NP Y N

Shriners Burn Hospitals Institution Specialty Private NP N N

Prepaid Health Plan HMO General Private NP-P N N

Public Health Department Community General State NP N N

Women’s and Infants’ Project Community Specialty State NP N N

Geriatric Corporation Institution Long term Private NP N Y

Visiting Nurses Association Community Specialty Private NP N N

Fin, Financing; HMO, health maintenance organization; Multi, multiunit; N, no; NP, non-profit; Own, ownership; P, profit; Tchg, teaching status; Y, yes.

Ownership
Ownership is another characteristic used to classify healthcare organizations. Ownership establishes the organization’s legal, business, and
mission-related imperative. Healthcare organizations have three basic ownership forms: public, private non-profit, and for-profit. Public
institutions provide health services to individuals under the support and/or direction of local, state, or federal government. These organizations
must answer directly to the sponsoring government agency or boards and are indirectly responsible to elected officials and taxpayers who support
them. Examples of these service recipients at the federal level are veterans, members of the military, Native Americans and prisoner healthcare
organizations. State-supported organizations may be health service teaching facilities, chronic care facilities, and prisoner facilities. Locally
supported facilities include county-supported and city-supported facilities. Table 7-2 shows how several common healthcare organizations are
classified.
Private non-profit (or not-for-profit) organizations—often referred to as voluntary agencies—are controlled by voluntary boards or
trustees and provide care to a mix of paying and charity patients. In these organizations, excess revenue over expenses is redirected into the
organization for maintenance and growth rather than returned as dividends to stockholders. These organizations are required to serve people
regardless of their ability to pay. Non-profit organizations located in impoverished urban and rural areas are often economically disadvantaged by
the amount of uncompensated care that they provide. In 2007, roughly 60% of uncompensated care in the United States was provided by 14% of
hospitals (United States Department of the Treasury, 2009). Some states, such as New York, have created charity pools to which all non-profit
organizations in the state are required to contribute to offset financial problems of the disadvantaged institutions. Historically, non-profit
organizations have been exempt from paying taxes as they commit to providing an important community service. The owners of such
organizations include churches, communities, industries, and special interest groups such as the Shriners. It is important for nurses to understand
the impact of ownership on how organizations are structured, the services they provide, and the patients they serve.
For-profit organizations are also referred to as proprietary or investor-owned organizations. These organizations operate with the specific
intent of earning a profit by providing healthcare services to individuals who can afford to pay for these services. Organizations such as private or
public insurers who provide healthcare insurance coverage are known as third-party payers. Owners may be individuals, partnerships,
corporations, or multisystems. Many for-profit organizations, like the not-for-profit ones, receive supplementary funds through private and public
sources to provide special services and research. This funding allows them to provide financial assistance to patients who can afford ordinary care
but are not in a position to finance catastrophic occurrences such as vital organ failure, birth of premature or sick infants, or transplant operations.
Multihospital systems, which are defined as two or more institutional providers having common owners, represent a significant development
that has taken place in the past two decades. Investor-owned, multihospital systems are becoming increasingly popular. Nursing homes, home
care, psychiatric services, and health maintenance organizations (HMOs) are commonly units in such systems.
Research has shown that ownership can impact efficiency and quality. Although hospital ownership is defined legally, there are significant
differences within the three sectors related to teaching status, location, bed size, and corporate affiliation. For-profit hospitals, which represent
approximately 15% of the beds in short-term acute care hospitals, are typically nonteaching, suburban facilities with small to medium bed
capacity and have the ability to access group purchasing cooperatives that lower non-salary expenses. For-profit hospitals tend to have higher
hospital charges and lower wage and salary costs that most likely represent an aggressive approach to maximizing return on investment.
Ownership results in differential treatment relative to regulatory requirements. Public and non-profit hospitals are tax exempt and have a
concomitant responsibility to provide mandated community service such as delivering care to the poor and indigent. Thus one can expect
operational differences between and among the three ownership sectors. Ownership impacts the organization’s level of effort in regard to the
provision of uncompensated care. Those organizations with taxing authority or direct support from local or state government have a clear
mandate to care for indigent patients and receive at least some level of dedicated funds to do so. For-profit hospitals offer fewer unprofitable
services and actively seek to avoid providing uncompensated care and are required to pay taxes that can have an impact on their bottom line. To
keep their non-profit status, these facilities must make a good-faith effort to provide community service and charity care. Unfortunately, the
literature provides conflicting and inconclusive evidence in regard to the impact of ownership on hospital financial performance.

Teaching Status
Teaching status is a characteristic that can differentiate healthcare organizations. The term teaching institution is applied to academic health
centers (those directly affiliated with a school of medicine and at least one other health profession school) and affiliated teaching hospitals (those
that provide only the clinical portion of a medical school teaching program). Studies have shown that although care is usually more costly at
teaching hospitals than at non-teaching hospitals (estimates range from 12% more expensive in Canada to 27% in the United States), teaching
hospitals generally offer better care because of their access to state-of-the-art technology and researchers. The higher costs of teaching hospitals
have been attributed to the unique missions these institutions tend to pursue, including graduate medical education, biomedical research, and the
maintenance of stand-by capacity for highly specialized patient care (Flatt & Rahal, 2006).
Traditionally, teaching hospitals have received government reimbursement to cover these additional costs. There are, however, intrinsic costs
of providing a medical training program that are not fully reimbursed by the government. Maintaining a teaching program places a financial
burden on hospitals relative to the direct cost of the program and the indirect cost of the inefficiencies surrounding the training process. These
inefficiencies include (1) salaries of physicians who supervise students’ care delivery and participate in educational programs such as teaching
rounds and seminars; (2) duplicated tests or procedures; and (3) delays in processing patients related to the teaching process. Currently, these
expenses are reimbursed based on a formula that considers the cost of caring for the low-income and uninsured patients who populate most
academic teaching programs. This reimbursement is being revised as states reduce subsidies for the education of physicians. Hospitals make
strategic decisions about their level of participation in physician training. Because of the additional costs, few for-profit hospitals sponsor
teaching programs. Teaching hospitals are usually located close to their affiliated medical school. They tend to be larger and located in more
urban and economically depressed inner-city areas than their non-teaching counterparts. Teaching hospitals, therefore, tend to exhibit
weaker economic performance compared with non-teaching hospitals.
Exercise 7-2
Return to the data you started in the first exercise and add financial and teaching status information.

Accreditation Status
Whether or not a healthcare organization has been accredited by an external body as having the structure and process necessary to provide high
quality care is another characteristic that can be used to distinguish one organization from another. Private organizations play significant roles in
establishing standards and ensuring care delivery compliance with standards by accrediting healthcare organizations. Examples of these
organizations are The Joint Commission and The National Committee for Quality Assurance (NCQA). The Joint Commission provides
accreditation programs for ambulatory care, behavioral health care, acute care and critical access hospitals, laboratory services, long-term care,
and hospital-based surgery. The NCQA is a non-profit organization that accredits, certifies, and recognizes a wide variety of healthcare
organizations, services, and providers. More information on accrediting organizations is provided in the “Accrediting Bodies” section on pp. 125-
126.
Consolidated Systems and Networks
Healthcare organizations are being organized into consolidated systems through both the formation of for-profit or not-for-profit multihospital
systems and the development of networks of independently owned and operated healthcare organizations.

Consolidated Systems
Consolidated systems tend to be organized along five levels. The first level includes the large national hospital companies, most of which are
investor owned. The second level involves large voluntary affiliated systems, which provide members with access to capital, political power,
management expertise, joint venture opportunities, and links to health insurance services or, as in Canada, to a national healthcare coverage
program. The third level involves regional hospital systems that cover a defined geographic area, such as an area of a state. The fourth level
involves metropolitan-based systems. The fifth level is composed of the special interest groups that own and operate units organized along
religious lines, teaching interests, or related special interests that drive their activities. This level often crosses over the regional, metropolitan,
and national levels already described. Through the creation of multiunit systems, an organization has greater marketing, policy, and contracting
potentials.

Networks
Healthcare markets with 100,000 or more residents are generally served by one to three health networks. The networks usually follow one of
three organizational models: public utilities, for-profit businesses, or loose alliances. Public utility models are organized and governed just like
today’s public utilities (e.g., the county water department). Their aim is serving large regional populations. In most markets, two or three
competing markets have emerged that require significant capital, causing many traditional not-for-profit providers to shift to for-profit status.
Loose alliances take the shape of loosely connected “virtual” networks that emulate integrated health systems through contracts and linked
computer systems.

Ambulatory-Based Organizations
Many health services are provided on an ambulatory basis. The organizational setting for much of this care has been the group practice or private
physician’s office. Prepaid group practice plans, referred to as managed care systems, combine care delivery with financing and provide
comprehensive services for a fixed prepaid fee. A goal of these services is to reduce the cost of expensive acute hospital care by focusing on out-
of-hospital preventive care and illness follow-up care. Group practice plans take various forms. One form has a centralized administration that
directs and pays salaries for physician practice (e.g., HMOs).
The HMO is a configuration of healthcare agencies that provide basic and supplemental health maintenance and treatment services to
voluntary enrollees who prepay a fixed periodic fee without regard to the amount of services used. To be federally qualified, an HMO company
must offer inpatient and outpatient services, treatment and referral for drug and alcohol problems, laboratory and radiology services, preventive
dental services for children younger than 12 years, and preventive healthcare services in addition to physician services.
Independent practice associations (IPAs) (or professional associations [PAs]) are a form of group practice in which physicians in private
offices are paid on a fee-for-service basis by a prepaid plan to deliver care to enrolled members. Preferred provider organizations (PPOs) operate
similarly to IPAs; contracts are developed with private practice physicians, but fees are discounted from their usual and customary charges. In
return, physicians are guaranteed prompt payment.
Nurse practitioners’ leadership in managing patients in group practices has contributed greatly to their success. Examples of this can be found
by reviewing literature related to nurses’ activities at Kaiser Permanente HMO, the Harvard Community Health Plan, and Minute Clinics.
There is increasing evidence that nurse-run clinics as well as ambulatory care centers can succeed whether they are integrated within a larger
medical complex or physically and administratively separate organizations. Examples of freestanding organizations include surgicenters, urgent
care centers, primary care centers, and imaging centers. Benefits and risks are associated with geographic and administrative separation between
organizations. For example, when an ambulatory surgery center is located separate from an acute care facility, there is a need to address
emergency response teams and seamless transfer of patients in need of a higher level of care. On the other hand, having the ambulatory surgery
center apart from the acute care hospital typically provides the opportunity for more patient-focused amenities such as parking and family
waiting. It is often the nurse manager in these facilities who is charged with identifying the strategies to maximize the benefits and minimize the
risks or challenges inherent in the characteristics of the facility and organization.