Can Opposites Attract?Published: August 04, 1999 in Knowledge@Wharton
Republicans and Democrats in the U.S. have been sparring hard lately over the role of health maintenance organizations, patients’ rights and rising health care costs. As these issues are hotly debated, it may be worthwhile to take another look at integrated health systems. These systems emerged nearly a decade ago, amid promises that they could achieve more cost-effective delivery along with value-added services for patients and improved provider satisfaction,. Today, however, very few systems have delivered on that promise. What went wrong?
A study by Lawton R. Burns, director of the Wharton Center for Health Management and Economics, suggests that health-care executives may be looking for the answers in the wrong place. In the pursuit of the perfect integrated health-delivery system, much attention has been given to the various structural vehicles--such as physician hospital organizations (PHOs)--that have been developed to enable physicians and hospitals to jointly contract with managed care payers. According to Burns, rather than concentrating on the structures of integration, management should focus its attention on the processes of integration such as partnering with physicians, representing them in governance, and developing leadership among them, to name a few.
Integrated health systems are built by bringing multiple hospitals and physicians together under one system to establish, at least in theory, a single cohesive market force. Because the physicians and hospitals often span across various markets, however, conflicts arise from the clash of different cultures and philosophies existing within these hospitals and medical groups. In fact, these conflicts are inherent to the systems’ structure and exist at various different levels: physician-to-physician, physician-to-system, and hospital-to-hospital. The systems’ progress has been stymied, in large part, because organizations have failed to attend to these conflicts or polarities. Until managers acknowledge these polarities and learn to manage them, the future success of these integrated systems may be limited.
In his study published in January 1999, "Polarity Management: The Key Challenge for Integrated Health Systems," Burns identifies nine polarities that were found to exist in six integrated health systems in Illinois. Generally, the polarities arise because these systems encompass multiple entities with competing agendas. For example, while the integrated health systems seek interdependence and centralization, physicians seek decentralization and autonomy. Similarly, hospitals often want to maintain local control of their services and are threatened by systems that seek to initiate and centralize activities. Furthermore, hospitals are often reluctant to embrace system-led objectives because they require cooperation with other member hospitals, many of which were once considered rivals. Finally, tensions also arise because physicians, as a group, are neither informed nor consulted on issues of integration despite the fact that systems want physician buy-in. Not surprisingly, the biggest challenge for administrators is managing these inherent tensions or polarities and creating a win-win scenario for all its participants.
The issues integrated health systems face are not unique to the industry. In fact, Burns argues that much can be learned from global firms such as Asea Brown Boveri (ABB), a $30 billion electrical engineering firm that once employed 65,000 workers in 1,300 separate operating companies in 140 different countries. For ABB, it is critical to achieve global product standardization while still maintaining market responsiveness and flexibility at the local level. According to a study by S. Ghoshal and C.A. Bartlett of Harvard, global firms must balance the simultaneous needs to be global and local, big and small, centralized and decentralized. How do they do this?
Recognizing that it can not resolve these polarities, ABB’s management has developed processes that allow them to balance these polarities and pursue them simultaneously. For example, the presidents of ABB’s operating companies report to both a global head, who has responsibility for a product line, as well as a regional country coordinator who has responsibility for a geographical line. In this way, ABB ensures that neither interest, global or local, is ignored. Integrated health systems face similar challenges as they enter new product markets and expanded geographic markets. Likewise, they must learn to navigate the narrow channel between conflicting objectives.
In the integrated health systems context, a key issue for physicians is how to maintain professional autonomy in a managed care environment without sacrificing economic security. One way physicians have attempted to reconcile these seemingly incompatible interests is through a process called collectivization. Essentially, physicians organize themselves into collectives such as large physician groups, specialty clinics or economic contracting vehicles. Although collectivization requires some sacrifice of autonomy at the individual level, the pay-off is collective autonomy and increased economic security. The size of the group provides increased visibility and leverage for physicians within the system. These medical groups also enjoy enhanced representation in governance and other system benefits (strategic planning and financial assistance). Systems benefit from this process because unorganized physicians feel pressured to form their own collectives.
While this study discusses some of the approaches that the Illinois health systems have employed to resolve these polarities, there is no formula for successful integration. Burns maintains that the structures (or contractual vehicles), however, are never the answer. Instead, managers must develop processes to manage the tensions within their system in a way that creates meaning for all of the participants: physicians, hospitals and systems. The first step is merely recognizing that these polarities exist and are interdependent, not mutually exclusive. One position can not be supported at the expense of another. Polarity management calls for a careful balancing of rival perspectives which, at times, requires managers to simultaneously pursue multiple directions. Finally, the integration process should emphasize communication and trust among all its participants from the very beginning.
According to Burns, managers should view the system physicians and hospitals as business partners over whom they have no control. The goal should be to create a strategic alliance that accomplishes the objectives of the systems while balancing the often divergent needs of the individual partners.