Everyone is; should healthcare? Outsourcing: Issues in strategic planning, organizational culture, and organizational ethics

Expenditures for personal health services in the United States have doubled over the last decade. They continue to outpace the growth rate of the gross national product. Costs for medical care have steadily increased at an annual rate well above the rate of inflation and have gradually outstripped payers' ability to meet their premiums. This limitation of resources justifies the ongoing healthcare reform strategies to maximize utilization and minimize costs. The majority of the cost-containment effort has focused on hospitals, as they account for about 40 percent of total health expenditures. Although good patient outcomes have long been identified as healthcare's central concern, continuing cost pressures from both regulatory reforms and the restructuring of healthcare financing have recently made improving fiscal performance an essential goal for healthcare organizations. ^ The search for financial performance, quality improvement, and fiscal accountability has led to outsourcing, which is the hiring of a third party to perform a task previously and traditionally done in-house. The incomparable nature and overwhelming dissimilarities between health and other commodities raise numerous administrative, organizational, policy and ethical issues for administrators who contemplate outsourcing. This evaluation of the outsourcing phenomenon, how it has developed and is currently practiced in healthcare, will explore the reasons that healthcare organizations gravitate toward outsourcing as a strategic management tool to cut costs in an environment of continuing escalating spending. ^ This dissertation has four major findings. First, it suggests that U.S. hospitals in FY2000 spent an estimated $61 billion in outsourcing. Second, it finds that the proportion of healthcare outsourcing highly correlates with several types of hospital controlling authorities and specialties. Third, it argues that healthcare outsourcing has implications in strategic organizational issues, professionalism, and organizational ethics that warrant further public policy discussions before expanding its limited use beyond hospital “hotel functions” and back office business processes. Finally, it devises an outsourcing suitability scale that organizations can utilize to ensure the most strategic option for outsourcing and concludes with some public policy implications and recommendations for its limited use. ^

Financial performance drivers and strategic control: The case of cancer treatment centers

Strategic control is defined as the use of qualitative and quantitative tools for the evaluation of strategic organizational performance. Most research in strategic planning has focused on strategy formulation and implementation, but little work has been done on strategic performance evaluation particularly in the area of cancer research. The objective of this study was to identify strategic control approaches and financial performance metrics used by major cancer centers in the country as an initial step in expanding the theory and practice behind strategic organizational performance. Focusing on hospitals which share similar mandate and resource constraints was expected to improve measurement precision. The results indicate that most cancer centers use a wide selection of evaluation tools, but sophisticated analytical approaches were less common. In addition, there was evidence that high-performing centers tend to invest a larger degree of resources in the area of strategic performance analysis than centers showing lower financial results. The conclusions point to the need for incorporating higher degree of analytical power in order to improve the tracking of strategic performance. This study is one of the first to concentrate in the area of strategic control.^

Academic medical centers: A framework for strategic repositioning

This study sought to understand the elements affecting the success or failure of strategic repositioning efforts by academic medical centers (AMC). The research question was: What specific elements in the process appear to be most important in determining the success or failure of an AMC.s strategic repositioning? Where success is based on the longterm sustainability of the new position.^ "An organization's strategic position is its perceptual location relative to others" (Gershon, 2003). Hence, strategic repositioning represents a shift from one strategic position within an environment to another (H. Mintzberg, 1987a). A deteriorating value proposition coupled with an unsustainable national health care financing system is forcing AMCs to change their strategic position. Where the value proposition is defined as the health outcome per dollar spent. ^ AMCs are of foundational importance to our health care system. They educate our new physicians, generate significant scientific breakthroughs, and care for our most difficult patients. Yet, their strategic, financial and business acumen leaves them particularly vulnerable in a changing environment. ^ After a literature review revealed limited writing on this subject, the research question was addressed using three separate but parallel exploratory case study inquiries of AMCs that recently underwent a strategic repositioning. Participating in the case studies were the Baylor College of Medicine, the University of Texas M. D. Anderson Cancer Center, and the University of Texas Medical Branch.^ Each case study consisted of two major research segments; a thorough documentation review followed by semi-structured interviews of selected members of their governance board, executive and faculty leadership teams. While each case study.s circumstances varied, their response to the research question, as extracted through thematic coding and analysis of the interviews, had a high degree of commonality.^ The results identified managing the strategic risk surrounding the repositioning and leadership accountability as the two foundational elements of success or failure. Metrics and communication were important process elements. They both play a major role in managing the strategic repositioning risk communication loop. Sustainability, the final element, was the outcome sought.^ Factors leading to strategic repositioning included both internal and external pressures and were primarily financial or mission based. Timing was an important consideration as was the selection of the strategic repositioning endpoint.^ In conclusion, a framework for the strategic repositioning of AMCs was offered that integrates the findings of this study; the elements of success, the factors leading to strategic repositioning, and the risk communication loop. ^