Health Care Management

To understand the roles and responsibilities of health care managers, you have to go behind the scenes to look at the corporate structure of the health care provider itself and understand how hospitals and other health care providers are organized, their corporate hierarchies, and the roles their managers play.

Hospital Management

Hospital Systems

The mergers and acquisitions that created hospital systems and the diversification of them into other levels of care also led to centralized system and corporate structures. These organizations’ executives are usually at the vice president level and have responsibility for the entire system, overseeing and coordinating the operations of the system members, hospitals, nursing homes, and physician practices. Centralized services are typically finance, human resources, materials management, information services, and business development.

Many systems have also centralized other services and departments, ranging from support areas of environmental and maintenance services, to clinical areas such as respiratory therapy and rehabilitation services. In these organizations, a corporate director and sometimes assistant directors are hired to oversee the operations of the clinical service in all of the company’s settings. Corporate services are housed at one of the system’s facilities or in separate office spaced leased or owned by the system.

Triad-Governing Board

Regardless of the ownership, control, or type of services a hospital provides, most hospitals are organized in the same manner. The traditional model for hospitals is a triad consisting of a governing board, administration, and the medical staff. Although the roles of these entities have grown and changed in recent years, each still retains basic responsibilities.

The governing board or board of trustees of a hospital or health systems has fiduciary responsibility for the organization. They must ensure that the organization is compliant with all applicable laws and regulations, is run in a financially sound manner, provides quality care, and meets the health care needs of the community. Initially, hospital board members were primarily philanthropists who donated large sums of money for building projects and the establishment of new services and programs. As health care and hospitals grew larger and more complex, trustees with financial, legal, political, and technical expertise joined boards. Increasingly, more physicians have become board members to assist in planning and policy decisions involving complicated medical issues. The hospital or system chief executive officer is usually a member of the governing board, either as a full voting member or ex-officio.

One of the major duties of the governing board is to hire a chief executive officer, who in turn hires the members of the executive staff. The executive staff, the chief financial officer, the chief operating officer, and the various vice presidents (of nursing, human resources, operations, etc.) are responsible for hiring the directors and managers (often called department heads) of the support (housekeeping, maintenance, food service), and ancillary (laboratory, radiology, respiratory therapy) departments. There are also numerous nursing managers for areas such as the inpatient units, operating room, and emergency room. The department heads recruit supervisors to help carry out their functions.

Committees

The medical staff elects officers to oversee their functions, such as credentialing new physicians and quality reviews, and work with the governing board and administration of the hospital to meet community health needs and ensure a high quality of care. This is accomplished through a committee structure; physician committees to review and make recommendations regarding different aspects of care (for example, pharmacy, and therapeutics committee for medication use, transfusion committee to review blood usage), and administrative committees (long range planning committee, equipment committee) that include administrative staff and sometimes members of the board. The medical staff offices generally consist of a president, vice president, treasurer, and secretary. The medical executive committee consists of the officers, the clinical department (medicine, surgery, pediatrics) chairs, and several at-large members elected by the medical staff. This body is responsible for the review and approval of applications for membership to the medical staff, monitoring medical care, and developing medical staff policy and procedures.

Service Line Models and Matrix Structures

There are hospitals and health systems that are organized around a service line model. With this approach, major clinical services that the organization provides, such as cardiology, obstetrics, and orthopedics, have separate structures reporting to a service line director who in turn reports to a vice president, chief operating officer, or the chief executive officer. The service line model strengthens the focus on a specific clinical area and often results in increased profitability and improved quality of care outcomes.

The complexities of reporting relationships, one manager reporting to two or more higher level managers (for example, a cardiology service line director reporting to the chief operating officer for administrative matters and the vice president of nursing for clinical matters) in an organization utilizing this approach frequently leads to what is referred to as a matrix structure. Tables of organization in this type of structure often reflect dual reporting relationships and contain dotted lines that define a collaborative relationship (e.g., the orthopedic service line director and the vice president for ambulatory care) between two individuals.

Long-Term Care

Nursing homes are organized much the same way as hospitals, but on a smaller scale. Nursing facilities are required to have a governing body, usually composed of community members, or designated individuals who perform this function. The governing body develops and implements policies and procedures for the operation of the facility and appoints an administrator licensed by the state to manage the facility.

Governing Boards

There are several types of governing boards. Single facility boards oversee homes that are owned by a single individual, partnerships, or run by a hospital or religious organization. Corporate boards direct regional groups of facilities or national chains. Many of the national chains are public companies with shareholders and therefore focus heavily on earnings, profits, and stock prices. State facilities and veterans’ homes have board members who are political appointees. In each of these scenarios, the nursing home administrator is responsible, either directly or through a corporate structure, to the governing board.

Nursing Home Management

The management of a nursing home consists of the administrator, associate or assistant administrators, director of nursing, medical director, and managers of the individual departments. Larger nursing homes (more than 150 beds) usually have an associate or assistant administrator responsible for specific departments and functions. The director of nursing is a key member of the management team as the head of the largest department, and along with the medical director, the primary person responsible for quality of care and clinical decisions. The department managers include directors of rehabilitation, social services, admissions and marketing, staff development, food service, housekeeping, maintenance, activities, and the business office.

Assisted Living Facilities

The management of an assisted living facility consists of an administrator, a nursing or wellness director, and several department managers. Department heads are generally an activities director, a food service manager, an environmental services director, and a marketing director. In many states, the administrator must be certified by meeting specific educational requirements and passing a written examination.

Adult Day Care Facilities

Managers or directors of adult day care centers come from a number of backgrounds, including social services and nursing. Nursing, social work, activities, therapy, dietary, transportation, and bookkeeping staff report to the director. Larger programs may also have a marketing director.

Home Health Care Facilities

Directors of home care services tend to have a nursing background. Corporate structures in larger regional companies include positions such as vice president of operations, vice president of business development, chief financial officer, and director of clinical services. Many of those filling corporate positions come from a management or business background.

Long-Term Acute Care Facilities

The management of a long-term acute care facility (LTAC) takes on several forms. Those in an acute hospital may be operated by that hospital or owned and operated by an outside company. These outside operators are long-term care companies that may own nursing homes, assisted living facilities, home care agencies, rehabilitation hospitals, and other units within acute care hospitals. There are also arrangements through which an acute care hospital owns LTAC units and contracts with a management company to operate it.

LTACs have their own management structure with a board of directors, executive director or administrator, chief financial officer, and department heads. Regional and national companies (e.g., ScionHealth) operating LTACs have regional directors of operations, marketing, and business development in addition to corporate executives. The rapid growth of these facilities will create new management positions at the facility, regional, and corporate levels.

Physician Group Practices

Today, more physicians are involved in some aspect of management, including planning and business development (new services, programs, and the growth of existing services), clinical effectiveness (achieving desired patient outcomes), and resource management (using appropriate tests, procedures, treatments, and hospital stays, and reducing unnecessary ones). New areas of management specialization include managed care and organizational development, and initiatives on a positive culture that promotes productivity, teamwork, and employee satisfaction. More than ever before, the need for talented managers with a multitude of skills is an imperative for any hospital or health system to be a successful organization.

Independent Practice Associations

Physician groups have several organizational structures. A common type is the independent practice association (IPA). Formed to achieve economies of scale through the pooling of resources, such as office staff and group purchasing, and to negotiate insurance contracts, these organizations preserve the autonomy of each physician member while providing economic benefits. Managed care contracts may be on a fee-for-service basis or capitated, which means that the physicians receive an agreed-upon monthly payment per member for the provision of medical care. Under capitation contracts, the physicians assume some risk because the level of utilization of the insured members varies; some patients may visit several times a month and others once a year.

IPAs can often consist of hundreds of physicians in numerous specialties, are organized through a legal process and are directed by the physician members, often through elected officers. Depending on the size of the IPA, a number of management staff are employed to review and negotiate contracts with insurers, review physician credentials, develop referral processes (from one member of the IPA to another), monitor reimbursement, and oversee utilization and quality assurance.

Physician Hospital Organizations

Another structure that attempts to align the interests of physicians and hospitals is the physician hospital organization, or PHO. Developed to secure favorable managed care contracts through increased leverage (i.e., a large group of physicians and a hospital that provides services to a sizeable population in a geographic area should, in theory, be able to secure more favorable payment from the managed care organizations), these organizations are legal entities managed by physicians and members of the hospital’s administration. As with IPAs, they attempt to negotiate fee-for-service and capitation contracts. The scope and complexity of hospital services (operating rooms, emergency rooms, laboratory, radiology, cardiac diagnostic tests), however, makes the negotiation of capitation contracts much more difficult. How to incorporate these services in terms of cost and projected utilization by patients is an issue in contract negotiation. Providing administrative services, such as billing and claims management, to IPAs and PHOs are entities called management services organizations. Health care managers generally run these organizations and, depending on the size of the business, may have other managers reporting to them.

The Business of Physician Practices

In the 1980s and 1990s, hospitals and private companies (e.g., PhyCor) began to acquire physician practices in an attempt to increase leverage (by attempting to gain control of large numbers of physicians in a geographic area) with managed care companies, position themselves for capitation or risk contracts (having a wide array of specialists would enable them to provide more comprehensive services and attract more members), and in effect increase control of the markets they served. The demand for physician practices on the part of hospitals that wanted to secure them before a competing hospital or physician practice company did drove up purchase prices. Many doctors received lucrative buyouts for their practices and/or long-term contracts with guaranteed income. Hospitals employed managers with expertise in physician practice management to oversee the contracts and run the business components, billing, purchasing, contracting, and staffing of the physician offices.

Physician Practice Management Companies

In the early 1990s, large national organizations known as physician practice management companies (PPMCs), such as MedPartners, emerged and began purchasing practices throughout the country. Founded on the concept that they could link independent practices and increase revenue while reducing expenses, these companies grew rapidly and many went public. Physicians sold all or part of their practices, often in exchange for stock in the PPMC. The companies promised more favorable managed care contracts, access to capital (for renovation and expansion of offices and equipment purchases), sophisticated computerized clinical information services, and professional management. The popularity of PPMCs peaked in 1998. Managed care companies found other physicians to contract with and in many cases, the office management provided was spread too thin and therefore proved ineffective: company stocks were overvalued, having been driven up solely by the rapid acquisition of practices, and many of the companies went bankrupt or out of business, leaving physicians with virtually worthless stock.

Today, there is a resurgence of PPMCs. These PPMCs employ management staff to run their operations, manage their finances and, in the case of certain specialty groups that contract with hospitals—such as emergency physicians—market their services. “Today’s realities are that managing a practice is more complicated than ever, that more physicians are attracted to the prospect of practicing in a large group setting, and practice management companies offer a legitimate and financially attractive alternative to independent practice, while providing the opportunity for returns to external investors as well,” according to TripleTree, LLC a health care investment bank.