Inter-Organizational Arrangements:Alliances, Mergers

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Inter-Organizational ArrangementsAlliances,
Mergers Integrated Systems

• Escola Nacional de Saude Publica Sergio Arouca
• Fundacao Oswaldo Cruz
• Rio de Janeiro, RJ
• June 2004

Arnold D. Kaluzny, Ph.D. Professor of Health
Policy and Administration
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Inter-Organizational Arrangements

• What we know
• What we think we know
• What we should know

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What we know!!
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What we know
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• Evolution of Health Care Delivery Forms

Hospital
Horizontal Systems
Vertical Systems
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The Alliance Continuum
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Organized (Integrated) Delivery Systems
A network of organizations that provides or
arranges to provide a coordinated continuum of
services to a defined population and is willing
to be held clinically and financially accountable
for the outcome and the health status of the
population served
(Shortell et al, 1993)
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Cooperative Ventures/Alliances

• A loosely coupled arrangement among existing
  organizations designed to achieve some long term
  strategic purpose not possible by any single
  organization

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Emergence of IDSsMergers Acquisitions

• 1995 51 private acute care hospitals part of
  hospital systems
• 2000- 57 private acute care hospitals part of
  hospital systems
• Little research on the effect on the effect of
  joining
• Improved patient care?
• Improved/more efficient operations?

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Do Hospital Systems Improve Quality Efficiency

• Who Joined Systems?
• For-profit hospitals 10 times more likely
• Hospitals with high managed care patient loads
• Hospitals where managed care was growing
• System formation has served to
• Increase market share
• No indication of improved quality of care
• No indication of improved operations
• No change in charity care provided
• Cuellar Gertler, Health Affairs,2005

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Strategic Alliances Enthusiasm vs. Reality

• Easier to have X in house than do in
  cooperation with partner
• Easier to manage own personnel than coordinate
  with others
• Easier to make quicker decisions in own
  organization than to check first with partner
• Easier to implement X in a homogeneous
  organization than to implement X in a cooperative
  venture

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Alliances in Health Care Why is it?The reality
is!
If an increasing amount of economic (health
service)activity continues to occur across,
rather than within, the boundaries defined by
formal ownership of one firm, managers will have
to understand (learn)how to work with partners
rather than subordinates.
Kanter, 1989
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Alliances in Health CareWhat We Know

• Alliances are legion
• Airlines
• Automobiles
• Telecommunications
• Pharmaceuticals

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Alliances in Health CareWhat We Know

• Alliances arise out of mutual need and
  willingness
• ...to share risks and costs
• ...to share knowledge and capabilities
• ...to reach common objectives

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Strategic AlliancesApplication and Illustrations

• Hospital Hospitals
• Purchasing Alliances/Premier
• Hospital Health Department
• Carolinas Health Care-Mecklenberg Health Dept
• Physician University
• Quality in Pediatric Subspecialty Care (QPSC)
• ABP,AAP,UNC

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Strategic AlliancesApplication and Illustrations

• Public- Private
• Quintiles-UNC Hospitals
• Early Detection Research Network(EDRN)
• Community Clinical Oncology Program (CCOP)
• HMO- Integrated Delivery Systems
• Cancer Research Network
• University Integrated Delivery Systems
• Center for Health Management Research(CHMR)

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What we think we know??
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Strategic AlliancesDistinguishing
Characteristics

• A process stages/factors/tasks
• Commitment, not control
• Factors affecting success / failure

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Life Cycle of Alliance
Factors Environment Motivation Alliance Centraliza
tion Dependency Recognition
Dependency Member Benefit
Stages Emergence Transition Maturity Crossroads
Tasks Define Purpose Hire Mgmt. Achieve Establish
Objective about Future Criteria Coordination Su
stain Control Commitment
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Strategic AlliancesCommitment, NOT Control

• Good partnerships, like good marriages, dont
  work on the basis of ownership or control. It
  takes effort and commitment and enthusiasm from
  both sides if either is to realize the hoped for
  benefits. You cannot own a successful partner
  any more than you can own a husband or a wife.
  (Ohmae, 1989)

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Alliances in Health Care Factors What We Think
We Know

• Sustaining Over Time
• Select the right partners
• Trust and commitment underlying glue
• Explicit operating rules
• Mutually agreed upon and understood expectations
• Partners must learn from and be strengthened --
  value added

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Alliances in Health Care

• Characteristics of an Effective Alliance (The
  Six Is)
• Alliance is IMPORTANT
• Alliance is long term INVESTMENT
• Partners are INTERDEPENDENT(mutual benefit)
• Alliance is INTEGRATED
• Alliance members are INFORMED
• Alliance is INSTITUTIONALIZED
• Kanter,89

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Alliances in Health Care What We Know

• Reasons for Failure
• Judging success by short-term financial results
  rather than long-term strategic objectives-NOT a
  quick fix
• Lack of trust among partners
• Uneven commitment and unbalanced power

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Alliances in Health Care What We Know

• Reasons for Failure
• Uninformed middle/lower managers
• Misunderstood motivations and expectation
• Lack of mutually accepted performance measures

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Managing a Strategic AllianceSpecial Challenges

• Ambiguities in Relationships
• Simultaneous Cooperation Competition ( eg CCOP
  in Iowa)
• Managerial Mindsets Hostile to Sharing /Control
  and Command

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Managing a Strategic Alliance Special Challenges

• Multiplicity of Details
• Emergence of Complex Networks Composed of
  Multiple Alliances

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What we think we know The Case of CCOP
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Community Clinical Oncology Program
Integral to NCI Clinical Trials Network
Cancer Centers
CCOPs
Cooperative Groups
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Community Based Cancer Care Challenge

• 80 care in community
• Questionable quality
• Treatment, prevention and control
• Indeterminate/dynamic technology
• Guidelines not effective/CHOP
• Changing delivery system

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Community Clinical Oncology Program

• What is a CCOP?
• A Group of Community Hospitals and Physicians
• Funded by a Peer Reviewed Cooperative Agreement
• To Participate In NCI-approved Cancer Treatment,
  and Cancer Prevention and Control Clinical Trials

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Intra-CCOP Relations
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Community Clinical Oncology Program

• What is a Minority-Based CCOP (MB-CCOP)?
• Hospitals and Physicians with gt 40 New Cancer
  Patients from Minority Populations
• University Hospitals are Eligible to Apply
• Funded by a Peer-Reviewed Cooperative Agreement
• Participate in NCI-approved Cancer Treatment, and
  Cancer Prevention and Control Clinical Trials

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Community Clinical Oncology Program

• What is a CCOP Research Base?
• An NCI-designated Cancer Center or Cooperative
  Group
• Funded by a Peer- Reviewed Cooperative Agreement
• Develop and Conduct Cancer Prevention and Control
  Clinical Trials
• Supports Development of Cancer Prevention Science

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Intra-Research Base Relations
Research Base Central Operations Office
Cancer Control Committee
Unit 4
Unit 1
Unit 3
Unit 2
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Components of the Community Clinical Oncology
Program
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CCOP - A Strategic Alliance(A Classic Example)

• A loosely coupled arrangement among existing
  organizations designed to achieve some long term
  strategic purpose not possible by any single
  organization

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Community Clinical Oncology ProgramMISSION
Bring the advantages of state-of-the-art cancer
treatment, prevention, and control research to
individuals in their own communities by

• Involving community physicians and their patients
  in NCI-approved clinical trials
• Involving primary health care providers in
  research process
• Increasing minority participation

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CCOP - Objectives

• Conduct treatment and cancer prevention control
  trials in the community
• Improve community practice patterns
• Diffuse state-of-the-art cancer management

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CCOP - Methods

• Increase access to clinical trials
• Involve community physicians (including primary
  care physicians) in clinical research
• Establish a clinical network for prevention
  control research

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Community Clinical Oncology Program

• 50 CCOPs (31 States)
• 11 MBCCOPs (8 States, DC Puerto Rico)
• 12 Research Bases

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Community Clinical Oncology Program

• Participating Physicians (4,037)
• 2,505 Physicians Accrue Trial Participants
• 1,532 Physicians Refer Trial Participants
• Participating Hospitals (403)

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Community Clinical Oncology Program

• CCOP MBCCOP

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Community Clinical Oncology Program

• CCOP Funding
• FY2002 91.3 Million
• CCOPs 32.8 million
• MBCCOPs 4.6 million
• Research Bases 14.1 million
• Prevention Members 2.9 million
• Large Prevention Trials
• SELECT 15.8 million
• STAR 13.9 million
• PCPT 7.2 million

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Practice Patterns
Time
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Community Based Cancer CareLESSONS

• No diffusion effect
• Change practice patterns - breast
• Need relevant protocols
• Involve support personnel
• Uneasy interactions
• University/Community
• Providers/Social Science

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Managing Strategic AlliancesAction Guidelines

• Explicit Participation Strategy
• Sequential Implementation
• Consensus Among Participants
• Align Incentives
• Prerequisite Skills
• Realistic Time Expectations

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Managing A Strategic AllianceExplicit
Participation Strategy

• Manage Participant Selection Relationships
• Manage the Adaptation Process Role of Boundary
  Spanners. Eg nurses

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Managing a Strategic AllianceAligning Incentives

• Risk Sharing Among Participants
• Shared Vision consistent with Financial and
  Procedural Realities
• Monetary only one incentive to influence behavior

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Before we begin today, may I say that both my
client and I were astonished that Your Honor was
not nominated for the Supreme Court.
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Managing A Strategic AllianceUsing Sequential
Implementation

• Follow the Theory of Small Wins
• Provide Visible Accomplishments
• Encourage Others
• Lower Resistance to Future Efforts
• Change Frame of Debate

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Managing a Strategic AllianceEnsure Consensus
Among Participants

• Single Loop Learning-knowledge of basic
  definitions relationships
• Double Loop Learning-understanding of basic
  assumptions underlying definitions and
  relationships

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Managing a Strategic AllianceProvide
Prerrquisite Skills

• Vision beyond the Institution
• Negotiation Win/Win vs Win/Lose
• Trust If you dont have trust, you
  must build it

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Managing a Strategic AllianceSet Realistic Time
Expectations

• Individual Involvement
• Implement Institutionalize

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What we should know!!
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What we should know!!

• Methodological
• Need Definition-Need for a Taxonomy
• Need Qualitative Case Studies
• Need Indictors of Performance

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What we should know!!

• Substantive
• Outcomes Impact
• What forms are more effective?
• Does performance influence structure?
• What feedback loops are available?
• Does prior experience/prior relationships predict
  success/failure
• Etc.

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What we should know!!

• Substantive
• Structure Process
• What are the organizational/environmental
  predictors of success and performance?
• What are the appropriate governance structures?
• What information systems can best cope with the
  demands of quality,sharing and accountability
• What are the antitrust issues involved?
• Etc.
• Formulation
• What competencies are required?
• What is the role of needs assessment?

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I suspect gtgtgtgtgtgtgtgtgtgtgtgtgt

• We have not succeeded in answering all of your
  problems/questions indeed, we have not
  completely answer any of them. The answers we
  have provided only serve to raise a whole new
  set of questions. In some ways we feel as
  confused as ever, but we hope that we are
  confused on a much higher level,... about more
  important things.