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Inter-Organizational Arrangements:Alliances, 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 Inter-Organizational Arrangements • What we know • What we think we know • What we should know What we know!! What we know “One can count on Americans to do the right thing, once they have exhausted all other alternatives.” Attributed to Sir Winston Churchill Evolution of Health Care Delivery Forms Hospital Horizontal Systems Systems Vertical Accountable Alliance Community Care Health Plans IDS Networks Community Health Care Management Systems Hybrid Organizations The “Alliance” Continuum Hierarchy Merger and Acquisitions (IDS) Market Joint Ownership Joint Venture Formal Cooperative Group/Alliance Informal Cooperative Venture/ Alliance 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) Cooperative Ventures/Alliances A loosely coupled arrangement among existing organizations designed to achieve some long term strategic purpose not possible by any single organization Emergence of IDS’s: Mergers & 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? 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 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 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 Alliances in Health Care: What We Know • Alliances are legion –Airlines –Automobiles –Telecommunications –Pharmaceuticals Alliances in Health Care: What We Know • Alliances arise out of mutual need and willingness ...to share risks and costs ...to share knowledge and capabilities ...to reach common objectives Strategic Alliances: Application 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 Strategic Alliances: Application 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) What we think we know?? Strategic Alliances: Distinguishing Characteristics • A process – stages/factors/tasks • Commitment, not control • Factors affecting success / failure Life Cycle of “Alliance” Factors Environment Centralization Recognition & Member Benefit Motivation Alliance & Dependency & Dependency Stages Emergence Transition Maturity Tasks Define Purpose Establish Criteria Hire Mgmt. Objective & Coordination & Control Achieve about Future Sustain Commitment Crossroads Strategic Alliances: Commitment, NOT Control Good partnerships, like good marriages, don’t 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) 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” Alliances in Health Care • Characteristics of an Effective Alliance: (The “Six I’s) –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 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 Alliances in Health Care What We Know • Reasons for Failure –Uninformed middle/lower managers –Misunderstood motivations and expectation –Lack of mutually accepted performance measures Managing a Strategic Alliance: Special Challenges • Ambiguities in Relationships • Simultaneous Cooperation & Competition ( eg CCOP in Iowa) • Managerial Mindsets Hostile to Sharing /Control and Command Managing a Strategic Alliance: Special Challenges • Multiplicity of Details • Emergence of Complex Networks Composed of Multiple Alliances What we think we know: The Case of CCOP Community Clinical Oncology Program Integral to NCI Clinical Trials Network Cancer Centers CCOPs Cooperative Groups 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 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 Intra-CCOP Relations Hospital Component 1 Component 2 Hospital Component 4 Hospital CCOP Central Office Hospital Component 3 Community Clinical Oncology Program What is a Minority-Based CCOP (MB-CCOP)? – Hospitals and Physicians with > 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 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 Intra-Research Base Relations Research Base Central Operations Office Unit 1 Unit 2 Cancer Control Committee Unit 3 Unit 4 Components of the Community Clinical Oncology Program Figure 2.1. Components of the Community Clinical Oncology Program National Cancer Institute _______________________ Overall Direction Program Management Funding Research Bases ________________________ Development of Protocols Data Management and Analysis Quality Assurance CCOPs ____________________ Accrual to Protocols Data Management Quality Control Cancer Patients and Subjects at Risk for Cancer 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 Community Clinical Oncology Program MISSION 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 CCOP - Objectives • Conduct treatment and cancer prevention & control trials in the community • Improve community practice patterns • Diffuse state-of-the-art cancer management 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 Community Clinical Oncology Program • 50 CCOPs (31 States) • 11 MBCCOPs (8 States, DC & Puerto Rico) • 12 Research Bases Community Clinical Oncology Program Participating Physicians (4,037) – 2,505 Physicians Accrue Trial Participants – 1,532 Physicians Refer Trial Participants Participating Hospitals (403) Community Clinical Oncology Program CCOP & MBCCOP Primary Care 12% Urologists 7% All Others 1% Surgeons 13% Med Onc/Hem 51% Rad Onc 16% Community Clinical Oncology Program CCOP Funding FY2002 CCOPs MBCCOPs Research Bases Prevention Members Large Prevention Trials • SELECT • STAR • PCPT $91.3 Million $32.8 million $ 4.6 million $14.1 million $ 2.9 million $15.8 million $13.9 million $ 7.2 million Practice Patterns Time Community Based Cancer Care: LESSONS • • • • • No diffusion effect Change practice patterns - breast Need “relevant” protocols Involve support personnel Uneasy interactions – University/Community – Providers/Social Science Managing Strategic Alliances: Action Guidelines • Explicit Participation Strategy • Sequential Implementation • Consensus Among Participants • Align Incentives • Prerequisite Skills • Realistic Time Expectations Managing A Strategic Alliance: Explicit Participation Strategy • Manage Participant Selection & Relationships • Manage the Adaptation Process: Role of Boundary Spanners. Eg nurses Managing a Strategic Alliance: Aligning Incentives • Risk Sharing Among Participants • Shared Vision consistent with Financial and Procedural Realities • Monetary only one incentive to influence behavior “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.” Managing A Strategic Alliance: Using Sequential Implementation • Follow the Theory of “Small Wins” – Provide Visible Accomplishments – Encourage Others – Lower Resistance to Future Efforts – Change Frame of Debate Managing a Strategic Alliance: Ensure Consensus Among Participants • “Single Loop” Learning-knowledge of basic definitions & relationships • “Double Loop” Learningunderstanding of basic assumptions underlying definitions and relationships Managing a Strategic Alliance: Provide Prerrquisite Skills • Vision beyond the Institution • Negotiation – Win/Win vs Win/Lose • Trust – “If you don’t have trust, you must build it” Managing a Strategic Alliance: Set Realistic Time Expectations • Individual Involvement • Implement & Institutionalize What we should know!! What we should know!! • Methodological – Need Definition-Need for a Taxonomy – Need Qualitative Case Studies – Need Indictors of Performance 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. 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? I suspect >>>>>>>>>>>>> “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.”