Cornell University Management in Healthcare Organizations Paper

Course Objectives for Assignment:

  • Identify and propose approaches to health care challenges in a highly regulated environment in order to moderate their impact and optimize the use of resources.
  • Develop and communicate plans to utilize human, technical, and financial Resources to manage healthcare organizations.


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Select one of the approaches of the organizing structure: Functional Approach, Geographic Approach, Production/Service Line Approach, and Customer/Patient/Stakeholder Approach.

Provide a short essay that is 2-3 paragraphs long on the selected approach that discusses the benefits (pros) and challenges (cons) of the structure.

Copyright 2019. Health Administration Press.
All rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
For every minute spent organizing, an hour is earned.
Benjamin Franklin, author, printer, scientist,
inventor, diplomat
Learning Objectives
Studying this chapter will help you to
➤➤ explain organizations and organization structure;
➤➤ organize work tasks into jobs and positions;
➤➤ organize jobs and positions into departments;
➤➤ explain delegation;
➤➤ explain factors that affect how work is organized;
➤➤ compare and contrast mechanistic and organic structures; and
➤➤ understand how the informal organization, contract workers, union workers,
and medical jobs with physicians complicate organizing work.
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Management of Healthcare Organizations
Throughout Partners HealthCare’s long history and extensive growth, managers had
been organizing work into tasks, jobs, positions, departments, divisions, and other
groupings to achieve the healthcare organization’s (HCO’s) mission and goals. After
Partners’ managers developed new strategic plans and goals for telehealth services,
they had to reorganize the HCO’s work to implement those plans. They assigned new
specific tasks to specific jobs, including primary care physician, cardiologist, diabetes
educator, telehealth nurse, pharmacist, equipment technician, project specialist, Center for Connected Health director, and others. Managers decided how much authority to
delegate to lower-level positions in the hierarchy (organization chart). Many positions
and work groups were specialized, and managers grouped them into departments
and coordinated their work to accomplish shared goals. In doing all this, managers
carefully considered internal and external factors that determined how work should
be organized. Figuring out how to organize work is one way that managers added
value to Partners HealthCare. As a result, managers helped the organization achieve
goals, satisfy stakeholders, and improve population health in the Boston region.
n chapter 2, we learned terms and concepts for organizing work that are important parts
of management theory. This chapter further applies those concepts and shows how they
are used in the wide variety of HCOs.
After managers at Partners HealthCare developed plans for their organization
(described in the opening vignette), they faced a complex question: How should they
organize work and workers to accomplish those plans? It was not a multiple-choice question
with just one correct answer. It was a complex puzzle for which different managers might
choose different answers based on their unique interpretation of the situation. Remember
contingency theory from chapter 2? The best way to organize is contingent (dependent)
on factors such as organization size, environment, plans, and technology, which managers
must try to perceive and interpret. There is no single best way to organize. Rather, there are
many possible ways to organize—and each has strengths and weaknesses. Managers must
consider the pros and cons of different organization forms and decide which would be best
for the HCO now. Later, they should reconsider the HCO’s organization form when its
size, environment, plans, and other factors change.
Organizing is the second of the five main functions of management described in
this book. Several of the management roles described by Henry Mintzberg in chapter
2 involve organizing: liaison, entrepreneur, disturbance handler, and resource allocator.
Managers at all levels must organize the work and workers for which they are responsible.
Even managers of small departments or sections of a department must understand how to
formally organize work so that they can achieve their area’s goals.
This chapter first defines organizations and then explains how hundreds of work
tasks are organized into jobs and positions, which are organized into departments. Managers
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Chapter 4: Organizing: Jobs, Positions, and Departments
organize by using the principles of organization structure explained in this chapter. Organizing work in HCOs is too complex a subject to address in one chapter. This chapter explains
how to organize jobs and departments. Chapter 5 describes structural designs for organizing departments into entire organizations. Chapter 6 discusses how to organize groups
and teams needed to coordinate positions and departments. These chapters also explain
complications that arise when organizing HCOs. Together, these three chapters provide a
practical introduction to how managers organize HCOs. The organizing principles may
be applied to an entire organization, to a division or department within an organization,
and to a smaller section or work unit within a department.
O r g a n iz ati o n s
Organizations are “social entities that are goal-directed, designed as deliberately structured
and coordinated activity systems, and are linked to the external environment” (Daft 2016,
642). What does this mean?
◆◆ An organization is a social entity—it has people.
Social entities that
are goal-directed,
designed as
deliberately structured
and coordinated
◆◆ An organization is goal directed—it pursues a purpose.
activity systems, and
◆◆ An organization is deliberately structured and coordinated—it is intentionally
set up, organized, and arranged.
linked to the external
◆◆ An organization is an activity system—it is alive with people doing things that
affect each other.
◆◆ An organization is linked to the external environment—it connects and
interacts with its surroundings.
formal organization
The official
organization as
O r g a n iz in g W o r k i n H e a lth c are O rgan i zati ons
approved by managers
An organization (as defined here) undertakes deliberately structured activity. Managers
intentionally organize, or structure, the activities, tasks, and work into systems that become
the formal organization. This creates the organization structure of jobs, reporting relationships, vertical hierarchy, spans of control, groupings of jobs into departments and an
entire organization, and systems for coordination and communication (Daft 2016).
This structured activity can involve managers at various levels performing five types
of organizing (Daft 2016) that are explained in chapters 4–6:
Work tasks must be grouped into job positions. Managers at all levels do this
for their particular work units and areas of responsibility.
Jobs must be organized (grouped) into work units, such as teams and
departments. Middle and top managers do this.
and stated in written
organization structure
The reporting
vertical hierarchy,
spans of control,
groupings of jobs into
departments and an
entire organization,
and systems for
coordination and
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Management of Healthcare Organizations
Departments must be organized (grouped) into an entire organization. Top
managers do this.
Work must be coordinated among and across job positions and departments.
Managers throughout the organization do this.
The organization must be linked to other organizations and people in its
environment. Managers throughout the organization do this.
Managers do not necessarily organize work in this sequence one step at a time.
Nor do they always use all five types of organizing to achieve every goal or plan. Entrepreneurs who start an entirely new diagnostic testing business will have to do all five types
of organizing. Years later, in the same organization, the managers might do only the first
and second types of organizing when they want to add one new position in one existing
department. Because these five types of organizing interact, managers may use several of
them simultaneously until everything fits together.
Sometimes HCO managers might not first organize tasks into jobs and then jobs
into a department. They might first add a department and then decide which jobs and
positions are needed for it. Let’s consider a hospital that wants to recruit physicians.
First, suppose the hospital adds one new physician recruiter in its existing medical staff
affairs office. That works out well, so another recruiter is added, and then a secretary, and
then another recruiter. Eventually, managers organize those four positions into a new,
separate department of physician recruitment. Alternatively, suppose that in the strategic
planning process, managers decide the hospital must become more active in physician
recruiting. They decide to create a new department of physician recruitment. Later, to
implement this goal, managers decide which tasks, jobs, and positions are needed for
the new department.
After organizing HCOs in these five ways, managers are not done organizing. They
often will need to reorganize to better achieve the HCO’s mission, vision, goals, strategies,
and plans. Recall that HCOs are open systems—open to their environments. Frequent
changes in the external environment force changes in how HCOs should be organized. For
example, accreditors, health insurers, businesses (which pay for health insurance for their
employees), and government agencies in the external environment have demanded that
HCOs improve the patient experience (as discussed in chapter 1). This external pressure
has led many HCOs to reorganize their tasks, jobs, departments, and work coordination.
The Partners HealthCare scenario at the beginning of this chapter also provides an example.
O r g a ni z i n g T a s k s i n to J obs an d P os i ti ons
Managers must decide which work tasks and responsibilities should be assigned to which
jobs and positions, along with the authority, reporting relationships, and qualifications for
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Chapter 4: Organizing: Jobs, Positions, and Departments
each job. These elements interact, so it is hard to determine one without the others. A good
starting point is to consider which tasks to combine into a certain job and then figure out
the other parts of the job.
In this chapter, job and position have been used somewhat interchangeably. These
two terms have similar yet slightly different meanings. “A job consists of a group of activities and duties that entail natural units of work that are similar and related” (Fottler 2015,
143). Some jobs, such as president, are performed by just one person. Other jobs, such as
nurse, might be performed by two, three, or many more people, depending on the volume
of nursing work. For example, a department might have two, three, or more nurse positions,
each filled by a separate person. “A position consists of certain duties and responsibilities
that are performed by only one employee” (Fottler 2015, 144). Thus, five people may fill
five distinct nurse positions and all perform the nurse job.
Organizing particular tasks into a job creates division of work and specialization.
Think of a job you had and list the specific tasks you did. Also think of the tasks workers
did when you went to a doctor’s office for a checkup, an urgent care facility for a minor
injury, or a hospice to visit a relative. Hundreds of tasks are done in HCOs, and managers
usually (but not always) organize tasks into specific jobs so that work is not left to chance.
Certain jobs are accountable for completing certain tasks. (After managers divide work
into specialized jobs, they must coordinate all the specialized jobs toward common goals,
as explained in chapter 5.)
Managers can use the verb–noun approach to organize tasks into a job. Here are
examples: arrange appointments of all outpatients, calculate biweekly payroll of nonsalaried
employees, and ensure patients’ protection from radiation. This approach indicates what
a worker is supposed to do. Another approach is to state the outcome for which a job is
accountable. Here are examples: accountable for appointments of all outpatients, accountable for biweekly payroll of nonsalaried employees, and accountable for patients’ protection
from radiation. Managers should avoid task descriptions that are too brief or vague, such
as appointments, payroll, and protection.
When assigning tasks to jobs, managers decide how wide or narrow to design a job.
A job with many tasks is wider and less specialized than a job with fewer tasks. There is no
“one best way” for a manager to determine how wide or narrow to make a job. The manager
of a personal care home’s maintenance department in Ithaca might follow the “practice
makes perfect” guideline and have a narrow range of repeated tasks that a worker presumably becomes very good at (the scientific management approach discussed in chapter 2).
This division of work would have separate, narrow jobs for carpentry, plumbing, electrical
work, and painting in a personal care home. But narrow, repetitive jobs can become boring, and workers may eventually feel less motivated doing them day after day. Thus, the
manager may decide to add tasks to broaden jobs (the human relations approach described
in chapter 2). He might assign all maintenance tasks to all of the maintenance jobs and
have less division of work and specialization.
A group of activities
and duties that entail
natural units of work
that are similar and
related; may be
performed by more
than one person.
A group of activities
and duties that are
performed by only one
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Management of Healthcare Organizations
Managers also must decide how precisely or loosely to identify job tasks and responsibilities. When their tasks are defined too precisely, employees may have difficulty adapting
to changing situations. Thus, a trend has been to broadly define core job tasks in a general
way with less specificity of assigned tasks. This approach allows flexibility amid changing organization needs and circumstances (McConnell 2018). It enables an employee to
temporarily shift to an urgent problem or flex a bit to meet a customer’s unusual request.
The questions of how specialized jobs should be and how many tasks to include in
them affect all jobs throughout an HCO—including managerial jobs. Vice president (VP)
titles in large hospitals reflect specialization and division of work: VP of financial affairs, VP
of human resources, VP of patient experience, and others. A C-suite of hospital executive
offices may include specialized executives, such as chief executive officer, chief operating
officer, chief finance officer, chief nursing officer, chief information officer, chief medical
officer, chief quality officer, and others. Alternatively, a small hospital might have only one
VP without specialization. Where and when tasks are performed also affect division of work,
specialization, and how tasks are organized. Tasks for a weekend nurse may be similar to but
not all the same as tasks for a nurse who works weekdays. The tasks of a hospital physical
therapist may slightly differ from tasks of a physical therapist in a sports medicine clinic.
In addition to assigning specific tasks to each specific job, managers identify other elements
of each job needed to organize work and create organization structure (McConnell 2018).
Did managers at the organizations where you worked do the following?
◆◆ Managers decide how much authority (power) to delegate to each job—for
example, to spend money, to enter notes in medical records, to sign contracts,
or to schedule patients. Each job must have sufficient authority to take
actions, use resources, make decisions, and perform tasks that have been
assigned to the job. Delegation of authority is explained later in this chapter.
◆◆ Managers establish reporting relationships for each job (as explained later in
this chapter). Reporting relationships identify
—— the position (e.g., supervisor, manager, lead, boss) to which a given
position directly reports; and
—— the positions (e.g., subordinates, direct reports), if any, that directly report
to a given position.
◆◆ Managers identify other positions and jobs with which a position must
coordinate (other than the immediate supervisor). For example, patient care
jobs usually must coordinate their work with other patient care jobs. An
accountant in the finance department might be required to coordinate with
an employee benefits manager in the human resources department.
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Chapter 4: Organizing: Jobs, Positions, and Departments
◆◆ Managers determine the qualifications needed to perform a job, such as
education, experience, competencies, licensure, attitudes, behaviors, and other
characteristics (further explained in chapter 7).
O r g a n iz in g J o b s a nd P o s i t i o ns i nto D epartments
Another step in organizing work (to accomplish goals) is departmentalization, the organization of jobs and positions into departments or other groups. A manager must decide
on what basis to departmentalize. A department (or bureau, division, section, office) can
be organized by grouping jobs that share one or more factors (Dunn 2016). For example,
managers might group together jobs that
Organization of
jobs and work into
departments, bureaus,
divisions, sections,
offices, and other
formal groups.
◆◆ perform the same activities and tasks (e.g., payroll tasks),
◆◆ use the same equipment and technology (e.g., telehealth equipment),
◆◆ serve the same type of customers (e.g., female patients),
◆◆ create the same product or service (e.g., emergency care),
◆◆ work in the same place (e.g., the
downtown site), or
◆◆ work at the same time (e.g., night
The US Department of Labor publishes the Occupational Outlook Handbook, which contains information about hundreds of
For example, managers at Sarah Bush Linjobs, including many in healthcare. This resource is available
coln Health System in Mattoon, Illinois, formed
online at The online handbook describes
a care coordination department. It includes care
which tasks and work are designed into different healthcoordinators, physician practice navigators, and
care jobs. You can search the handbook to learn more about
health coaches who perform care coordination
the healthcare jobs mentioned in your classes and those you
activities and tasks to improve population health
encounter throughout your career. Check it out online and see
(Hegwer 2016b).
what you discover.
As a department manager, you will apply
management theory principles you learned in
chapter 2 to design your department’s reporting relationships (vertical hierarchy), span of control, line and staff positions, unity of
command, and (de)centralization. We will study the application of management theory
principles by using an example of positions in the sales department of a health insurance
company. The sales manager, Kayla, must decide the reporting relationships of workers
in her department. She decides that all four sales representatives will report directly to
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organization chart
Visual portrayal of
vertical hierarchy,
departments, span
of control, reporting
relationships, and flow
of authority.
Exhibit 4.1
Organization Chart
with Two Levels
in the Vertical
Exhibit 4.2
Organization Chart
with Three Levels
in the Vertical
Management of Healthcare Organizations
her, as shown in the organization chart in exhibit 4.1. This creates vertical hierarchy for
the department.
When establishing reporting relationships and vertical hierarchy, the department
manager also determines the span of control (how many workers report directly to a manager).
If all four sales reps and one secretary report to Kayla, her span of control is five, which is
reasonable. Suppose that, over time, the department grows and hires nine more sales reps
who also report to Kayla. Her span of 14 could be too many for her to effectively manage.
She would not have enough time to manage all the workers, her decisions would be delayed,
and the sales reps would feel their boss is unavailable and uninterested in them. As department manager, Kayla should consider adding another level of management—a supervisor
level—between the sales reps and herself. This adds a level to the vertical hierarchy, as
shown in exhibit 4.2. All sales reps now report to either the East Region supervisor or the
West Region supervisor. Kayla’s span of control is now only three (two regional supervisors
and one secretary). Kayla will have to delegate sufficient authority and responsibility to
the supervisors so that they can make decisions without having to consult her too often.
Delegation of that authority to the supervisors will enable closer supervision of the sales
reps, which might be needed to achieve the planned sales goals.
Like many aspects of management, the “best” approach is contingent on several factors
(Walston 2017). Recall from chapter 2 that research has found that different departments
Sales Manager
Sales Rep
Sales Rep
Sales Rep
Sales Rep
Sales Manager
East Region Supervisor
West Region Supervisor
7 Sales Reps
6 Sales Reps
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Chapter 4: Organizing: Jobs, Positions, and Departments
face different contingencies and thus should be organized with different degrees of centralization, specialization, division of work, chain of command, and so forth. The variety and
standardization of work, the amount and frequency of change in work, workers’ education
levels and abilities, workers’ physical locations, and external pressures all affect span of
control. So too do the manager’s abilities, management style, and methods of monitoring
subordinates (Dunn 2016). If all the workers do similar work that is simple, repetitive, and
easily explained in procedural rules, a manager might capably supervise ten or more workers.
However, if workers do many different tasks that are complex, hard to explain, unpredictable, and nonroutine, then more supervision is needed and a manager should have a smaller
span of control. If the department’s environment changes often and unpredictably, a smaller
span of control will allow more frequent supervision to help workers adjust. Workers who
are more educated, better trained, and more professional require less supervision and thus
permit the manager a wider span of control. Smaller spans of control require more supervisory personnel and thus more expense, which is an important factor to consider.
Organizing jobs into a department also involves deciding which jobs are line positions and which are staff positions. In exhibits 4.1 and 4.2, the sales reps are line positions
in the vertical chain of command because they contribute directly to accomplishing the
department’s sales goals. The secretary is in a staff position outside the vertical chain of
command. That position supports the line positions and indirectly helps to achieve the
department’s sales goals. Staff positions may provide assistance to relieve the workload of
line positions, or staff may provide a specialized ability that line positions do not have
(Dunn 2016). People in staff jobs offer advice and support to people in line jobs who make
decisions. Staff jobs generally do not have much authority for making decisions. However,
they may have power based on expertise, such as a Medicare reimbursement specialist, as
discussed in chapter 10.
Unity of command is considered when organizing jobs in a department. According to this principle, a worker reports to—and takes directions from—a single boss. This
approach makes sense, and workers like it. However, sometimes it is not realistic, even in
a sales office—and especially in HCOs, as we will see later. In exhibit 4.1, four sales reps
each report only to the sales manager and follow unity of command. The secretary reports
directly to the sales manager yet most likely also assists and takes direction from the four
sales reps. Direct contact between the sales reps and secretary enables them to work together
rather than by communication through the sales manager. This makes better use of the sales
manager’s time and reduces miscommunications, delays, and other problems. However, it
places more demands on the secretary and may require more meetings to resolve conflict
if all four sales reps tell the secretary their work should be done first.
The manager must also decide how much to centralize and decentralize authority for
making decisions. Recall that with decentralization, a manager delegates authority to a subordinate (lower-level) position to make decisions. Decentralization empowers the lower position
by granting it authority to make decisions, take actions, and use resources needed to perform
delegate authority
Give authority to a
subordinate position
to make decisions and
take actions.
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Management of Healthcare Organizations
the job. How much decentralization depends on the tasks and responsibilities assigned to a job,
the people (manager and subordinate) involved, the type of work, and other factors. Certainly,
the manager must delegate enough authority to enable subordinates to perform tasks and fulfill
responsibilities assigned to their jobs. Kayla, as sales manager, can keep all authority centralized
for some decisions and tasks (e.g., choosing the Salesperson of the Year award winner) so that
only she does them. Yet she can simultaneously decentralize authority to sales reps for other
decisions and tasks (e.g., scheduling sales calls, preparing contract proposals). The manager
must delegate enough authority to lower-level positions, share enough information with those
employees, and trust them so they can do the jobs they are responsible for (as assigned by
the manager). Then the manager should get out of the way, avoid micromanaging, and hold
them accountable for the delegated work. Appropriate delegation often enables lower-level
employees to be more productive, motivated, and satisfied (Walston 2017).
When delegating authority, Kayla must consider possible problems. For example,
she should realize that each sales rep probably will not do the work exactly the same way
as she and other sales reps would do it. Decentralization increases variation and decreases
standardization at lower levels of the organization. Is that acceptable to her? Kayla must
think carefully about which authority to delegate to which subordinates. She might want
to assign more tasks and delegate more authority to one sales rep (Josh) for his professional
growth so he can cover for Kayla when she is away. However, other sales reps might then
feel left out and think Kayla is unfair. Later chapters on leadership will offer more advice
about delegating.
In summary, when delegating authority, the following things must happen (Dunn
2016; Walston 2017):
A manager must ensure that the employee knows what job the manager
expects to be done.
The manager must grant the employee authority for the tasks, decisions,
resources, and actions needed to do the job.
The employee must then accept responsibility and authority to do the job and
be held accountable for it.
The manager must trust the employee to do the job and keep the manager
informed with periodic reports.
After authority is delegated to lower positions, the manager position still has authority
too. Delegating authority is like sharing knowledge—it increases the number of positions
and people that have it, rather than taking it from one and giving it to another (Dunn 2016).
Further, the manager is still responsible for the work delegated to lower-level employees.
If those employees do not fulfill their assignments, the manager is ultimately responsible
and must do the work herself.
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Chapter 4: Organizing: Jobs, Positions, and Departments
Notice how Partners HealthCare used these organizing principles in the Here’s What
Happened at the beginning of this chapter. Managers brought together specialized jobs
(e.g., diabetes educator, telehealth nurse, equipment technician) and created a Center for
Connected Health with responsibility for developing patient-centered telehealth services.
A director was given authority for the center, and authority for patient care decisions was
delegated to lower-level patient care staff.
F a c t o r s T h at I n f l u e nc e O r g an i zi ng W ork
An HCO’s environment (external factors) and the organization itself (internal factors)
affect how managers organize work. Prior strategic planning, discussed in chapter 3, analyzed both types of factors. Take a few minutes to jot down examples of how the external
environment and the organization itself might affect how work is organized. Then read
the following example.
New technology invented in the external environment creates new ways of performing existing tasks—and sometimes entirely new tasks—that must be organized into jobs.
The invention of digital communication led to the redesign of jobs to use electronic health
records rather than traditional paper records. Digital “writing” slowed down physicians in
hospital emergency departments, so many of those departments hired digital scribes. A
scribe goes into the emergency room with the physician (and the patient) and writes all
the digital medical records in real time while the physician treats the patient. After caring
for the patient, the physician reviews, edits, and signs the digital record. Thus, because of
a technological innovation in the external environment, a new digital scribe job was created and the tasks of the emergency room physician job changed. Artificial intelligence,
chatbots, and virtual assistants developed in the external environment are further changing
tasks and work in HCOs (Schawbel 2017).
specialized, rigid tasks;
centralized decisions;
strict hierarchy, control,
and rules; and vertical
External Factors
Recall from chapter 2 that contingency theory arose from studies that found one type of
organization structure works best if the external environment is mostly stable and predictable,
whereas a different organization structure works best if the external environment changes
quickly and unpredictably. A mechanistic structure fits best with a stable, predictable
environment, while an organic structure fits best with an unstable, changing environment.
Characteristics of mechanistic and organic organizations are shown in exhibit 4.3.
These two organization structures are idealized types, and organizations are not
entirely one or the other. They blend the two types and could be mostly one type or the
other. Many managers feel their environments have become more unstable and unpredictable, so they have reorganized their HCOs to become more organic. The organic model
seems more alive and natural than the mechanistic form. On the other hand, elements of
communication and
shared flexible
tasks; teamwork;
decisions; loose
hierarchy, control, and
rules; and horizontal
communication and
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Exhibit 4.3
Environment and
Management of Healthcare Organizations
Stable, Predictable Environment
Unstable, Unpredictable Environment
Mechanistic structure is best.
Organic structure is best.
Separate, specialized, rigid tasks
Shared, flexible tasks adjusted by teamwork
Centralized decisions
Decentralized decisions
Strict vertical hierarchy, tight control,
narrow span of control, many rules
Loose, flatter hierarchy; loose control; wide
span of control; few rules
Vertical communication and
Diffuse horizontal communication and
Sources: Data from Daft (2016) and Walston (2017).
mechanistic structure are being used to organize some patient care work, as noted in the
Check It Out Online sidebar.
You might want to quickly review in chapter 1 the sectors of the external environment and
the healthcare trends and future developments.
Thinking about these will help you understand
the many external factors that affect how work
Healthcare workers often follow care protocols that list stanand jobs are organized and why work and jobs
dardized work processes for specific health problems. These
are being reorganized. In recent years, stakeholdprotocols are based on scientific evidence and best practices
ers outside of HCOs have demanded—and reimto help organize work by healthcare workers. Search online for
bursement has changed to reward—better value,
“standard care protocols” or “hospital care protocols” to find
clinical quality, customer satisfaction, patient expeexamples of standardized work processes in healthcare. Check
rience, patient safety, and transitions throughout
it out online and see what you discover.
the continuum of care. These external forces have
been driving changes in how HCOs organize their
work, jobs, and structure. Some of these changes
are described in the Using Chapter 4 in the Real World sidebar and following bullet points
(Bosko and Gulotta 2016; Hegwer 2016a; McConnell 2018; Radick 2016; Walston 2017):
◆◆ Reorganization to be more patient centered (rather than provider centered)
for the patient’s convenience
◆◆ Workflow analysis and redesign to streamline and facilitate prompt, seamless
patient care among different jobs, departments, and facilities
◆◆ New tasks organized into new jobs such as chronic disease educators,
population health coaches, care coordinators, medical practice facilitators, and
patient experience officers
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Chapter 4: Organizing: Jobs, Positions, and Departments

Scripted tasks and behaviors (sometimes embedded in electronic health
records) for staff to follow when interacting with patients and families

Shifting more work to primary care and other ambulatory services in the
continuum of care

Data analytics, clinical information technology, and artificial intelligence to
improve clinical care work processes and provide decision support for clinical
Collecting payment from a medical group’s patients may be difficult, awkward, and
stressful for everyone involved. Front desk staff can better perform this task if the job
has been designed well. The American Medical Association (AMA) offers scripts for this
purpose. The scripts give staff standard approaches to collecting payment that allow for
a courteous, respectful patient experience. Here is one script (AMA 2015):
Script 3: For collecting payment from patient upon check-out
After the appointment, the medical staff walks the patient to the front desk, says
goodbye to the patient and quickly exits the area. The patient is now ready for checkout. Reviewing the patient’s insurance eligibility verification response, say: “According to your insurance benefit coverage details, your fee today is $310.”
Look directly at the patient and say, “How would you like to pay for that—by
check, cash or credit card?”
Then wait and allow the patient to answer. . . . Look at the patient directly and
allow them to answer. Do not speak until the patient has responded to your question.
If a patient says they cannot pay the entire amount at the time of service, follow up
by asking, “How much are you able to pay today?”
Thank the patient for whatever amount he or she can pay, and follow up by saying, “And when do you anticipate paying the balance of today’s visit?”
Be sure the patient commits to a date for that payment and, again, wait for
the patient to respond. . . . Make sure you address the entire balance, not just
one payment, and then put the new payment arrangement in writing. This creates an agreement that the patient is more apt to abide by, as opposed to an oral
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Management of Healthcare Organizations
Internal Factors
An HCO’s size, its goals, and worker motivation are internal factors to consider when
organizing tasks into jobs. In a small HCO, there may not be much division of work into
specializations. Because larger HCOs have more work, more workers are hired, which allows
for more specialization and, in turn, requires more coordination. In a small HCO, there
is not enough medical imaging work for a full-time computed tomography (CT) tech, a
full-time magnetic resonance imaging (MRI) tech, and so forth. So the HCO may have
unspecialized imaging technicians who have broader responsibilities and perform CT, MRI,
and radiology. Extensive growth in the medical imaging workload and number of employees
could lead to specialization, division of work, and need for coordination. Conversely, if a
large HCO downsizes during an economic recession, the fewer remaining workers may be
expected to do whatever needs to be done with less specialization.
An HCO’s goals also influence how work is organized. If the HCO has a goal to
improve the quality of medical imaging, managers may create narrower medical imaging
jobs that specialize in just one modality (e.g., CT or MRI) and staff those jobs with workers
who are experts in that modality. Assuming that practice makes perfect, this specialization
would improve quality. Also, specialization generally reduces errors and the need to redo
work, which could help achieve an efficiency goal. In contrast, if the goal is to be responsive to customers’ unique preferences to improve their patient experience, managers may
organize jobs flexibly to allow workers to interact with customers and adjust to their needs.
Doing so calls for more decentralization of authority to frontline service workers so they
can make decisions quickly for customers. It also calls for fewer rigid rules.
When designing jobs, managers must also think about worker motivation. If jobs
are too repetitive and only follow a simple step-by-step process, workers may become
unmotivated. Jobs in which workers perform tasks alone may demotivate people who
need social interaction. Jobs with rigidly organized narrow tasks and no opportunity for
creativity demotivate people who need growth or self-expression. We will learn more about
motivation in later chapters on staffing, leading, and motivating. For now, realize that job
design affects—and therefore should consider—motivation.
Jobs can be organized in multiple ways. Some approaches focus on getting the work
done, producing the products and services, and achieving the goals. Other approaches focus
on keeping workers satisfied, enabling employees to grow, and fulfilling human needs.
Each approach has advantages and disadvantages, and a manager must try to balance all
considerations when organizing work. After deciding on an approach and implementing
it, the manager should periodically evaluate the results and reorganize if necessary.
A F e w C o mpli c at i o n s
Managers can use the methods and principles explained in this chapter to organize work in
HCOs. When doing so, they should consider four possible complications—the informal
organization, contract workers, unionized workers, and medical jobs with physicians.
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Chapter 4: Organizing: Jobs, Positions, and Departments
Suppose you are the manager of a college health and wellness center. (You may think
creatively about its mission and services.) Brainstorm and list at least 15 tasks that your
center performs. Use the verb–noun approach to listing the tasks. Then organize the
tasks into jobs. Which jobs will perform which tasks? Compare your ideas with those of
other students.
I n f o r m a l O r g a n i z at i o n
This chapter has focused on the formal organization—the organization shown in the official
bylaws, charts, job descriptions, policies, and other documents. However, managers must
realize that after they formally organize work and workers, the workers will not always follow the formal organization. They often create and follow their own unofficial, informal
organization, which coexists with the official, formal organization. Employees use their
own unwritten and informal rules, work procedures, behaviors, expectations, and communication networks (e.g., the grapevine) to create their informal organization. Managers
should understand that the informal organization can support—or disrupt—the formal
organization. The informal organization is powerful and influential and often reflects how
work is really done and how employees really feel about the organization (McConnell 2018).
Informal groups and unofficial arrangements arise from shared interests and social
relationships among people who work together (Dunn 2016). Groups may form among
the third-shift personnel in a skilled nursing facility, the information technology staff in
a health insurance firm, or the therapists in a rehabilitation center. Coworkers with common interests or friendships outside the HCO may also create informal groups at work.
Members of these groups talk, gossip, share opinions, support each other, and report what
they have heard (true and untrue) elsewhere in the organization. They interact both at
work and outside of work via social media, informal gatherings, recreational activities, and
other opportunities. Group members help each other gain satisfaction and fulfill certain
needs, such as the need for friendship, belonging, security, acceptance, status, comfort,
emotional support, affiliation, reinforcement of one’s beliefs, sympathy, camaraderie, and
collective power.
Informal groups have their own rules, culture, and behavioral norms that specify
what members of the group are supposed to do. These expectations may conflict with
an HCO’s official goals, job descriptions, and work plans. The groups strongly influence
members who want to remain in the group and gain its benefits. The informal leader lacks
formal authority yet influences others by using informal reward power and coercive power
informal organization
Workers’ own unofficial
and unwritten work
rules, procedures,
agreements, and
networks (e.g., the
grapevine), which
coexist and may
conflict with the official
ones of the formal
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Management of Healthcare Organizations
in the group. If a group member does not support the group’s rules, then the leader and
other group members may discipline that member using ridicule, avoidance, rejection, or
other punishments.
Just as the formal organization has smaller parts, such as departments, so too does
the informal organization. The basic unit is the small group—a few workers who share
contact, interaction, feelings, and friendship. Depending on the size of the organization,
there may be dozens of small groups in the informal organization. Small groups may form
in each formal department of an organization and also around specific interests, such as
“the parking problem.” An employee may belong to more than one small group in the
informal organization that coexists with the formal organization.
The informal organization, its groups, and its leaders can greatly influence employees
to support—or oppose—the tasks, jobs, departments, and decisions of the formal organization (Dunn 2016). For example, the informal organization may support or oppose a
change in the work schedule and job tasks at an outpatient therapy clinic. Managers in the
formal organization may struggle to implement changes if the informal organization does
not support the changes. Formal organization leaders should recognize this fact and work
with informal leaders to gain this support. They must figure out who the informal group’s
leaders are and understand the group’s norms, viewpoints, and expectations. Then they must
develop collaborative working relationships with the informal group and its leaders. The
formal leader must turn the informal leader into an ally rather than a rival. Later chapters
provide more information about informal organizations.
Contract Workers
Sometimes, not all the workers in an HCO are actual employees of the organization. For
example, when a hospital is unable to fill vacant nurse positions, it might contract with a
staffing agency for nurses. The agency hires its own nurses and contracts with businesses
that need temporary nursing staff. The hospital pays the agency a fee, and the agency provides temporary workers (sometimes called travel workers). Temp agencies provide contract
workers for dozens of job specialties, sometimes for a day and sometimes for much longer.
The contract between the agency and the HCO formally identifies the work responsibilities, required clearances to work, supervision, authority, and other aspects of the
relationships among the worker, agency, and HCO. Even so, questions and conflicts can
and do arise. The HCO might feel the agency worker lacks the skills or behaviors needed
for the job, or the worker might feel the HCO demands more work than the contract
allows. A contract therapist will feel more loyalty to the Therapists ’R’ Us agency than to
the HCO she is assigned to.
Another type of contract worker is someone, usually with specialized expertise, who
negotiates his own contract with an HCO rather than working for a staffing agency or being
hired as an employee. Biomedical engineers, medical physicists, and speech therapists are
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Chapter 4: Organizing: Jobs, Positions, and Departments
examples. These contract arrangements can be useful in some situations, but they complicate the department’s and HCO’s formal organization. When a hospital in Spartanburg
developed a new radiation treatment center for cancer, it contracted with a full-time medical
physicist. Along with job responsibilities, the written contract described how that position fit into the organization. The contract stated which manager the position reported to,
identified what authority the position held, and explained how the position was required
to coordinate with management, employees, and the medical staff.
In today’s “gig economy,” the contract worker concept has many variations, and
employers are increasing their use of gig workers (Schawbel 2017). HCOs use freelance,
per diem, temporary, part-time, and on-call arrangements and jobs. All of these approaches
require managers to properly organize the relationships between the workers and HCOs.
Unionized Workers
Some workers in HCOs may vote to be represented by a labor union regarding their jobs,
work, rules, schedules, compensation, and other terms of employment. For example, some
clinical workers, maintenance workers, clerical workers, and others are represented by unions.
Although it is not part of the official organization, the union controls unionized workers and
their relationship with the employer. Unions obtain authority through employee elections
and negotiated contracts (backed by labor laws) to control aspects of who works when,
where, and how. After employees vote to be represented by a labor union, HCO managers alone cannot organize the work, tasks, and jobs. Instead, managers must use collective
bargaining and negotiate with the union to jointly decide the terms and conditions of
work for the represented workers (Malvey and Raffenaud 2015). Union rules control how
HCO managers and employees communicate and interact with each other and how union
representatives and HCO managers resolve workplace disputes. Unions complicate how
work is organized into jobs and departments because managers must make such decisions
jointly with the union. Labor unions are discussed in more detail in chapter 8.
M e di c a l J o b s wi t h P h y s i c i a n s
In hospitals, medical practices, outpatient surgery centers, health insurance companies, and
some other HCOs, certain tasks, jobs, and positions must be performed by a physician.
Some of these jobs involve medical work, such as surgeon, radiologist, anesthesiologist, and
hospitalist. Others are administrative yet also involve medical work, such as vice president of
medical affairs, medical director of quality care, and cardiology medical director. These jobs
require a physician with appropriate medical expertise, a license to practice medicine, and
other qualifications that only a physician would have. For these jobs, the HCO may hire
and pay a physician, may contract with and pay a physician (see the “Contract Workers”
section earlier in this chapter), or may grant the physician privileges to work in the HCO
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Management of Healthcare Organizations
without being paid by the HCO. (In the last case, the physician is paid by patients and their
insurance plans.) Positions that require a physician can make HCOs very different from
other organizations. These positions make organization structure and management more
complex because they do not fit neatly with the traditional chain of command, organization chart, and use of management authority.
Let’s consider hospitals, because they have many kinds of medical jobs with physicians. A hospital generally does not hire a physician through the human resources department—the way it hires most employees. A physician applies to the hospital for medical
staff privileges in a specialty such as neurology, orthopedics, or cardiology. She specifies
the kinds of medical work and procedures for which she is requesting privileges. She
submits her credentials (e.g., medical school degree, years of residency training, license,
recommendation letters) and provides evidence of competency to perform her specified
medical work. The medical staff office collects all this information and forwards it to the
medical staff credentials committee for review. The credentials committee then makes a
recommendation to the board of directors for consideration. The board decides whether
to grant the physician the requested privileges to practice the requested kinds of medical
work in that hospital.
Hospitals also have hospital-based physician (HBP) positions, such as pathologist,
emergency physician, and hospitalist. Although there are variations, physicians in these
positions work in and directly for the hospital rather than in their own private medical
practice in the community. Physicians in these jobs might be employed by or contract with
(and be paid by) the hospital to provide their services. Or, they might provide services in
hospitals but bill patients and insurers for those services. In general, HBPs have authority and responsibility for their medical work but not for administrative work unless it is
specifically required in their contract or assigned to them by managers.
In a variation of this scenario, a hospital or hospital system hires physicians as
employees to work in medical offices (rather than in the hospital itself ). Hospitals and their
systems often own and operate primary care and medical specialty practices. The physicians
are hired as employees and practice ambulatory medicine. They are office-based physicians,
working for a hospital (system). If a patient needs to be admitted to the hospital, the
patient is cared for by a HBP hospitalist who practices inpatient medical care. Like HBPs,
the office-based physicians have authority and responsibility for medical work but not for
administrative work unless it is specifically assigned to them by managers.
Where does medicine end and administration begin? Good question. The boundary
between medicine and administration is fuzzy. Unity of command can be routinely violated
if HBPs and administrative managers both direct the same laboratory technicians or the
same emergency nurses. Managers and physicians share responsibility for the quality of
patient care, but problems arise when physicians feel that anything affecting medical care
is a medical matter and within their sole authority. If a radiologist claims authority to fire a
technologist who made a mistake, the manager can say that is an administrative matter. On
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Chapter 4: Organizing: Jobs, Positions, and Departments
the other hand, managers must be careful about how involved they get in medical matters.
If a physician asks a nonphysician manager, “And where did you go to medical school?” the
physician likely believes the manager has become too involved in something that requires
medical expertise. Yet, the administrative manager can—and must—require physicians
to comply with hospital medical staff bylaws, rules, and standards. Usually, boundaries
and responsibilities are understood and respected so that work proceeds smoothly. When
managers take the lead with respectful, candid, and open dialogue, physicians can become
integral parts of the management hierarchy with agreement on authority, coordination,
organizing, and other matters. For this structure to work, the manager must cultivate a
professional relationship with the physician leader based on trust, honesty, and ability.
Some physicians who work in a hospital are not hired, contracted, or paid by the
hospital. The hospital grants privileges to these independent physicians to provide care to
patients in the hospital; these physicians then bill the patients (and insurance plans) for
payment. For example, a neurosurgeon is granted surgical privileges to perform neurosurgery
on his patients in the hospital and collect payment for his services from those patients and
their insurance plans. That physician most likely has a medical office practice in the community where he sees patients. He might also have privileges to perform neurosurgery on
patients at other hospitals. The percentage of physicians in independent practice has been
declining, while the percentage in interdependent practice (with a hospital) has been growing.
Do administrative managers have authority over the surgeon? Well, not entirely. In
the hospital organization chart, the surgeon does not report to the operating room (OR)
manager as the scrub nurses do. In many hospitals, the physicians are in a medical hierarchy different from the usual administrative hierarchy (organization chart). This medical
hierarchy (explained more in chapter 5) usually reports to the chief of the medical staff or
perhaps to the CEO and ultimately is accountable to the board of directors in the chain of
command. Physicians do have more autonomy than other workers in deciding how they
will perform their work. The manager can specify how the OR custodian should clean the
room after a surgical case, but the manager cannot specify how the surgeon should perform
the surgery. Hospital managers may, however, dictate which equipment and supplies are
used in the OR to ensure consistency and efficient purchasing practices. In addition, the
hospital neither employs nor pays the independent surgeon, which reduces the manager’s
power and influence over that physician. Yet, the manager does have authority to ensure the
surgeon complies with hospital bylaws, policies, and standards. When the hospital grants
a physician privileges to practice in the hospital, the privileges require this compliance,
and the physician agrees.
In HCOs, medicine and management are gradually merging, resulting in less separation of medical and administrative matters. New payment methods—such as payment based
on value, clinical quality, and customer satisfaction—are causing medicine and management to become more interdependent. Hospital managers must develop effective working
relationships with physicians who are becoming more involved in leading, managing, and
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Management of Healthcare Organizations
integrating clinical care across the continuum. Further, regardless of how integrated or
separate medicine and management are, the physician has medical expertise on medical
matters. A manager cannot direct a physician the way she directs nonphysician workers.
Remember that physicians are physicians, which means they have autonomy, influence,
and expectations based on medical expertise.
One More Time
Organizations, including HCOs, are “social entities that are goal-directed, designed as
deliberately structured and coordinated activity systems, and are linked to the external
environment” (Daft 2016, 642). Managers deliberately structure HCOs by organizing tasks
into jobs, organizing jobs into departments, and organizing departments into an entire
organization. To accomplish this, managers use management theory, concepts, and principles including specialization, division of work, authority, reporting relationships, vertical
hierarchy, chain of command, span of control, line and staff positions, unity of command,
departmentalization, delegation, and decentralization. These elements are used to organize work and jobs.
There is no single best way to organize—it is contingent on external factors in the environment and internal factors in the HCO. Mechanistic structure works best in a stable environment, while organic structure is best for unstable environments. Organizations blend
both approaches to fit with their environments and other contingency factors. When organizing HCOs, managers must consider the informal organization, contract workers, unionized workers, and medical jobs with physicians—which all complicate organizing HCOs.
• Organization structure and charts
• Line and staff positions
• Specialization and division of work
• Unity of command
• Vertical hierarchy (chain of
• Departmentalization
• Reporting relationships
• Span of control
• Delegation of authority and
• Mechanistic and organic structure
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Chapter 4: Organizing: Jobs, Positions, and Departments
For Discussion
Organizing work into distinct jobs requires managers to make decisions about tasks,
responsibilities, authority, specialization, spans of control, reporting relationships,
qualifications, and other matters. Which of these decisions do you think would be
easiest to make? Why? Which would be hardest? Why?
2. Discuss how specific internal factors and specific external factors affect how work
should be organized.
Compare and contrast mechanistic and organic structures. Why might an HCO be
partly organic and partly mechanistic?
4. Discuss how the informal organization affects managing an HCO. How can HCO
managers try to work with rather than against the informal organization?
How do medical jobs and work done by physicians affect how managers manage
Case Study Questions
These questions refer to the Integrative Case Studies at the back of this book.
Disparities in Care at Southern Regional Health System case: Explain how an informal
organization may exist at SRHS. Then explain how the informal organization might
affect Mr. Hank’s efforts to reduce disparities in patient care at SRHS.
2. Hospice Goes Hollywood case: Describe how some complications in management
and organization (explained in this chapter) may affect what happens in this case.
“I Can’t Do It All!” case: Using this chapter, explain how you think Mr. Brice should
organize work at Healthdyne. Describe how he should write tasks in vice presidents’
job descriptions, delegate authority to vice presidents, and decentralize decision
4. The Rocky Road to Patient Satisfaction at Leonard-Griggs case: Explain how
an informal organization may exist in this case. Then explain how the informal
organization might affect Ms. Ratcliff’s plans.
The Rocky Road to Patient Satisfaction at Leonard-Griggs case: Which tasks are
evident in the intern’s job? Which tasks are being added to the jobs of office
personnel? Using terms, concepts, and methods from this chapter, explain how you
would improve the way work is assigned and authority delegated in this case.
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Management of Healthcare Organizations
Riverbend Orthopedics is a busy group practice with expanded services for orthopedic
care. It has seven physicians and a podiatrist, plus about 70 other employees. At its big,
new clinic building, Riverbend provides extensive orthopedic care. Several technicians
provide diagnostic medical imaging, from basic X-rays to magnetic resonance images.
The physicians perform surgery in their own outpatient surgery center with Riverbend’s
own operating nurses and technicians. Therapy is provided by three physical therapists
and one part-time contracted occupational therapist. In addition to staff providing actual
patient care, the clinic has staff for financial management, medical records, human
resources, information systems/technology, building maintenance, and other administrative matters. Occasional marketing work is done by an advertising company. Legal
work is outsourced to a law firm. Riverbend is managed by a new president, Ms. Garcia.
She and Riverbend have set a goal of achieving “Excellent” ratings for patient experience from at least 90 percent of Riverbend’s patients this year.
One of Riverbend’s physicians, Dr. Barr, argues that because he is a physician, he
must be granted autonomy to practice medicine the way he prefers to practice (i.e., for
the physician’s convenience).
m InI c ase s tuDy Q uestIons
1. Explain how Ms. Garcia could apply tools, methods, concepts, and principles of organizing from this chapter to help achieve the goal. You may make reasonable assumptions and inferences.
2. Using what you learned in this chapter, describe how you think Ms. Garcia should
work with Dr. Barr and other physicians to achieve Riverbend’s goal. You may make
reasonable assumptions and inferences.
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Chapter 4: Organizing: Jobs, Positions, and Departments
American Medical Association (AMA). 2015. “Scripts to Help Your Practice Collect Patient
Payment at the Time of Service.” Accessed May 9, 2018.
Bosko, T., and B. Gulotta. 2016. “Improving Care Across the Continuum.” Journal of Healthcare Management 61 (2): 90–93.
Daft, R. L. 2016. Organization Theory and Design, 12th ed. Mason, OH: South-Western
Dunn, R. T. 2016. Dunn and Haimann’s Healthcare Management, 10th ed. Chicago: Health
Administration Press.
Fottler, M. D. 2015. “Job Analysis and Job Design.” In Human Resources in Healthcare, 4th
ed., edited by B. J. Fried and M. D. Fottler, 143–80. Chicago: Health Administration Press.
Hegwer, L. R. 2016a. “5 Ways to Support Clinical Integration.” Healthcare Executive 31 (1):
    . 2016b. “6 Business Imperatives for Population Health Management.” Healthcare
Executive 31 (4): 11–28.
Malvey, D., and A. Raffenaud. 2015. “Managing with Organized Labor.” In Human Resources
in Healthcare, 4th ed., edited by B. J. Fried and M. D. Fottler, 389–426. Chicago: Health
Administration Press.
McConnell, C. R. 2018. Umiker’s Management Skills for the New Health Care Supervisor,
7th ed. Burlington, MA: Jones & Bartlett Learning.
Radick, L. E. 2016. “Improving the Patient Experience.” Healthcare Executive 31 (6): 32–38.
Schawbel, D. 2017. “Workplace Trends You’ll See in 2018.” Published November 1. www.
Walston, S. L. 2017. Organizational Behavior and Leadership in Healthcare: Leadership Perspectives and Management Applications. Chicago: Health Administration Press.
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Copyright 2019. Health Administration Press.
All rights reserved. May not be reproduced in any form without permission from the publisher, except fair uses permitted under U.S. or applicable copyright law.
Form follows function.
Louis Sullivan, architect
Learning Objectives
Studying this chapter will help you to
➤➤ organize positions and departments into complete organizations;
➤➤ describe, compare, and contrast five different organization structures;
➤➤ examine the governing body atop the organization;
➤➤ coordinate work internally throughout an organization;
➤➤ coordinate the organization with external organizations; and
➤➤ explain medical staff organization in hospitals.
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AN: 2144509 ; Peter Olden.; Management of Healthcare Organizations: An Introduction, Third Edition
Account: s4264928.main.eds
Management of Healthcare Organizations
Partners HealthCare is a large, complex organization governed by a board of directors.
The corporate-level senior management includes the president/CEO, executive vice
president (EVP) of administration and finance, VP of graduate medical education, VP
of population health management, VP of human resources, VP of communications,
chief clinical officer, chief strategy officer, chief information officer, chief quality and
safety officer, senior medical director, and others. Below them are middle managers
and lower-level managers responsible for an array of departments. Each department
has employees; larger departments also have levels of management. Partners owns
and operates academic medical centers, hospitals, physician practices, managed care
plans, community health centers, rehabilitation facilities, clinics, hospices, research
institutes, and other healthcare organizations (HCOs). Each has an organization
structure of managers, departments, and positions. Dozens of committees, teams,
and groups—such as transitions teams and a strategy implementation group—help
coordinate the many parts into a whole. In addition to this internal organization
structure, Partners organizes itself to connect and coordinate with its external environment. Partners forms interorganizational relationships to link with colleges and
universities, insurance companies, suppliers, city government, grant funders, and
others in its environment. Managers decide how to organize to fulfill their HCOs’
mission and goals.
s we continue to study the real-world example of Partners HealthCare, we learn that
it created organization structures to achieve its goals and mission. Many managers
organize work tasks into positions and departments. Higher-level managers organize departments into an entire organization. They must then coordinate the departments
throughout the organization. Managers apply the principles of hierarchy, span of control,
delegation of authority, centralization, line and staff positions, and departmentalization to
create the whole organization. Managers also decide how to organize work and positions to
connect with the external environment. Newer and lower-level managers must understand
this structure to know how their own work unit or department fits into the bigger picture
and interacts with other parts of the organization. No department exists independently!
This chapter first provides background information about forming entire organizations and the relevant factors managers should consider. Five forms of organization structure
for HCOs are presented, along with their advantages and disadvantages. The chapter then
explains methods for coordinating departments within an HCO and for coordinating an
HCO with external organizations. Finally, the chapter describes complications that might
arise in an HCO and affect how the organization is designed. One complication is the
organized medical staff—a unique organization structure found in hospitals.
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Chapter 5: Organizing: Organizations
O r g a n iz ati o n S t r u c t ur e s
Much of an organization’s structure is reflected in its organization chart. This chapter explains
(and illustrates with organization charts) five different forms of organization structure that
are used by HCOs:
Functional structure
Divisional structure
Matrix structure
Horizontal structure
Network structure
Each of these general models has pros and cons. Many HCOs mix elements of these structural forms to create their own hybrid form.
Which structural form is best? It depends, as you might have guessed. This chapter’s
opening quote suggests that an organization’s form depends on its function or purpose. Just
as the form of a building depends on the building’s purpose, the form of an organization
depends on the organization’s purpose. That is why managers must first plan the mission,
goals, and purpose of the organization. The structural form of a university organization
is different from that of a health insurance organization partly because the organizations
have different purposes. What else determines the appropriate structural form? Recall from
chapter 4 that an organization may be organic, mechanistic, or a mixture of both types,
depending on its external environment, mission, goals, size, work technology, and culture
(Daft 2016).
When determining organization structure, managers must consider differentiation
among departments and work units. Each department is specialized to perform work that
differs from other departments’ work. The emergency, housekeeping, and administration
departments do different work, and each department interacts with different parts of the
external environment, pursues different goals, and uses different resources and production methods. Thus, the departments are organized differently. Further, employees in
each department have different knowledge, skills, attitudes, behaviors, values, and ways
of thinking. Differentiation—the differences in departments’ structures and how their
workers think and feel—helps to achieve specialized types of work (Daft 2016). However,
differentiated departments eventually must be integrated (coordinated) to work together
toward the organization’s overall purpose. Without integration, differentiated workers and
departments will work only toward their own department goals and not toward overall
organization goals. Integrating departments is explained further in this chapter’s section
on coordination.
Differences in
structures and how
their workers think and
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Management of Healthcare Organizations
The five organization charts shown in this chapter show five different approaches
to organizing departments into a formal organization. Boxes, circles, and other shapes
represent positions, departments, and other organization components. Vertical lines
between boxes in a chart show the vertical hierarchy (chain of command), reporting
relationships, flow of authority, and communication up and down the hierarchy. Boxes
also may be connected with horizontal lines to show horizontal relationships. Higher
boxes in a chart represent positions with more authority and responsibility. Of course,
just drawing boxes and lines does not make an organization. The charts simply represent
managers’ ideas about how they want the organization to be structured. To create the
desired organization in real life, managers must implement their ideas. Managers create
the structure by organizing, staffing, leading, controlling, and doing other work explained
throughout this book. When managers create and maintain accurate charts, employees
can use the charts to understand how their organization works and how they fit into it
(Dunn 2016).
Planning and organizing are closely connected. Chapter 3 taught us that managers must first assess changes, opportunities, and threats in the environment and adapt the
HCO to those changes. Adaptation often requires a change in organization structure, such
as from a functional to a divisional form. Second, in the planning process, managers assess
the HCO’s strengths and weaknesses, which may reveal that the HCO is not working well
because it is not organized well. Perhaps middle managers do not have enough authority
to act quickly, or perhaps departments are isolated rather than coordinated. If so, then
managers will have to redesign the organization. Third, as chapter 3 explained, managers
establish goals and then develop plans to implement them. Implementation often includes
redesigning the organization structure so that the HCO can achieve the goals. In chapter 3,
we read that Partners HealthCare set a goal to reduce the number of readmitted patients.
To achieve that goal, managers had to apply organizing principles to redesign tasks, positions, departments, and the organization structure. The Using Chapter 5 in the Real World
sidebar gives another example of redesign to achieve goals.
functional structure
An organization
structure that
organizes departments
and positions
according to the
functions workers
perform and the
workers’ abilities.
Functional Structure
The functional structure organizes departments and positions according to the functions
workers perform and the workers’ abilities (Daft 2016). In exhibit 5.1, the finance functions are organized under a VP of finance, health services functions are organized under
a VP of health services, and so on. The vertical hierarchy and chain of command is clear,
allowing for much control. This approach consolidates each kind of expertise into one
part of the organization. Specialization is strong, so knowledge and skill are strengthened for finance, for marketing, and for human resources. However, specialization limits
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Chapter 5: Organizing: Organizations
At rural Western Maryland Health System (WMHS), chronic disease care had been provided through separate, disease-specific clinics—a diabetes clinic, a heart disease
clinic, and so forth. This organization structure caused duplication of costly staff, such
as nurse practitioners, dietitians, and pharmacists. Patients with multiple chronic diseases had to schedule multiple appointments and go to different clinics. Then external
changes in insurance payments and incentives drove WMHS to reduce duplication while
achieving quality standards. To do this, managers redesigned their organization structure. They formed a Center for Clinical Resources that organized care for all common
chronic diseases in one place (physically and organizationally). This change simplified
how patients accessed care for multiple chronic conditions. It increased sharing of staff
and efficiency. The new organization structure enabled staff to coordinate their care for
patients with several chronic diseases. Staff could now better help patients understand
how to manage all their medications, perform all their self-care, and follow all their
dietary requirements. These improvements reduced expensive emergency department
visits, reduced hospital admissions, and reduced total costs by almost $15 million. Managers changed the organization structure to achieve cost and quality goals and thereby
adapt to change in the external environment (Van Dyke 2016).
exHIbIt 5.1
Organization Chart
Board of Directors
VP Finance
VP Health Services
VP Human Resources
VP Marketing
Long-Term Care
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Management of Healthcare Organizations
employees’ understanding of the whole organization and requires much coordination.
Horizontal coordination methods (discussed later in this chapter) are needed to improve
collaboration between workers under different functional VPs. For example, liaisons could
be assigned to coordinate the finance and health services functions to help manage the
costs of health services.
Many HCOs use the functional structure. It is common in smaller, newer organizations. This form is not effective for larger, diversified HCOs in rapidly changing
environments because decision making is too centralized (at the top) and becomes too
slow. The advantages and disadvantages of the functional form are as follows (Daft 2016;
Dunn 2016):
◆◆ Specialized positions grouped in departments
◆◆ Efficiency, economies of scale, and cost control
◆◆ Development of in-depth knowledge and abilities
◆◆ Most effective with only a few products and low complexity
◆◆ Slow decision making and innovation
◆◆ Slow adaptation to changing environment
◆◆ Functional “silos” focus on their own functional work
◆◆ Inadequate horizontal department coordination
Divisional Structure
divisional structure
An organization
structure that
organizes departments
and positions to focus
on particular groups of
customers or services.
The divisional structure organizes departments and positions to focus on groups of customers, products, or services rather than on (functional) types of workers (Daft 2016).
For example, when an HCO in Towson grows and broadens its range of services, it may
change from a functional to a divisional form. Compare and contrast these two forms in
exhibit 5.2. What changes do you see?
Positions and departments are reorganized into a hospital division, a clinics division,
and a long-term care division. Each division is designed to focus on one type of customer,
such as customers who need hospital services. Each division is headed by a separate VP
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Chapter 5: Organizing: Organizations
Exhibit 5.2
Change from
Functional to
Divisional Structure
Board of Directors
VP Finance
VP Health Services
VP Human Resources
VP Marketing
Long-Term Care
Board of Directors
VP Hospital
VP Clinics
VP Long-Term Care
Finance Director
Finance Director
Finance Director
Hospital Services Director
Clinic Services Director
LTC Services Director
HR Director
HR Director
HR Director
Marketing Director
Marketing Director
Marketing Director
who has appropriate stature and authority. What else do you see? Each division now has
its own finance director (and staff), health services director (and staff), human resources
director (and staff), and marketing director (and staff). The finance experts are no longer
all grouped together as they were in the functional form. Each division now has its own
finance knowledge, abilities, and expertise to quickly respond to its own financial affairs
and those of its customers. Changes in the environment do not affect hospital, clinic, and
long-term care services the same way. The divisional structure recognizes this and gives each
division the staff, resources, and decentralized authority to monitor its environment and
adjust itself as needed. Doing so may increase the total expense of staff and other resources.
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Management of Healthcare Organizations
The HCO must evaluate the increased cost compared to improved sales, revenue, patient
experience, and market share. The advantages and disadvantages of the divisional form are
the following (Daft 2016; Dunn 2016):
◆◆ Ability to adapt to changing environment
◆◆ Better patient experience and customer satisfaction
◆◆ Decentralized, faster decisions
◆◆ Coordination of functions within each product/service division
◆◆ Good for larger organizations with several main products/services
◆◆ Less efficiency and economies of scale
◆◆ Product/service “silos” that focus on their own product/service
◆◆ Less coordination and synergy among all products/services
◆◆ Less development of in-depth functional expertise
◆◆ Potential duplication of resources
M at r i x S t r u c t u r e
matrix structure
An organization
structure that
organizes work by
combining functional
and divisional
structures; uses
vertical and horizontal
The matrix structure combines the functional and divisional forms by superimposing
horizontal coordination structure on top of vertical hierarchy structure (Dunn 2016).
This structure can help an organization achieve efficiency (using vertical lines of authority)
while also achieving quality and satisfaction for specific groups of customers, products,
and services (using horizontal lines of authority). A matrix organization has advantages
of both the functional and divisional forms. This approach is useful when an HCO
must simultaneously
authority to manage
◆◆ efficiently share costly staff and resources among multiple products, services,
and customers, and
◆◆ coordinate staff and resources to create quality products/services and improve
customer satisfaction (Daft 2016; Walston 2017).
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Chapter 5: Organizing: Organizations
Examine carefully exhibit 5.3. What’s going on in this organization? Functional
management positions exist for functions such as human resources, marketing, and finance.
The functional managers report up the functional vertical hierarchy to the president. These
managers have authority over the lower-level employees who are permanently assigned
to them, such as the marketing employees who work under the VP of marketing. These
employees all have functional expertise, such as marketing expertise or nursing expertise.
On the left side of the organization chart are several divisional managers, who commonly
are called product/service line managers. Each of these managers is responsible for a specific
product/service (e.g., cardiology, neurology) or group of customers. To meet goals set for a
service line (e.g., surgery), the service line manager uses horizontal authority to manage the
workers assigned to her service by the functional managers. Imagine Diana is the surgery
service line manager at a hospital in San Diego. She must manage employees assigned to
surgery by functional managers. That can be challenging.
The matrix structure offers no unity of command for the functional workers. For
example, the VP of marketing assigns Sara (a marketing employee) to work on cardiology
services. Sara works for—and is accountable to—the cardiology manager and the VP of
marketing. Some employees may even report to more than one divisional manager. The VP
of marketing might assign Sara to work part-time for the cardiology manager and part-time
for the neurology manager. Sara then would have three bosses.
Exhibit 5.3
Matrix Structure
Governing Body
VP of
VP of
VP of
Primary Care
Source: Adapted from Daft (2016).
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Management of Healthcare Organizations
Often, HCOs that adopt product/service line management organize into a
matrix form. For each clinical service, a service line manager has the authority to adapt
that service to unique changes in technology, customer preferences, and other factors
affecting that service. The service line manager horizontally coordinates the marketing,
finance, service production, and other functions across the service line to achieve goals
for that service line. The functional and divisional managers often share authority to
lead the same workers, which requires effective interpersonal, conflict resolution, and
communication skills.
Some large, complex healthcare systems operate multiple smaller HCOs at different
sites that cover much or all of the continuum of care. These systems increasingly are adopting variations of the matrix form in which service line managers coordinate care across all
facilities at all locations involved in a specific type of care (Buell 2016). For example, an
orthopedic service line integrates all orthopedic care (e.g., diagnostic, surgical, rehabilitative,
chronic) delivered to orthopedic patients in dispersed facilities, settings, and locations of the
large healthcare system. Each service line may be led by a service line manager or by a dyad
(physician and administrator). Allina Health, a large health system based in Minneapolis
that has 13 hospitals, uses clinical service lines as its main organization structure to provide
care at multiple sites throughout the continuum (Van Dyke 2016). Matrix structures are
likely to be used by accountable care organizations to integrate various HCOs and services
across the continuum of care (Walston 2017).
Managers use a variation of the matrix design for project management in HCOs
(Dunn 2016). Senior managers assign a project manager to each project. The project managers replace the service line managers in the matrix chart. Each project manager forms a
project team using permanent functional employees from finance, marketing, and other
areas to provide skills needed for the project. Employees work their “regular” job while also
serving on one or more project teams led by project managers. Outside stakeholders, such
as an architect or supply vendor, might also be on project teams.
HCOs can and do create structural variations to fit their unique organization needs.
Thus, managers might blend a mostly functional form with the matrix form for just a few
medical service lines. The advantages and disadvantages of the matrix form are as follows
(Daft 2016; Dunn 2016):
◆◆ Development of both functional and product/service expertise
◆◆ Efficient, shared use of staff while improving customer satisfaction
◆◆ Ability to adapt to external changes affecting individual products/services
◆◆ Coordination and communication across the organization
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Chapter 5: Organizing: Organizations
◆◆ No unity of command; more than one boss for each worker
◆◆ Potential for confusion, stress, and conflict among workers
◆◆ Well-developed skills required for communication and conflict resolution
◆◆ Time and expense required to train staff to work in a matrix
◆◆ Frequent conflict, requiring time and meetings to resolve
H o r i z o n ta l S t r u c t u r e
The horizontal structure organizes work into several horizontal core processes that are
performed by self-managed, multidisciplinary teams of workers. “A process refers to an
organized group of related tasks and activities that work together to transform inputs into
outputs that create value for customers” (Daft 2016, 116). Examples of core processes are
supply chain logistics, new product development, customer acquisition, and order fulfillment.
Healthways, a company that improves health and well-being for employers, health plans,
and health systems, is organized around five core processes: (1) understand the market, (2)
build value solutions and products, (3) acquire and retain customers, (4) deliver solutions
and add value, and (5) manage the business (Cummings and Worley 2015).
In the horizontal structure, core processes are performed by self-managed teams
of empowered workers who have the necessary functional skills (Cummings and Worley
2015; Daft 2016). Teams have authority to make most decisions without vertical chainof-command supervision. A process owner is accountable to senior management for the
process team’s overall performance, but this position does not use vertical chain-of-command supervision. Instead, the process owner focuses on facilitating the work process and
coordinating workers. Team members are trained to perform multiple process activities
so they can help throughout the process. This training also prepares workers to use data,
resources, policies, and management methods to manage their process. Workers have the
authority to use their judgment and make decisions to create value for customers. The
process team’s performance is measured according to how well it creates value and increases
customer satisfaction.
This structure eliminates traditional department boundaries and vertical hierarchy
that may hamper coordination, flexibility, and decision making. As shown in exhibit 5.4,
teams, not positions and departments, are the basic component of organizing the horizontal
form (Cummings and Worley 2015; Daft 2016). Each team thoroughly understands its
customers and their expectations. The team designs its process to create value and ensure
customer satisfaction. A team’s workers have varied functional expertise yet continually
interact, coordinate, and communicate with each other to perform the team’s process. Thus,
horizontal structure
An organization
structure that
organizes work
into core processes
that are performed
by self-managed,
multidisciplinary teams
of workers.
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Claims Processing
External Provider
of Benefits
and Benefit
and Benefit
New Product
Group/Member Enrollment
Exhibit 5.4
Horizontal Structure
Management of Healthcare Organizations
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Chapter 5: Organizing: Organizations
workflow and coordination are faster, more agile, and better able to adapt to changes in
the external environment, including customers’ needs.
Organizations with highly interdependent activities and a strong customer focus
should consider this form; so, too, should organizations in uncertain and changing external environments. This newer horizontal structure—also called process, boundaryless, and
team-based structure—has become more common in recent years (Cummings and Worley
2015). The advantages and disadvantages of the horizontal form are as follows (Cummings
and Worley 2015; Daft 2016; Dunn 2016):
◆◆ Intense focus on creating value for customers
◆◆ Flexibility, efficiency, speed, responsiveness to customers
◆◆ Focus on the organization rather than own department
◆◆ Much teamwork and coordination
◆◆ Integration of varied tasks, activities, and expertise
◆◆ Fewer layers of management
◆◆ More responsibility and growth for employees
◆◆ Risk of worse performance if organized around wrong core processes
◆◆ Extensive change of organization structure and management
◆◆ Resistance by managers and staff specialists
◆◆ Significant training requirements for new skills, culture, and knowledge
◆◆ Limited development of in-depth functional expertise
network structure
An organization
structure that
organizes work by
Network Structure
Managers of organizations that use the network structure (also called modular structure)
outsource tasks, jobs, functions, and departments to other organizations (Daft 2016).
The organizations all connect via interpersonal relationships, trust, contracts, information
systems, and telecommunications (Cummings and Worley 2015). The top manager is
similar to a general contractor who subcontracts (outsources) most work to other organizations. The organization might do only what it specializes in and outsource everything
outsourcing much
of it to a network of
other organizations
connected by
contracts, and
information systems.
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Management of Healthcare Organizations
else. For example, a urology group practice focuses on doing urology. The urologists could
outsource financial management, information technology, legal services, human resources
tasks, marketing, and administration to other organizations. As shown in exhibit 5.5, the
network form does not have a vertical hierarchy.
The network structure is a matter of degree; most HCOs contract out at least some
work. For a new ambulatory surgical center, this approach enables a fast start, flexibility,
and quick growth through partner organizations such as a law firm, an accounting firm,
and an advertising firm. Years later, when it is much bigger, the HCO probably will still
outsource some work (e.g., legal work) rather than hire its own staff (e.g., an attorney).
Even large HCOs contract out some work. For example, many contract with language
interpretation companies to communicate with patients who do not know the local
prevailing language.
The network structure is used by all sizes of organizations. In large ones, such as
global pharmaceutical firms, the network becomes very complex, dynamic, and dispersed.
Managers spend much of their time managing the network. They may add new partner
organizations, change the amount of work sent to others, renegotiate agreements, strengthen
Exhibit 5.5
Network Structure
student in
dorm room
starts graphic
art business
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Chapter 5: Organizing: Organizations
coordination among partners, monitor performance, and make other adjustments to the
network. Many HCOs outsource work using a network approach that is so seamless that
patients and others do not realize it exists. A manager should always remember that the
network approach creates dependencies and risk. Success depends on organizations in the
network. Lousy performance by any of them weakens the network. The advantages and
disadvantages of the network form are listed here (Cummings and Worley 2015; Daft
2016; Dunn 2016).
◆◆ Quick access to expertise, systems, facilities, and equipment with minimal
◆◆ Flexibility to grow, shrink, and adjust to rapidly changing external
◆◆ Useful for organization specialization and innovation
◆◆ Less time spent on managing a large, complex organization hierarchy
◆◆ Dependence on other organizations for critical services
◆◆ Risk of failure if outsource partner performs poorly
◆◆ Time and expense to choose partners, negotiate contracts, and manage
◆◆ Potentially weaker employee loyalty and commitment
H y b r id S t r u c t u r e s
The five organization structures explained in this chapter are just a starting point. Managers often create custom structures by combining elements of more than one organization
structure. They might start with functional and then add matrix structure for the ob-gyn
service line and for the outpatient surgery service line. Or, top managers might create a
divisional structure in which each division has its own finance staff and marketing staff,
but then take a functional approach in centralizing human resources to ensure consistency
of employment practices. The possibilities and variations are endless. If you’ve seen one
HCO organization chart, you surely haven’t seen them all!
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