RE NTATION P AD,A

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1 SECURITY CLASSIFICATION OF THIS PAGE Ij!! RE NTATION P AD,A74-8 Ia. REPORT SECURITY CLASSIFICATION!t. 't, oved 2a. SECURITY CLASSIFICATION AUTHORIT 3. DISTRIBUTION /AV A,... 2b. DECLASSIFCATION/DOWNq DING SCHEDULE.N SSIFJD/UJIITED 14. PERFORING ORGANIZATION REPORT NUB ) 5, ONITORING ORGANIZATION REPORT NUBER(S) a. NAE OF PERFORING ORGANIZATION T 6b. OFFICE SYBOL 7a. NAE OF ONITORING ORGANIZATION. Keller Ary Counity Hospital (If applicable) US Ary-Baylor University Graduate I HSUD Progra in Health care Adin 6c. ADDRESS (City, State, and ZIP Code) 7b. ADDRESS (City, State, and ZIP Code) AHS West Point, New York 1996 San Antonio, Texas a. NAE OF FUNDING/SPONSORING 8 b. OFFICE SYBOL 9. PROCUREENT INSTRUENT IDENTIFICATION NUBER ORGANIZATION (If applicable) 8c. ADDRESS(City, State, and ZIP Code) 1. SOURCE OF FUNDING NUBERS PROGRA PROJECT TASK IWORK UNIT ELEENT NO. NO. NO. ACCESSION NO. 11. TITLE (Include Security Classification) Deterining the Appropriate Organiational Structure and Staffing for a anaged Care Office at Keller Ary Counity Hospital, West Point, New York 12. PERSONAL AUTHOR(S) BRIAN EDWARD ANSELAN 13a. TYPE OF REPORT 113b. TIE COVERED 114. DATE OF REPORT (Year, onth, Day)!15. PAGE COUNT Final FRO 7/89 TO 7/9 199 April 15I SUPPLEENTARY NOTATION 17. COSATI CODES 18. SUBJECT TERS (Continue on reverse if necessary and identify by block nuber) FIELD GROUP SUB-GROIJP Organiational Strucutre; anaged Care; ilitary Hospitals I 19, ABSTRACT (Continue on reverse if necessary and identify by block nuber) See Attached 2. DISTRIBUTION /AVAILABILITY OF ABSTRACT 21. ABSTRACT SECURITY CLASSIFICATION [j UNCLASSIFIED/UNLIITED C SAE AS RPT. DTIC USERS 22a. NAE OF RESPONSIBLE INDIVIDUAL 22b. TELEPHONE (Inlude Arta Code) 22c, OFFICE SYiBOL IRTAN E. ANSELAN , )D For 1473, JUN 86 Previous editions arv obsolete. SE CUITY CLASSIC A-N OF T"S P!A

2 Block 19 Abstract The purpose of this study was to deterine the ost appropriate organiational structure and alignent for a anaged care office at Keller Ary Counity Hospital (KACH), West Point, N.Y. The study ethodology relied on an extensive literature search, interviews with key personnel and direct observations. I used the Structural Design odel designed by Jan Galbraith (1971) and Richard Daft (1989) to deterine the ost appropriate organiational structure for the anaged care office. Using the results of the Structural Design odel, I developed several organiational alignent alternatives. I then used the proble solving process to deterine y data analysis, I concluded that the anaged care office should be organied as a atrix structure and aligned as a separate entity under the Deputy Coander for Adinistration (DCA). This recoended organiational structure and alignent will enhance operations for the anaged care office and optiie coordination aong the applicable hospital departents. This study validated Health Services Corand's (HSC) decision regarding the structure for a siilar office; however, I proposed an alternative alignent odel that is ore appropriate for this office. Because of the close siilarity of organiational structures aong edical Departent Activities (EDDACs), the results of this anageent project can be used by other EDDACs with a anaged care office and tailored to their own organiations. Other EDDACs will find that aligning their anaged care office under the DCA rather than as a branch in the Patient Adinistration Division (PAD) will iprove the effectiveness and coordination of the anaged care progras

3 DEPARTENT OF THE ARY U. S ARY EDICAL DEPARTENT ACTIVITY Wast Point, New Yok REPLY TO ATTENTION OF: HSUD (31-1) 23 ay 199 EORANDU THRU COL Willia Inau, Deputy Coander for Adinistration FOR Residency Coittee, U.S. Ary-Baylor University Graduate Progra in Health Care Adinistration (HSHA-IHC), Acadey of Health Sciences, Fort Sa C Houston, TX o SUBJECT: Graduate anageent Project I a re-subitting one copy of y Graduate anageet Project for approval as well as the DD For 1473 and DTIC For 59 in accordance with the instructions contained in I the Adinistrative Residency anual. Encl HSUD 1st End BRIAN E. ANSELAN CPT, S Adinistrative Resident COL Inau/ba/335 DA, HQ, USA EDDAC, West Point, NY ay 9 FOR Residency Coittee, US Ary-Baylor University Graduate Progra in Health Care Adinistration (HSHA-IHC), AHS, Fort Sa Houston, TX I have reviewed and approved CPT Anselan's Graduate anageent Project. I a satisfied that he has ade the odifications suggested by AJ Varney and recoend approval of his GP. WILLIA.IN ZU COL, S Deputy Coander for Adinistration

4 DETERINING THE OST APPROPRIATE ORGANIZATIONAL STRUCTURE AND ALIGNENT FOR A ANAGED CARE OFFICE AT KELLER ARY COUNITY HOSPITAL, WEST POINT, NY A Graduate anageent Project C -4 Subitted to the Faculty of r. Baylor University In Partial Fulfillent of the x 'V Requireents for the Degree of aster of Health Adinistration by Captain Brian E. Anselan, S 15 April, 199 I -_ ~ N N- I.. i I - A

5 Deterining the ost i Acknowledgents I would like to acknowledge those people who have assisted e in the developent of this Graduate anageent Project. a C First, I would like to thank Colonel Willia Inau for hiso assistance. His insights were instruental in the developent of y ethodology and data analysis and provided e with a greater understanding of the hospital organiational structure and dynaics. I also appreciate the tie he devoted to reviewing drafts of this study and providing constructive criticis. The content and Z A arguents in y study are stronger due to his feedback. I would also like to express y gratitude to y three faculty readers: LTC George Gisin, LTC F. Willia Brown and AJ Richard Varney. Each of the have responded with tiely guidance and feedback regarding the developent of y project. I especially appreciate the tie and guidance that LTC Brown provided in assisting e to develop y ethodology. His suggestions considerably strengthened y ethodology for this project. Finally, I wish to thank Richard Daft, author of the book, Organiation Theory and Design (1989). His book synthesied all of the structural design odels and paradigs I needed to conduct an organiational structure study at Keller Ary Counity Hospital. This reference provided e with an excellent knowledge base in organiation design that greatly facilitated y conduct of this anageent project.

6 Deterining the ost ii Abstract The purpose of this study was to deterine the ost appropriate organiational structure and alignent for a anaged care office at Keller Ary Counity Hospital (KACH), West Point, N.Y. The study ethodology relied on an extensive literature search, interviews < ~Z with key personnel and direct observations. I used the Structural r Design odel designed by Jay Galbraith (1971) and Richard Daft x (1989) to deterine the ost appropriate organiational structure for the anaged care office. Using the results of the Structural Design odel, I developed several organiational alignent alternatives. I then used the proble solving process to dete'ine the ost appropriate organiational alignent alternative. Based on y data analysis, I concluded that the anaged care office should be organied as a atrix structure and aligned as a separate entity a G4 under the Deputy Coander for Adinistration (DCA). This - recoended organiational structure and alignent will enhance operations for the anaged care office and optiie coordination aong the applicable hospital departents. This study validated Health Services Coand's (HSC) decision regarding the structure for a siilar office; however, I proposed an alternative alignent odel that is ore appropriate for this office. Because of the close siilarity of organiational structures aong edical Departent Activities (EDDACs), the results of this anageent project can be

7 Deterining the ost iii used by other EDDACs with a anaged care office and tailored to their own organiations. Other EDDACs will find that aligning their anaged care office under the DCA rather than as a branch in C the Patient Adinistration Division (PAD) will iprove the effectiveness and coordination of the anaged care progras. < 4. Z K Ẕ 4 x Cn

8 Deterining the ost iv TABLE OF CONTENTS PAGES X 'Vi C ACKNOWLEDGENTS... i ABSTRACT ii CHAPTER < I. INTRODUCTION Conditions Which Propted the Study Iẕ 4 Stateent of the anageent Proble... 3 Review of the Literature X Purpose of the Study Z II. ETHODS AND PROCEDURES Organiational Structure Phase Organiational Alignent Phasea III. RESULTS AND DISCUSSION Organiational Structure Phase Organiational Alignent Phase IV. CONCLUSIONS AND RECOENDATIONS Conclusions Recoendations Ipleentation Final Rearks o.o.. 93 V. REFERENCES LIST OF TABLES Table 1. anaged Care Office ethod of Assessent 41 Table 2. Functional, Product and atrix Structure Profiles Table 3. Suary of Environental Coplexity Survey Table 4. Suary of Environental Change Survey 63 Table 5. Total FTEs at KACH as of 31 DEC Table 6. anaged Care Office Profile Table 7. anaged Care Office versus atrix Structure Profile Table 8. anaged Care Office versus Product Structure Profile Table 9. anaged Care Office versus Functional

9 Deterining the ost v LIST OF FIGURES Figure 1. Structural Design odel... 5 Figure 2. Structural Design odel Figure 3. Fraework for Assessing Environental Uncertainty Figure 4. Fraework for Departent Technologies.. 35 C Figure 5. Fraework for o Assessing Environental a Uncertainty Figure 6. Fraework for Departent Technologies.. 66 APPENDIX -- A. DEFINITIONS B. ACRONYS Z C. SURVEY QUESTIONAIRE FOR ENVIRONENTAL COPLEXITY AND CHANGE D. CONTINGENCY FRAEWORK FOR ENVIRONENTAL UNCERTAINTY AND ORGANIZATIONAL RESPONSES E. FT. CARSON PATIENT SERVICES DIVISION F. VERIFICATION OF TECHNOLOGY COPLEXITY AND INTERDEPENDENCE ASSESSENT G. ORGANIZATION CHART FOR ALTERNATIVE 1 H. ORGANIZATION CHART FOR ALTERNATIVE 2 I. ORGANIZATION CHART FOR ALTERNATIVE 3 J. ORGANIZATION CHART FOR ALTERNATIVE 4 K. PROPOSED ATRIX STRUCTURE FOR THE CHSB

10 Deterining the ost 1 DETERINING THE OST APPROPRIATE ORGANIZATIONAL STRUeTURE AND ALIGNENT FOR A ANAGED CARE OFFICE AT KELLER ARY COUNITY HOSPITAL, WEST POINT, N.Y. Conditions Which Propted the Study Over the past few years, the delivery of health care in the Ary edical Departent (AEDD) has experienced draatic changes. Constraints on Federal and Departent of Defense (DoD) budgets created an environent of liited resources within the DoD health C Z syste. At the sae tie, the deand for services continued to grow and the cost of providing care, particularly through the Civilian Health and edical Progra of the Unifored Services (CHAPUS), skyrocketed. Cost containent and the efficient use of resources are now the governing philosophy of the AEDD. Prospective payent in the for of Diagnosis Related Groups (DRGs) is being introduced into the DoD health syste as a eans of cost containent. In addition, the DoD Health Affairs Office has turned to anaged care as a potential eans of cost containent. The DoD Health Affairs Office developed nuerous anaged care deonstration projects in attepts to deterine which odels would be ost effective in containing the costs of ilitary edicine. Yet, while the econoics of delivering health care is changing, the organiational structure of the EDDAC has not changed. Is the structure of EDDACs appropriate to enhance the function of providing the highest quality care at the best price?

11 Deterining the ost The function of ilitary hospitals is to anage the changing 2 environent to its advantage in ters of quality of care and resource utiliation. Ary EDDACs ust then develop environent, enhance opportunistic thinking and decision aking, and foster cost conscious responses to the growing service base. Prior to Septeber 1989, the anageent and coordinacton of the anaged care activities at KACH were fragented along functional lines. No one person had responsibility for all C < Z x anaged care activities. The PAD controlled the Health Benefits Advisor (HBA) duties and Suppleental Care progra. The Resource anageent Division (RD) coordinated the DoD Sharing Agreeent Progra and the Clinical Support Division (CSD) coordinated the CHAPUS Partnership and Direct Health Care Provider Progras (DHCPP). This was further coplicated by the KACH organiational structure in which the PAD and CSD reperted to the DCCS while the RD reported to the DCA. This fragented approach prevented the developent of a coprehensive anaged health care delivery strategy. In Septeber, 1989 HSC established the ilitary-civilian Health Systes Branch CHSB). As one of its priary goals, the CHSB is responsible for developing, coordinating and onitoring a anaged health care syste for the EDDAC. HSC provided three additional anpower requireents and funding to staff this branch,

12 Deterining the ost 3 in addition to shifting the HBA authoriation to this brarrch. The directive also andated that the CHSB was to be aligned as a branch under the PAD. The HSC Regulation 1-1 stipulates that the PAD is to be aligned under the DCA. However, at KACH, the Coander decided to configure PAD under the DCCS. The CSD is also under the DCCS. < Therefore, the DCA is effectively reoved fro the direct 'olicy Z and decision aking process regarding anaged care initiatives. Stateent of the anageent Proble (n The proble stateent for this study was to deterine the ost appropriate organiational structure and alignent for a anaged care office at Keller ACH, West Point, N.Y. c a G) x Review of the Literature In y literature review, I have first presented the theoretical constructs of y anageent project which are organiational structure and anaged care. Then I have reviewed the anaged care applications that the DoD is currently eploying. Organiational Structure There is no single best way for an institution to organie in all situations. Contingency theory states that there is no best way, that it depends on the situation (Daft, 1989). The fundaental tenet of contingency theory, as applied to organiational theory, asserts that there is no universal type organiational structure, but a ultitude of possible alternative

13 Deterining the ost ethods of organiation. The appropriate structure is corttingent 4 on such organiational factors as tasks, sie and external environent. These factors serve as both opportunities and constraints that influence the internal organiation (Daft, 1989; Leatt & Schenck, 1982; Neuhauser, 1972). Theorists argue that C a to "effective and successful organiations structure or organie < theselves in a anner copatible with these contextual deands or respective contingencies" (Leatt & Schenk, 1982, p.221). The Structural Design odel (Figure 1) by Jay Galbraith (Daft, 1989) posits that organiational structure is deterined by (I, four contextual variables: environent, goals, technology and sie. Each of these factors is associated with a correct structural design, and each of these ay influence each other as well.

14 Deterining the ost 5 Structural Design odel Figure 1. Structural Design is contingent on Environent, Sie, Goals and Technology contextual variables. StnwwrctAl Design C -4 Goal Techology Note. Fro "atrix Organiation Designs" by J.R. Galbraith, 1971, Business Horions, There are three basic organiational structures: Functional, product and atrix. In a functional structure, activities are grouped together by coon function fro the botto to the top of the organiation such as Nursing, Surgery, edicine, and Radiology. The functional organiation is ost effective when the environent is stable, the technology is relatively routine with low interdependence across functional lines, the goals pertain to internal efficiency and technical specialiation, and the sie is sall to ediu (Daft, 1989; Hellriegel, Slocu & Woodan, 1986; Litterer, 198; Nackel, 1988; Shortell & Kaluny, 1988).

15 Deterining the ost -In a product structure, the organiation is based on - 6 organiational outputs. For each product output, all necessary resources are grouped within the departental structure. The product structure is ost effective when the environent is fn a C uncertain, technology is non-routine and reflects interdependenceo C) across departents, goals ephasie external effectiveness and adaptation, and the sie is large (Daft, 1989; Hellriegel,'Slocu & Woodan, 1986; Litterer, 198; Nackel, 1988; Shortell & Kaluny, 1988). A atrix organiation exists when both product and functional Cn structures are ipleented siultaneously in each departent. It is siilar to the use of full-tie integrators or product anagers except that in a pure atrix organiation, the product anagers are given foral authority equal to that of the functional anagers. The atrix structure is best used when environental uncertainty is high and when goals reflect a dual requireqnt, such as for both product and function. This structure is good for non-routine technologies that have interdependencies both within and across functions. It tends to work best in organiations of oderate sie with a few product lines (Daft, 1989; Hellriegel, Slocu & Woodan, 1986; Litterer, 198; Nackel, 1988; Shortell & Kaluny, 1988). According to Davis and Lawrence (1977, as cited in Daft, 1989), the atrix structure is appropriate for the following special conditions:

16 Deterining the ost 1). Environental pressure is for two or ore critical 7 outputs such as technical quality and frequent new products. 2). The environental doain of the organiation is both coplex and uncertain. 3). Econoies of scale in the use of internal resources is needed such as not having sufficient engineers to assign the full tie to separate product lines, such that enginers arec teporarily allocated to several product lines. Different fors of a atrix organiation can be identified on a continuu which ranges fro the pure functional organiation to 'V C a < x U, the pure product organiation (Galbraith, 1971 as cited in Larson & Gobeli, 1987). At the functional end of the spectru, hierarchical or vertical coordination exists. At the other end of the spectru, product organiation exists in which lateral or horiontal coordination operates (Litterer, 198). "atrix organiations lie between the two extrees by integrating the functional structures with a horiontal project structure" (Larson & Gobeli, 1987, p.127). Organiations apply the atrix structure in varying degrees and in different ways. The level of horiontal linkage used deterines where the organiation falls on the spectru. Horiontal linkages or lateral relations refer to the degree of

17 Deterining the ost 8 coordination and counication that exist across organiat-ional departents (Duncan, 1979; Daft, 1989; Neuhauser, 1972; Shortell & Kaluny, 1988). The following horiontal linkages are alternatives listed in ascending order of coplexity. Paperwork and eos are siple a C devices that provide a low level of horiontal linkage. Direct < contact between anagers of different groups perits a slilhtly K higher degree of lateral coordination. Creating a liaison role is the next alternative and is a foral counications link between two units. Task forces are ore coplex echaniss of creating horiontal linkage and are teporary coittees coposed of representatives fro each departent to deal with a specific X project or proble (Duncan, 1979; Daft, 1989; Hellriegel, Slocu & Woodan, 1986; Litterer, 198). The need for stronger, ore coplex horiontal coordination ay necessitate the establishent of an integrator role. The integrator is located outside the departents and is responsible for coordinating the actions of several departents. The integrator frequently has titles such as progra anager, brand anager, project anager, or product anager. Integrators have a great deal of resposibility, but have little authority as foral authority reains with the functional departent anagers (Daft, 1989; Duncan, 1979; Lawrence & Lorsch, 1967; Hellriegel, Slocu & Woodan, 1986).

18 Deterining the ost Establishing project teas tends to be the strongest - 9 horiontal linkage device. Project teas are peranent task forces and are often used in conjunction with an integrator (Daft, 1989; Duncan, 1979; Litterer, 198). Larson and Gobeli (1987) cite three different fors of atrix structures. The pure atrix structure or balanced atrix is one in which the functional anager and product anager equali7 direct authority over work operations. The project anager is sharek priarily concerned with what needs to be accoplished while the Z functional anager is concerned with how it will be accoplished. The functional atrix occurs when the project anager's role is restricted to coordinating the efforts of the functional groups with only indirect authority to expedite and onitor the work plan. The functional anagers are responsible for the design and copletion of their respective technical requireents. The last atrix structure is the project atrix. This for occurs when the project anager has direct authority to ake decisions regarding personnel and work flow activities. The functional anager is liited to providing services and technical advisory support.

19 Deterining the ost 1 anaged Care The ter "anaged care" refers to any syste in which the anageent of health care delivery uses cost control echaniss ac (Kongstevdt 1989). Aaron and Breindel (1988) siilarly define a anaged care, but add that the cost control echaniss are norally established by third parties (non-patient and non-provider). The ore coon fors of anaged care plant arex Health aintenance Organiations (HOs) and Preferred Provider x Organiations (PPOs). HOs are pre-paid capitated plans that provide coprehensive health care for a specified period. PPOs are contractual arrangeents with providers or institutions in which they provide health care services at pre-established discounted fee-for-service prices. However, the distinction between HOs, PPOs, and other fors of anaged care plans has narrowed, and any hybrid anaged care plans have sprouted (Kongstevdt, 1989). Traditionally, health care has been financed by a fee-for-service syste in this country. This financing echanis reibursed health care providers, including both physicians and hospitals, their total costs or charges incurred in the treatent process. The ore physicians and hospitals charged and the higher their costs, the greater their revenues. There was no incentive to control access or contain costs, but rather, physicians and hospitals were econoically otivated to induce deand (Aaron &

20 Deterining the ost Breindel, 1988; Kongstevdt, 1989). This syste prooted - 11 inefficiency and resulted in skyrocketing inflation in health care. As the cost of providing health care benefits to eployees soared, corporations soon felt the adverse ipact on profits and copetitiveness with foreign goods. Corporations turned to anaged health care delivery systes that could control cats. anaged edical care has existed since 1929 when the first HO was 4 established. anaged edical plans did not proliferate until after the passage of the HO Act of Z This law opened the door for anaged care plans to increase in nubers and to expand their enrollent to beneficiaries of governent financed health care progras including edicare and edicaid (Kongstevdt, 1989). Following the passage of the HO Act, anaged care plans grew in popularity in the 198s as an alternative to the inflationary fee-for-service syste (Aaron & Breindel, 1988). By definition, anaged care plans rely on cost containent echaniss to control costs. There is a wide variety of cost control easures available with varying degrees of effectiveness. Different types of anaged care plans eploy their own ix of cost control echaniss. Soe of these cost control easures include financing echaniss such as capitation and discounted fee-for-service plans; utiliation anageent echaniss such as preadission certification, second surgical opinions and case

21 Deterining the ost anageent; and risk sharing echaniss aong providers such as 12 capitation and withholds (Kongstevdt, 1989; Aaron & Breindel, 1988). The ilitary health care syste continues to encounter a C inflationary pressures and greater deand for service. The DoD is experienting with nuerous anaged care initiatives to rein in health care costs. any of these anaged care progras focus onk CHAPUS costs. CHAPUS Since the direct care syste could not eet total deand for care, Congress legislated CHAPUS as a cost sharing health insurance plan. Nearly 9.2 illion people including all active duty serviceen, their dependents, and ilitary retirees and their dependents are eligible to use the DoD direct health care syste. This deand far exceeds the capabilities of the syste. Since the active duty population has priority in the syste, the excess deand generated by dependents and retired beneficiaries is referred to the ore expensive CHAPUS progra. On average, for every dollar that is spent for edical treatent in a ilitary treatent facility, it costs CHAPUS $1.57 to provide the sae treatent (Gisin & Sewell, 1989; Congressional Budget Office (CBO), 1988; telephonic interview with CPT Gidwani, 21 Noveber 1989). CHAPUS pays a large part (norally 75-8%) of civilian hospital and physician costs. Beneficiaries can use CHAPUS at

22 any tie for outpatient care, but ust obtain perission Deterining the ost 13 (non-availability stateents) fro the local ilitary edical coander for inpatient care if they live within a 4 ile radius catchent area (Gisin & Sewell, 1989). While funding for the direct health care syste has always a o been provided through service channels, CHAPUS funding until recently was provided directly to the Office of CHAPUS, Dnver,C CO by the DoD. This allowed the opportunity for considerable cost shifting fro the three services to the DoD (CBO, 1988). Traditionally, local ilitary hospital coanders encouraged patients to use CHAPUS to reduce the overcrowding at their facilities. This helped the local hospitals and services while creating a burgeoning CHAPUS budget for the DoD. As Gisin and Sewell (1989, p.88) noted, the "DoD found itself to be priarily a bill payer, with little control over either the nuber of beneficiaries or the scope of services provided through CHAPUS." Over tie, this led to friction between the services and the DoD regarding the perceived willingness of the services to provide the axiu aount of care in ilitary hospitals and clinics. CHAPUS sustained budget deficits in the 198s that required suppleental appropriations in excess of $3 illion each year. To put a rein on rapant CHAPUS expenditures, the DoD Health Affairs Office decided to allocate CHAPUS funds directly to the three services beginning in FY88, thereby placing the burden of

23 Deterining the ost controlling CHAPUS costs on the (Gisin & Sewell, 1989). -Over 14 the last ten years, Congress and the DoD sponsored a variety of progras designed to recapture CHAPUS workload into the ilitary direct health care syste. Beginning in FY88, Congress gave the C o services authority to pursue deonstration projects aied at iproved anageent of CHAPUS funds (HSC, 1988). Catchent Area anageent. One such deonstration project authoried by Congress is the Catchent Area anageent (CA) project. This progra gives local hospital coanders the x opportunity to deonstrate that when given adequate funding, resources and authority, they can enhance health care delivery within their respective catchent areas while containing costs. Under the provisions of this progra, the local hospital coander receives both the appropriated Operations and aintenance Ary (OA) funding and CHAPUS funding budgeted for the hospital's catchent area. The coander is responsible for providing care to all beneficiaries within budgetary constraints. The local coander also has the authority to deterine the level and ix of in-house services to be provided and which services are to be contracted out (Gisin & Sewell, 1989; HSC, 1988). Necessary to the success of the CA project is the channeling of CHAPUS workload into the ilitary treatent facility to axiie treatent provided at lower costs. Hospital coanders have the latitude to hire or contract the necessary ix and nuber

24 Deterining the ost of direct health care providers and ancillary support personnel to 15 axiie the direct health care syste workload. During FY89 and FY9, the CA was to be tested at five DoD hospitals, and upon evaluation of the results, a decision would be ade regarding expansion of this concept to other DoD facilities (Gisin & Sewell, 'D C a 1989; HSC, 1988). CHAPUS Refor Initiative. The CHAPUS Refor Initiative (CRI) is a DoD deonstration project for beneficiaries in California and Hawaii that began in August of The Z Foundation Health Corporation was awarded a contract to provide CHAPUS services to ore than 8, beneficiaries in the two states. Using health care finders (HCFs) located at each edical treatent facilty (TF), Foundation would first try to axiie the CHAPUS workload for each ilitary TF in the two state area. The HCFs would then refer beneficiaries to a network of PPOs if an appointent at nearby TFs are unavailable. Beneficiaries-also have the option of enrolling in HOs (Office of The Surgeon General (OTSG), 1989). Preferred Provider Arrangeents. The DoD initiated a CHAPUS deonstration project in Georgia and Florida on 1 July 1988 in which several PPOs agreed to provide health care to CHAPUS beneficiaries at discounted prevailing CHAPUS rates with lower

25 beneficiary cost shares. This is a two year test of the Deterining the ost 16 deonstration project and savings are projected at $4.5 illion over the duration of the experient (Price, 1989). Partnership Progra. Under the provisions of DoD Instuction (DoDI) (1987), the "ilitary Civilian Health Services Partnership Progra" was established in October The Partnership Progra was designed to assist hospital coanders ink augenting their edical staff to capture CHAPUS workload when services to CHAPUS beneficiaries through the treatent facility's own resources. The purpose of the progra is to allow CHAPUS beneficiaries to receive inpatient and outpatient care, through the CHAPUS progra, fro civilian health care providers in the TF (internal partnership) and fro ilitary health care providers in civilian facilities (external partnership). The preise of the Partnership Progra is that the Do. health care delivery syste can operate ore efficiently by using the CHAPUS progra to suppleent the TF rather than disengaging the patient to CHAPUS, which is a considerably ore costly health care coponent, according to Albert Shult, Partnership Progra Coordinator at HSC. Since the civilian health care provider working in the ilitary hospital incurs lower overhead, the hospital coander negotiates for a discounted fee-for-service. Norally, the hospital coander is expected to obtain at least a

26 Deterining the ost 3% discount fro the CHAPUS prevailing rates (personal interview 17 with Albert Schult, 6 July 1989). Alternate Use of CHAPUS Funds Progra. The Alternate Use of CHAPUS Funds Progra is a Congressionally approved project allowing up to $5 illion in FY89 CHAPUS Funds to be used for other than CHAPUS clais when such use would iprove the productivity of ilitary hospitals and produce net verifiable savings. The Assistant Secretary of Defense (Health Affairs) has been designated as the proponent for the progra and is the approving authority for all progra proposals. C a a Z Personal Services Contracts Congress authoried the AEDD to negotiate personal services contracts for direct health care providers such as physicians, dentists, nurses, radiologists, and laboratory technicians. Aong the purposes of personal services contracts are to facilitate ission accoplishent, axiie beneficiary access to ill.tary treatent facilities, and reduce the use of CHAPUS. For FY88, the progra paid for 385 work years world wide for all types of contracts in 51 ilitary edical facilities. This progra helped reduce the Ary CHAPUS bill by bringing ore health care providers into TFs (OTSG, 1989; DoD, 1985).

27 Deterining the ost 18 Suppleental Care TFs are tasked to provide eligible beneficiaries with X edical care to the extent that such care is required, authoried, and available. If the patient is an eligible beneficiary and the care required exceeds the ability of the TF to provide this necessary care, suppleental care funds can be used to obtain < ~Z these services fro local civilian resources. Suppleental care funds ay be used to obtain such x non-elective services as special treate' rrocedures, consultations, tests, and supplies. They can also be used to cover all obstetric expenses for active duty feales, if OB services are not available in the TF. Norally, suppleental care services are provided on an outpatient basis. However, inpatient referrals can be ade, usually for eergency situations. With the exception of OB services, the patient can reain hospitalied in a civiliap facility, using suppleental care funds, for up to 48 hours. For periods exceeding 48 hours, approval ust be obtained fro the regional edical center to which the EDDAC reports. After audit reports revealed that any facilities were paying excessive charges for edical services purchased fro civilian sources, the Office of the Secretary of Defense (OSD) for Health Affairs instructed the tri-services to institute tighter controls on suppleental care expenditures. Hospital coanders are now

28 Deterining the ost expected to pursue alternative ethods of obtaining suppleental 19 care such as VA-DoD Sharing Agreeents, the Partnership Progra, Direct Health Care Providers Contracting and inter- and intra-service evacuation if it is feasible and less costly (OTSG, 1988). As a provision of the Partnership Progra, TF coanders ay use available suppleental care funds to purchase care for- non-chapus beneficiaries fro Partnership providers at a x negotiated discounted fee-for-service price (DoD, 1988) Once their other alternatives are explored, hospital coanders ay obtain Suppleental Care provided that they ensure that fees paid do not exceed prevailing CHAPUS rates. TF Coanders ust ensure that resource-sharing agreeents are considered where ultiple federal facilities coexist; and where possible, they ust pursue Partnership Agreeents or professional services contracts for services frequently purchased fro civilian sources. VA-DoD Sharing In 1982, Congress authoried VA hospital directors and ilitary hospital coanders to engage in sharing agreeents that resulted in increased quality of care, iproved service to the patient and enhanced cost effectiveness of treatent. This progra allows DoD hospitals to take advantage of the excess capacity of edical services existing at nearby VA facilities at substantially reduced cost and vice versa. These sharing

29 agreeents can afford considerable savings to a hospital Deterining the ost 2 coander's Suppleental Care budget. ilitary-civilian Health Systes Branch Health Services Coand established a new ilitary-civilian Health Systes Branch (CHSB) under the EDDAC's Patient C Adinistration Division in Septeber This branch will < support the ission of coordinating direct care and CHAPUT K services including the anageent of all anaged care activities. -4 " "D Currently, the Clinical Support, Patient Adinistration and, to a (n lesser extent, Resource anageent Divisions perfor any of the functions that the new branch will conduct. HSC also created two positions for the new branch; the supervisory Health Services anager and the Civilian Resource Coordinator. HSC distributed three additional anpower requireents to KACH for their ilitary-civilian Health Systes Branch. Keller ACH received anpower requireents for each of the new positions create and for a Budget Assistant. The Health Benefits Advisor authoriation was shifted fro the Patient Affairs Branch in the PAD to the SHSB for a total of four personnel. HSC indicated that the additional requireents would be funded in FY9.

30 Deterining the ost 21 Purpose of -the Study I based y graduate anageent project on the following hypotheses: H = The organiational structure and alignent, as specified in the HSC Regulation 1-i and the TDA for Keller ACH, is the ost appropriate to coplete the stated ission and requireents of the anaged Care Office. Ha = The organiational structure and alignent, as a C < specified in the HSC Regulation 1-1 and the TDA for Keller ACH, is not the ost appropriate to coplete the stated ission and requireents of the anaged Care Office. To deterine the ost appropriate organiational structure and alignent to adinister the anaged care office, an organiational and an environental assessent were ade with the following objectives: 1. Identify the goals and functions of the anaged care office. 2. Deterine the ost appropriate organiational structure for the anaged care office with the Structure Design odel by: a. Assessing the goals of the anaged care office to deterine if the focus of the goals are internal, external or dual.

31 Deterining the ost b. Assessing the departental technology of the anaged 22 care office along two diensions: Job task coplexity and interdependence. c. Assessing the level of uncertainty in the KACH environent by eploying a fraework that easures two diensions of environental uncertainty: Environental coplexity and environental stability. Z d. Deterining the sie of KACH in ters of the nuber of -4 x people eployed in the organiation. 3. Deterine the ost appropriate organiational alignent of the anaged care office by: a. Developing alignent alternatives based on the organiational structure recoended by the Structural Design odel. b. Evaluating alignent alternatives. c. Choosing the best alignent alternative.

32 Deterining the ost 23 ethods and Procedures I divided y project into two phases: organiational structure and organiational alignent. The purpose of the W a organiational structure phase was to deterine the ost a appropriate structure for the anaged care office. The choice of organiational structure was one of three possibilities: functional, product or atrix. Only after I had deterined the structure could I then proceed to identify the ost appropriate organiational alignent. The organiational alignent chosen < -4 would then deterine the ost appropriate reporting relationship for the anaged care office. I have discussed the ethodology and procedures for each phase separately. y discussion of each phase includes the odel designs and fraeworks I used and the criteria developed for each odel and fraework. I conducted an extensive literature search prior to y phased approach and reviewed a wide variety of reference aterialgoverning the following topics: a. anaged Care b. CHAPUS Progra c. CHAPUS anaged Care Deonstration Projects d. Suppleental Care e. Personal Contracting f. Organiational Structure g. Organiational Design Criteria

33 Deterining the ost In addition to nuerous books and journal articles, I reviewed 24 various ilitary correspondence including inforation papers, eorandus, letters, and DoD Instructions. y ethodology also included direct observation of specific a C anaged care functions, interviews with coand and staff ebers at KACH and telephone interviews with staff ebers fro the OTSG and HSC. The ethical rights. of those people interviewed wire preserved by inforing the of the purpose of y interview and stating their right to refuse or stop the interview at any tie prior to the interview. < C Z Organiational Structure Phase The odel I used to deterine the appropriate structure for the anaged care office at Keller ACH was patterned fro the Structural Design odel (Figure 2) developed by the organiational theorist, Jay Galbraith and odified by Richard Daft (Galbraith, 1977 as cited by Daft, 1989). The odel postulates that organiational structure is deterined by four contextual variables: Organiational environent, technology, goals, and sie. By assessing the environental factors and organiational characteristics of the progras to be incorporated in a functional entity in ters of these four variables, Galbraith and Daft posit that the ost appropriate structure for an organiation can be

34 Deterining the ost 25 deterined. The structural design odel by Galbraith and Daft established construct validity and reliability for the study. Structural Design odel Figure 2. Structural Design is contingent on Environent, Sie, Goals and Technology contextual variables.o SUucgt" Deusp Io C W C Environent Z Note. Fro "atrix Organiation Designs" by J.R. Galbrait, 1971, Business Horions, Goals. An organiational goal is a desired state of affairs that the organiation attepts to realie (Etioni, 1964 as cited in Daft, 1989). Goals can reflect either anageent's internal focus or external focus. Strategy is the plan of action that describes resource allocation for dealing with the environent and for achieving organiational goals. The goals and strategy define the scope of the operations and relationship with the organiation's various constituencies (Daft, 1989).

35 Deterining the ost I relied on interviews and literature reviews to deterine the goals and functions of the anaged care office and the subsequent analysis of the goals' focus. I interviewed the DCA, various HSC and OTSG staff ebers ac and the CA project officer at Ft. Carson regarding current and future trends in anaged care in the Ary. I also conducted literature searches. Specifically, I < reviewed DoD and HSC correspondence related to anaged care initiatives in the ilitary. I had the DCA review and approve the goals and functions that I developed for the anaged care office. I evaluated the goals of the anaged care office to deterine ~Z 26 if the focus of each goal was internal or external. Goals that reflect an internal focus concern efficiency and technical quality and specialiation. Organiational goals that stress an external focus concern growth, innovation, product developent, adaptation to the environent and client satisfaction. Once I had categoried each of the anaged care office goals as having either an internal or external focus, I had the DCA review and verify y assessent. Then, I characteried the overall focus of the anaged care office. y criteria for categoriing the anaged care office focus was to categorie it as internal if all of the goals had an internal focus. Or I would categorie the anaged care office focus as external if all of the goals had an external focus. However, if there was any

36 Deterining the ost cobination of goals that reflected both an internal focus-and 27 external focus, I would have the DCA deterine whether the ephasis of the goals was internal, external or dual and would classify the goals as such. C Organiations whose goal orientation is technical efficiency, technical specialiation and quality are likely to be organied in a functional structure. Organiations in which goals focu on external effectiveness, adaptation to the environent and client satisfaction will likely be configured in a product structure. There are soe organiations that have equally weighted, dual goals of technical specialiation and adaptation to the environent. These situations would dictate a atrix structure as ost appropriate (Daft, 1989). Organiational Environent. Environent is that which anageent considers to be relevant or potentially relevant for organiational decision aking (Duncan, 1979). Daft (1989 defines environent as all eleents existing outside the boundaries of the organiation that can affect all or part of the organiation. The essential aspect of environent which affects organiational structure is the degree of uncertainty the environent presents for the organiation. Uncertainty is defined

37 Deterining the ost 28 as a situation in which decision akers have insufficientinforation regarding environental factors and have difficulty predicting external changes (Daft, 1989). y fraework for assessing environental uncertainty at KACH cobined two diensions: environental coplexity and ac o environental change. This paradig, the Fraework for Assessing Environental Uncertainty (Figure 3), was developed by Dun'an C (1972, as cited by Daft, 1989). His environental uncertainty fraework cobines both r oplexity and change diensions to 'V deterine the level c-: uncertainty in the environent. According to this paradia, a siple, stable environent represents a low level of uncertainty. The fraework equates low-oderate uncertaincy with a coplex, stable environent. Uncertainty escalates to oderate-high for a siple, unstable environent. The highest level of uncertainty occurs in a coplex, unstable environent.

38 Deterining the ost Fraework for Assessing Environental Uncertainty - 29 Figure 3. The fraework deterines environental uncertainty by cobining environental coplexity and environental change. Environental Coplexity o C Siple Coplex o Stable Low Low-oderate Uncertainty Uncertainty Environental Change x Unstable High-oderate High Uncertainty Uncertainty Note. Fro "Characteristics of Perceived Environents and Perceived Environental Uncertainty" R.B. Duncan, 1972, Adinistrative Science Quarterly, I began y assessent of environental uncertainty by analying the coplexity diension. The coplexity diension refers to the nuber and dissiilarity of external eleents relevant to an organiations operations. Daft (1989) suggests that there are ten external sectors that can potentially influence the organiation's operations: 1. Econoic conditions sector 2. Governent sector 3. Industry sector 4. arket sector 5. Huan resources sector 6. Financial resources sector

39 Deterining the ost 3 7. Technology sector 8. Socio-cultural sector 9. International sector 1. Raw aterials sector C In a siple environent, only a few siilar external eleents influence the organiation. In the coplex environent, any diverse external eleents interact with the organiation. I evaluated the level of coplexity at KACH in ters of the ten external sectors listed by Daft (1989) that potentially influence the organiation. I surveyed the senior edical Corps Officer, COL Wolcott, the senior edical Service Corps Officer, COL Inau, and the senior Nurse Corps Officer, LTC Bell, to deterine their perceptions of which sectors influence the KACH K (n) environent (Appendix C). They indicated next to each sector whether they believed the sector was relevant to the KACH environent or not. A siple two out of three ajority constituted a consensus for each sector. Based on the nuber of sectors that were relevant to KACH, I categoried the KACH environent as siple or coplex. I operationally defined a siple environent as 4 or less sectors that influence the organiational environent. y operational definition for a coplex environent was one in which 5 or ore sectors influence the organiational environent.

40 Deterining the ost The next phase of y assessent of environental unce-rtainty 31 involved an analysis of the change diension. The change diension concerns the level of change associated with the environental factors. A stable environent reains relatively unchanged over a period of tie, while an unstable environent has environental eleents that are subject to abrupt changes (Daft, C < 1989; Duncan, 1979). K To categorie the change diension, I again used the ten 'D external sectors for y analysis. I used the " sae survey Z instruent and saple population to deterine if the external sectors were changing or reaining stable. I requested the survey population to indicate next to the sectors, which they said were relevant to the KACH population, whether this sector was changing or stable. If half or ore of the respondents indicated that the sector was changing, I classified the sector as changing. Based on the nuber of external eleents experiencing-change, I characteried the KACH environent as stable or unstable. y operational definition of a stable environent was one in which less than half of the relevant eleents were experiencing change. Conversely, I defined an unstable environent as half or ore of the relevant eleents that were experiencing changes. Once I had labeled these two diensions of uncertainty, I used the Fraework for Assessing Environental Uncertainty to deterine the level of uncertainty at KACH. I copared y

41 Deterining the ost characteriations of the coplexity diension and change dikension at KACH to the odel. The atrix paradig identified the level of uncertainty at KACH based on y analysis of the coplexity and change diensions. Environental uncertainty is an iportant variable in designing an organiational structure. Daft (1989) developed appropriate organiational structure responses to the lever of uncertainty in the organiation's environent (Appendix D). In a x stable, siple environent, an organiation can rely on rules, regulations, procedures and vertical counication to operate effectively. This is consistent with a functional structure. The stable, coplex environent can also rely on rules, but also requires any departents for boundary spanning. This environent 32 a C V lends itself towards a functional structure. The unstable, siple environent should be a ore inforal, decentralied structure with a few integrating roles. A product structure would beappropriate in this situation. However, when the environent is unstable and coplex, frequent changes require ore inforation processing to achieve coordination. The coordination required by an uncertain environent requires extensive horiontal linkage and integration wiich is a characteristic of a product or atrix structure (Daft, 1989; Duncan, 1979). Technology. Technology is the transforation process in which the knowledge, tools, techniques, and actions are used to

42 Deterining the ost transfor inputs into outputs (Rosseau, 1979 as cited in Daft, ). Two independent aspects of technology that are iportant in deterining appropriate organiation structure are coplexity of the job tasks and the interdependence required aong departents. I assessed each of the functions of the anaged careo C office that I identified in y analysis of Goals in ters of these two separate departental technology diensions: Job task C coplexity and interdependence. (Daft, 1989; Walker & Lorsch, _ 1968). used several ethodologies to conduct y analysis of each (n of the functions. y priary ethod was interviews. For tasks currently being perfored in the hospital, I spoke with appropriate division chiefs and eployees who perfor these tasks. I suppleented the data I gather fro observations of these tasks. y rotations as the adinistrative resident provided e an excellent opportunity to observe various anaged care functions. For future tasks, I spoke to HSC and OTSG staff ebers and the CA site project officer at Ft. Carson. To a lesser extent, I relied on literature reviews to gather data on future anaged care tasks. Job task coplexity is defined in ters of routine versus non-routine and is a function of task variety and analyability. Charles Perrow developed a odel titled, Fraework for Departent Technologies, that reflects this relationship (Daft & acintosh,

43 Deterining the ost as cited in Daft, 1989). Variety refers to the nubet of unexpected and new events that occur in the task process. Analyability refers to the degree that a function or task can be reduced to objective, established, coputational procedures to solve probles. The routine versus non-routine diension of Perrow's Fraework for Departent Technologies (Figure 4) is an excellent o C) ẕ4 easure for analying departental technology. The routine versus x non-routine diension cobines task variety and analyability into a single diension of technology. The analyability and variety Z diensions are often inversely related in departents as illustrated in the fraework. This fraework suggests that technologies high in variety tend to be low in analyability and vice versa.

44 Deterining the ost 35 -Fraework for Departent Technologies Figure 4. This fraework cobines task variety and task analyability into a single diension called Routine versus Non-routine technololgy. Variety Low High ~Z Low Craft Non-routine Z -4 Z it C High Routine Engineering Anlyailt Note. Fro " A New Approach to Design and Use of anageent Inforation" by R. Daft and N. acintosh, 1978, California anageent Review, Routine job tasks are defined as having low task variety and high task analyability. Routine tasks are characteried by few unexpected and novel events, foralied and standardied procedures and the use of objective and coputational proble solving techniques. Non-routine tasks have high task variety and rely on accuulated experience, knowledge and judgeent rather than established procedures to resolve probles (Daft, 1989; Walker & Lorsch, 1968). To evaluate task coplexity, I used the routine versus non-routine diension of Perrow's Fraework for Departent Technologies and assessed each anaged care function in ters of

45 Deterining the ost the level of variety and analyability involved. Using this 36 diension, I labeled the anaged care tasks as either high variety/low analyability or low variety/high analyability. I defined low variety as tasks that were perfored in the sae anner day to day with few unexpected or new events. High variety tasks, however, frequently encountered unexpected or new events. I operationally defined low task analyability as tasks that cannot rely on forally established procedures to perfor the work. Tasks defined as high analyability were those that can or do rely on standard, foral procedures to resolve probles. Once I assessed and labeled each function in ters of variety and analyability, I had y assessents verified by a second party to establish reliability. For those tasks associated with the C x PAD, I had the Chief of the PAD verify y results. For the reainder of the tasks, I had the DCA review and verify y assessents. Once the functions were labeled and verified, I then classified the anaged care office departent technology as routine or non-routine. I based y deterination of task coplexity for the anaged care office by the nuber of functions that were labeled as high variety/low analyability or non-routine. I decided to categorie the anaged care office as

46 Deterining the ost routine if less than half of the functions were labeled as--high variety/low analyability, and non-routine if half or ore of the functions were labeled as high variety/low analyability. X a The functional organiation sees to lead to better results in situations where stable perforance of a routine task is 37 X 'Di desired, while product organiations lead to better results in< situations where the task is less predictable and requires innovative proble solving. This can be coplicated by the possibility that there is a ixture of these diensions in each organiation. There ay be a ixture of routine tasks and K X x Z non-routine tasks, jobs requiring little interdependence aong specialists, and jobs that require a great deal (Daft, 1989; Nackel, 1988). ixed diension organiations ay have to adopt a coproise between product and functional structures (Walker & Lorsch, 1968). The other technology diension that I analyed was interdependence. Interdependence is the extent to which eployees or departents depend on each other for resources or aterials to accoplish their task. Thopson (1967, as cited in Daft, 1989) defined three types of interdependence that influence organiational structure. Pooled interdependence is the lowest for of interdependence and occurs when departents work independently of each other and work does not flow between departents. Sequential interdependence is a serial for in which

47 Deterining the ost parts-produced in one departent becoe inputs to another 38 departent and is a higher level of interdependence than pooled. The highest level of interdependence is reciprocal. This level exists when the input flows back and forth between departents before an output is produced. Reciprocal interdependence requires the coordination of a variety of services to be provided to produce the final product such as the care provided in a hdspital to patients (Duncan, 1979; Litterer, 198). To characterie the level of interdependence in the anaged care office, I assessed each function for its level of interdependence. I defined a pooled interdependent function as one in which the unit was independent and did not rely on work flow fro another unit to produce its output. y definition of a sequential interdependent function was one in which there were successive stages of production and in which the unit's output did not eventually return back to the unit as an input. I defined reciprocal interdependent functions as those in which the work flow oved back and forth between units before the final product was achieved. Once I assessed and labeled each function in ters of interdependence, I had y assessents verified by a second party to establish reliability. For those tasks associated with the

48 Deterining the ost 39 PAD, I had the Chief of the PAD verify y results. For the reainder of the tasks, I had the DCA review and verify y assessents. ac Once y results were verified, I characteried the level of interdependence for the entire anaged care office based on y assessent of its functions. Daft (1989) argues that structural priority should be given to the greatest interdependence that exists in the organiation. Since decision-aking, counication and coordination probles are greatest for reciprocal interdependence, he states that reciprocal interdependence should -4 x receive priority in the organiational structure. Therefore, for the purposes of y project, I characteried the level of interdependence for the anaged care office based on the highest level of interdependence that existed for any of its functions. anageent requireents vary for each level of interdependence. Pooled interdependence requires very little horiontal linkage or integration and operates quite well in a functional structure. Sequential interdependence requires ore lateral coordination and soe for of integration. Reciprocal interdependence requires extensive horiontal linkage and necessitates either a product or atrix organiation to operate effectively (Daft, 1989; Duncan, 1979; Litterer, 198). Sie. Sie is the organiational agnitude as reflected in the nuber of people in the organiation. Sie is typically

49 Deterining the ost 4 easured as sall, ediu or large, and it is an iportantcontextual variable that can influence structure. Large organiations are norally ore foralied by relying on written rules, procedures and policies to achieve standardiation and C a control. As a result of their sie, large organiations perito greater decentraliation and require a greater degree of horiontal and vertical integration than do saller organiations (Daft, 1989; Litterer, 198). I easured the sie of KACH in ters of the nuber of full tie equivalents (FTEs) eployed at KACH as of 31 Deceber Cn I gathered this data fro the Personnel Division at the hospital. Based on the nuber of FTEs at KACH as of 31 Deceber 1989, I categoried the sie of the hospital as sall, ediu or large. 'o ake this deterination, I used the criteria established by the Office of anageent and Budget (OB) on 18 ay According to the OB, a "Very Sall" organiation is less than 2 eplloyees, a "Sall" organiation is 2-99 eployees, a "ediu" organiation is eployees and a "Large" organiation is 5 or ore eployees. The OB states that the standards are consistent with standard business eployent classes and are to be used by all federal agencies when publishing business data. Sie ipacts organiational structure through econoies of scale and resource liitations. Econoies of scale are usually associated with functional structures. It is norally ore

50 Deterining the ost expensive to buy a nuber of sall facilities for product - 41 divisions than a few large ones for functional departents. Product structures ay require ore staff than functional X structures. A large organiation can ore readily afford to give up soe econoies of scale than can a sall organiation. Foro these reasons, a sall organiation is consistent with a functional structure and a large organiation is associate with a product structure. A oderately sied organiation with a few product lines could be structured as a atrix organiation (Daft, 1989; Nackel, 1988; Litterer, 198). C K 4 (n Structural Design odel. Once I had characteried each of the contextual variables, I copared y results with the Structural Design odel. I developed a table and listed each of the four variables. Then, I annotated y assessent next to each variable for the anaged care office. Table 1 ananged Care Office ethod of Assessent Environent: Technology : anaged Care Office Organiation Level of uncertainty Level of task coplexity; degree of interdependence Sie : Sie of organiation Goals : Focus of goals: External, internal or dual Note. Adapted fro "What is the Right Organiation: Decision Tree Analysis Provides the Answer" by R. Duncan, 1979, Organiational Dynaics, 431.

51 Deterining the o 42 I then copared y assessent of KACH and the anaged' are office in ters of the four contextual variables against the three structural odel profiles provided by Daft (1989). I have suaried the appropriate situation with respect to environent, c technology, goals and sie for each for of structure below (Galbraith, 1971; Daft, 1989; Nackel, 1988). Table 2 Functional, Product and atrix Structure Profiles Functional Organiation Z -_4 X Environent: Stable, low uncertainty Technology : Routine, low interdependence Sie Sall to ediu Goals : Internal efficiency, technical specialiation and quality Product Organiation Environent: oderate to high uncertainty, dynaic Technology Non-routine, high interdependence Sie : Large Goals : External effectiveness, adaptation atrix Organiation Environent: High uncertainty Technology : Non-routine, any interdependencies Sie : oderate Goals : Dual- external adaptation and technical specialiation Note. Adapted fro "What is the Right Organiation: Decision Tree Analysis Provides the Answer" by R. Duncan, 1979, Organiational Dynaics, 431. If the anaged care office organiation profile did not exactly atch one of the three structural profiles, I decided to pick the organiational structure that atched the ost variables

52 Deterining the ost with the anaged care office profile. Should the anaged-care office atch the sae nuber of variables for ore than one structural profile, I decided to choose the organiational structure based on prioritiing the four variables. Since C adequate horiontal linkage is instruental to the effectiveness 43 of an organiation, I have the variable, technology, as the ost iportant. Next in order of priority was sie, followed bf goals and then environent. Thus, if there was a tie, the structure profile that atched the anaged care office in ters of technology would be selected as the ost appropriate < organiational structure for the anaged care office. If the tie was still unbroken, then I planned to ake siilar coparisons with sie, goals and environent in that order until the tie was broken and I had chosen the ost appropriate organiational structure. Organiational Alignent Phase Upon deterining the ost appropriate organiational structure for the anaged care office, y next objective was to deterine the ost appropriate organiational alignent for the anaged care office at KACH. I used the proble solving process to ake this deterination. The proble solving process involved the following steps: 1. Discuss the situation. 2. Define the proble.

53 Deterining the ost 3. Develop alternative courses of action Analye each alternative. 5. Select the best alternative. 6. Discuss ipleentation of the alternative I used a variety of references to ake y analysis ando C) decision. I relied on HSC Regulation 1-1, The Organiation and Functions anual, the HSC eorandu dated 12 Septeber 1989 regarding the ilitary-civilian Health Systes Branch, the KACH TDA and the goals of the anaged care office to conduct y -4 analysis and select an alternative. Results and Discussion The results of y data analysis show that a atrix structure is the ost appropriate organiational structure for the anaged care office and that the anaged care office should be aligned as a separate office under the direct supervision of the DCA. I have presented y data analysis and discussion for the Organiational Structure Phase and Organiational Alignent Phase below. Organiational Structure Phase The data analysis for organiational structure reveals the following results. The goals of the anaged care office have a dual external and internal focus. The environental uncertainty level at Keller ACH is high. The sie of KACH is ediu, and the

54 Deterining thr ost technology of the anaged care office reflects non-routine-tasks and reciprocal interdependence with other hospit.'f departents. Using the Organiational Design odel deonstrates that a atrix organiation is the ost appropriate organiational structure for a the anaged care office. Goals. y goal analysis consisted first of identifying the 45 goals and functions of the anaged care office and then assessing the goals to deterine the focus of these goals. By identifying x-v the goals and functions of the anaged care office, I ascertained the purpose of this organiation and its intended strategies to accoplish its goals. With this inforation, I deterined the focus of the goals of the anaged care office. Goal Identification. To identify the goals and functions of the anaged care office, I began by interviewing the KACH Deputy Coander for Adinistration, COL Willia Inau. He stated that the priary goal for this office is to increase our capacity to provide health care without a corresponding increase in costs or decrease in quality. This organiational goal has three operative goals: iprove access to beneficiaries, contain the rate of growth of governent health care expenditures, and aintain the quality of care. Each of these operative goals ust be achieved if the anaged care office goal is to be accoplished. COL Inau further explained that his concept of the anaged care office has siilar functions to those of the

55 Deterining the ost 46 ilitary-civilian Health Systes- Branch (CHSB). Howeverrhe qualified this by stating that the anaged care office is not necessarily constrained to the functions of the CHSB. COL Inau anticipates that anaged care will play a larger role in ilitary edicine in the coing years. Therefore, there ay be additional functions to be perfored by the anaged care office than only those listed for the CHSB. However, he asked that I liit the functions of the anaged care office to those that can be perfored now or in the iediate future. He o < X Z 4 V'D x certainly expects that all negotiations for agreeents to support the anaged care concept will go through this office. any of the functions that COL Inau expects to be perfored by the anaged care office are specified in an HSC eorandu dated 12 Septeber 1989 which establishes the CHSB. The eorandu states that the branch was established to support the ission of coordinating direct care and CHAPUS services. -The eorandu describes the following functions of the CHSB: a. Develop and aintain data and inforation regarding the clinical capabilities within the TF and the civilian counity. b. Identify clinical areas within the TF which would benefit fro the ipleentation of a Partnership agreeent, VA-DoD sharing agreeent, DHCPP, or other initiatives which axiie the use of the TF resources.

56 Deterining the ost c. Responsible for developent of stateents of work-for contract purposes and agreeents which support the DHCPP and Partnership progra. d. Responsible for onitoring suppleental care expenditures and identifying cost effective civilian alternatives for 47 suppleental care progra use. e. Responsible for negotiating agreeents and contracts to support the DHCPP, Partnership Progra, Suppleental Care Progra, and VA-DoD Sharing Progra. Shall not perfor contracting officer < -V representative duties in support of any contracting efforts. f. Coordinate with the CHAPUS Fiscal Interediary, OCHAPUS, and the CHAPUS Division, DCSCS, at HSC for CHAPUS policy guidance, reiburseent policies and practices, special progra status, and benefits changes. g. Disseinate inforation to beneficiaries and providers regarding the CHAPUS and TF capabilities and policies. - h. Operate the Health Care Finder (HCF) progra which provides inforation and referral services to beneficiaries and providers concerning the availability and location of edical services within the TF catchent area. i. Provide inforation to beneficiaries and providers concerning health benefits progras available. These include but

57 Deterining the ost are not liited to CHAPUS, edicare, edicaid, VA benefitn, 48 civilian counity health resources, and services provided by charity and state agencies within the catchent area. j. Conduct continuous onitoring of the health care C o resources within the catchent area, including the ilitary counity, in order to provide current inforation regarding the < availability and 1 of services to beneficiaries and the TF; k. Issue Non-availability stateents (NAS) and aintain the autoated NAS issuance syste in DEERS for the TF. 1. Provide inforation to the coander concerning the K 'i x -V (n nubers and reasons for issuance of NAS within the TF. Provide inforation to beneficiaries and providers regarding the requireents for NAS.. Develop and aintain a utiliation anageent syste to onitor the progress of services provided under Partnership agreeents and other CHAPUS initiatives. n. Ipleent and onitor alternate use projects. I telephonically interviewed LTC Gwaltney, Chief of the CHAPUS Division at HSC and the proponent for the new CHSB, to obtain ore inforation regarding this office. LTC Gwaltney ephasied that the purpose of the CHSB is erely to provide support personnel to handle the current requireents of CHAPUS

58 Deterining the ost anaged care progras. Although she suspects that soe for of 49 CA is the wave of the future, LTC Gwaltney said the CHSB was not designed to perfor an eventual CA ission or function. LTC Gwaltney explained that the CHSB integrates functions norally associated with the PAD, the Resource anageent Division (RD) and the CSD. The CHSB is organied under the PAD Division. She said the CHSB will assist and facilitate decision aking concerning anaged care progras. Having established the current scope of the anaged care C < x cn office, y next objective was to ascertain the iediate future direction of anaged care in the Ary. The CRI and CA projects are the ost coprehensive anaged care progras in the ilitary. Since LTC Gwaltney said she felt that soe for of CA would ore likely be the trend in anaged care that the Ary pursues, I contacted the CA project officer at the OTSG. I spoke to CPT Gidwani, CA Project Analyst, at the O SG to deterine the status and future of the CA project. According to CPT Gidwani and the HSC CA Proposal, the goals of CA are to: a. Contain the rate of growth of governent health care expenditures. b. Iprove accessibility to health care services. c. Iprove beneficiary and provider satisfaction with the availability and accessibility of health care services.

59 Deterining the ost 4. aintain quality of care provided to the CHAPUS 5 beneficiary population. CPT Gidwani said that although the CA project was in its incipient stage, it has been very successful. He said that CA a C shows signs of containing CHAPUS costs and redirecting patient flow to the direct health care syste. CPT Gidwani went on to say that although CA has a three year trial period, Congress is anxious to expand CA to other ilitary hospitals and ay do so before the end of the trial period. Since the CRI is still a viable alternative to CA, I < K X (n telephonically interviewed Ann Price, CRI Project Analyst at the OTSG, to learn the status of CRI and its future. s. Price stated that the CRI is in the third year of its three year trial period. She said that although the CRI was confronted by several serious probles initially, the contractor, Foundation Health Corporation, has ade the necessary corrections to ensure that the CRI is operating as planned. The Rand Corporation conducted the evaluation of CRI and ade its report to Congress in January. s. Price feels confident that the CRI will be continued in California and Hawaii and that the governent will renew its contract with Foundation. She said the CRI ay eventually be expanded to New exico, Ariona, and Nevada.

60 Deterining the ost Since both project officers see the potential expansion of both of these projects, I contacted LTC Cleent, Chief of the Progra, Analysis, and Evaluation Division at the OTSG, to hear his opinion on the future of these projects. It is LTC Cleent's C opinion that cost savings are ore apparent for CA than for the CRI. He said CA offers ore flexibility and is better structured to contain costs than the CRI. As a result, he said CA shows the potential for greater savings than the CRI. "I However, there is no foral tie table for the expansion of CA. Since there is a growing consensus that CA of soe for is the likely direction of anaged care in the ilitary, y next objective was to learn how the deonstration sites structured their CA organiations and which functions they perfored that would be appropriate now for a anaged care office at KACH. CPT Gidwani suggested that I speak with LTC Badgett, the CA project officer at Ft. Carson. I contacted LTC Badgett and questioned hi regarding his organiation structure and functions for CA. He said that a Patient Services Division (PSD) (Appendix E) was designed to adinister and anage the CA project at FT. Carson. This includes the anageent of CHAPUS related progras, health care access systes and a patient grievance syste. Elepnts fro the CSD and the PAD were incorporated into the 51 a X PSD to ensure an integrated approach to the CA project. The

61 Deterining the ost patient appointent syste and the patient representative 5fficer 52 fro the CSD and the Health Benefits Advisor (HBA) fro the PAD are now eleents of the PSD. He said the RD will continue to be responsible for the total TF budget to include the CHAPUS account, but there is a budget liaison eleent in the PSD. The PSD falls under the doain of the DCA. In addition to the Office of the Chief, the PSD consists of the Progra and Patient Services Branches. The Progra Branch consists of a arketing Section, Partnership Section, Enrollent Section and the Project Coordinate Appropriate Resources Effectively (CARE) X C a G) x Progra Section (The Project CARE Progra is a case anageent deonstration progra). The Chief of the Progra Branch also serves as the budget liaison. The Patient Services Branch consists of the CHAPUS Section, Patient Representative Section and the Patient Appointent Section. The Ft. Carson PSD incorporates nearly all of the funetions identified for the CHSB and includes additional functions necessary for the planning, ipleentation and onitoring of CA. The only functions that the PSD does not perfor, that are associated with the CHSB, concern the VA-DoD Sharing Agreeents, Suppleental Care Progras and Alternate Use of CHAPUS Funds Progra. According to LTC Badgett, there are no VA edical facilities in the Ft. Carson catchent area. As for the Suppleental Care Progra, he said although it was not included as

62 Deterining the ost a function for the PSD originally, it is now under considetation 53 for being shifted to the PSD. The Alternate Use Progra is not a function either since the coprehensive nature of CA replaces the 3 liited scope of the Alternate Use Progra. According to the HSC CA Proposal and LTC Badgett, the following CA unique functions are incorporated into the PSD: a. Identify ethods of optially delivering health care in ax anaged care syste to all enrolled beneficiaries. b. Responsible for developing stateents of work for agreeents with outside providers and provider organiations. c. Responsible for negotiating agreeents and contracts with civilian providers and alternative health care delivery institutions. d. Enrollent of beneficiaries in a anaged care syste. e. Responsible for arketing of the benefit packages available to beneficiaries. f. Responsible for the operation of the patient grievance syste to resolve patient concerns. g. Operation of the patient appointent syste. h. Operation of Project CARE. i. Develop a utiliation anageent syste to onitor provider practice patterns and patient utiliation. Although Ft. Carson's PSD is still in its incipient stage, x LTC Badgett describes it as successful. By integrating the

63 Deterining the ost necessary functions together, the PSD quickly adapted to the new environent of anaged care. The extensive coordination necessary to plan, ipleent and onitor CA is facilitated by this organiation while siultaneously expediting and enhancing the decision aking process. LTC Badgett expressed his satisfaction with the structure of 54 < the PSD. He believes the functions of the PSD are appropriate.c With the exception of adding the anageent of the Suppleental Care Progra to the ission of the PSD, LTC Badgett said that he would not alter this organiation. Retrospective Case ix Analysis Syste (RCAS). LTC Cleent 'V Z suggested that a anaged care office will rely on RCAS data for analysis and decision aking. Analying RCAS data will becoe another function of the anaged care office once RCAS is fielded. I discussed the applications of RCAS with CPT Aguirre, Chief of the PAD at KACH. According to CPT Aguirre and the RCAS User's anual, RCAS is a DRG anageent tool. It is an inforation retrieval syste that facilitates inpatient health care utiliation analysis to support anageent decision aking. RCAS is enu driven and offers a variety of DRG analysis including utiliation analysis, targeted analysis, DRG coparative data and eventually, charge analysis, abulatory analysis and cost anageent strategies.

64 Deterining the ost Utiliation analysis provides inforation regarding lngth of stay, discharge rates and days of care. The data can be analyed by beneficiary category, diagnoses group or TF. Targeted analysis provides analytical assistance by identifying predefined subsets of adissions for cost containent purposes. predefined subsets are: resource intensive procedures, second < opinion surgeries, diagnoses not norally hospitalied, potential abulatory surgery, outliers and Friday/Saturday adissions. The " x DRG Coparative Analysis Syste offers coparative data fro civilian hospitals on length of stay nors, discharge rate nors, charge nors, per die nors and ancillary and total charges per discharge for each of the 473 DRGs. The 55 This coparative data will be useful as a benchark for specific DRGs in a particular area. An iportant function for the anaged care office will be to interpret and analye RCAS data. RCAS data will provide invaluable inforation and analysis. Utiliation review is an integral coponent of anaged care. RCAS provides utiliation analysis and DRG coparative analysis which the anaged care office will rely on to contain costs, to identify areas for potential cost savings or iproved efficiency and to effectively negotiate with outside providers. PAD will continue to be responsible for the aintenance of the RCAS syste. Suation of goals and functions. I subitted a list of y proposed anaged care office goals and functions to the DCA for

65 Deterining the ost review and final approval. COL Inau approved the goals and 56 functions listed below. The goals and functions of the anaged care office are slightly broader than the those proposed for the CHSB. The future of anaged care in the ilitary portends to be CA. However, the absence of a tie table and a well defined a concept of CA prohibits the inclusion of any potential CA fuctions in the anaged care office at this tie. Thus, the goals and function of the anaged care office incorporate the iediate -4 applicable goals and functions associated with CA and RCAS utiliation analysis in addition to those prescribed for the CHSB. The following goals and functions delineate the ission and scope of the anaged care office at KACH: Goals a. Develop and operate a anaged health care syste for the catchent area beneficiaries. b. Contain the rate of growth of governent health care expenditures. c. Iprove accessibility to health care services. d. Iprove beneficiary and provider satisfaction with the availability and accessibility of health care services. e. aintain quality of care provided to the CHAPUS beneficiary population.

66 Deterining the ost 57 Functions a. Conduct workload, utiliation and cost analysis to include (ilitary Expense, Perforance and Reporting Syste) EPRS and RCAS data for the planning, ipleentation and onitoring of C a anaged care syste. b. Identify optial ethods of delivering health care to all < beneficiaries in a anaged care syste. The anaged care systek will include, Partnership agreeents, VA-DoD sharing agreeents, DHCPP, Alternate Use of CHAPUS Funds and other initiatives which Z axiie the use of the TF resources. c. Responsible for developent of stateents of work for contract purposes and agreeents which support the, VA-DoD sharing agreeents, DHCPP, Alternate Use of CHAPUS Funds and the Partnership progra. d. Responsible for onitoring suppleental care expenditures and identifying cost effective civilian alternatives for suppleental care progra use. e. Responsible for negotiating agreeents and contracts to support the, Partnership Progra, Suppleental Care Progra, Alternate Use of CHAPUS Funds and the VA-DoD Sharing Progra. Shall not perfor contracting officer representative duties in support of any contracting efforts. f. Coordinate with the CHAPUS Fiscal Interediary, OCHAPUS, and the CHAPUS Division at HSC for CHAPUS policy

67 Deterining the ost 58 guidance, reiburseent policies and practices, special progra status and benefits changes. g. Disseinate inforation to beneficiaries and providers a regarding the CHAPUS and TF capabilities and policies. Provide inforation to beneficiaries and providers concerning health 'D C benefits progras available. These include but are not liited to CHAPUS, edicare, edicaid, VA benefits, civilian counity health resources, and services provided by charity and state agencies within the catchent area. h. Conduct continuous onitoring of the health care < W K x resources within the catchent area, including the ilitary counity, in order to provide current inforation regarding the availability of services to beneficiaries and the TF. i. Issue Non-availability Stateents (NAS) and aintain the autoated NAS issuance syste in DEERS for the TF. Provide inforation to the coander concerning the nubers and reasons for issuance of NAS within the TF. Provide inforation to beneficiaries and providers regarding the requireents for NAS. j. Develop and aintain a utiliation anageent syste to onitor the progress of services provided under Partnership agreeents and other CHAPUS initiatives. k. Ipleent and onitor Alternate Use projects. 1. Responsible for arketing the health benefit packages available to beneficiaries.

68 Deterining the ost The goals and functions of the anaged care office reflect the cobination of CHSB and CA goals and functions. I ade inor changes to the functions of the CHSB prior to their inclusion to the anaged care office. The developent and C aintenance of data and inforation regarding clinical capabilities reains with the current functional proponents. The EPRS data syste will reain a function of the RD and the RCAS syste will belong to the PAD. The interpretation and analysis of this data, however, will be priarily the responsibility of the anaged care office. Also, the anaged care office will not directly negotiate with providers for the DHCPP. This function is the responsibility of the West Point Purchasing and Contracting 59 x 'a Z Cn Branch by law and will reain so. Lastly, I deleted the HCF function since it cannot be perfored until CA is established. Currently, ilitary hospitals are prohibited by law fro perforing this function. Goal Assessent. Once I had ascertained the goals and functions of the anaged care office, I assessed each of the anaged care office goals to deterine if the focus of the goal was internal, external or dual. The following suaries y analysis for each goal: Goal: Develop and operate a wanaged health care syste for the catchent area beneficiaries.

69 Deterining the ost Focus: External. This goal requires the hospital to-adapt 6 to the changing industry conditions and the concept of anaged care. The hospital ust be prepared to develop and ipleent new progras and be innovative in its approach to designing and C ipleenting new anaged care initiatives. Goal: Contain the rate of growth of governent health care < expenditures. Focus: Internal. This goal concerns an ephasis towards iproved efficiencies in the delivery of health care. This goal is anifested by the ephasis of the anaged care initiatives toward axiiing workload in the TF. Goal: Iprove accessibility to health care services. Focus: Dual. This goal not only requires innovation and anaged care progra developent to eet increasing deands of care, but it also requires the hospital to iprove efficiency of patient flow to increase access to care. Goal: Iprove beneficiary and provider satisfaction with the availability and accessibility of health care services. Focus: External. This goal stresses custoer satisfaction, which is an external focus. Goal: aintain quality of care provided to the CHAPUS beneficiary population.

70 Deterining the ost Focus: Internal. The goal of quality care requires -the 61 hospital to focus on technical quality and specialiation, which is an internal focus. y assessent of the focus of the anaged care office goals a C concluded that this office has a cobination of goals that reflects both an internal and external focus. Since there is a cobined internal and external focus, y ethodology dictated that the DCA would ake the final deterination of the priary focus of the anaged care office. He could have decided that the priary ehasis of the anaged care office is internal, external or an K Z Cn equally balanced dual focus. Upon review of y assessent, COL Inau validated y analysis and stated that the priary focus of the anaged care office is an equally balanced dual focus. Environent. y analysis of environent eployed the Fraework of Environental Uncertainty. The two diensions that coprise this paradig are environental coplexity and change. I began by assessing environental coplexity followed by environental change. Finally, I used the assessents of these two diensions to deterine the level of envrionental uncertianty at KACH. Environental Coplexity. Based on y survey of the Coander, the DCA and the Chief, Departent of Nursing to easure environental coplexity, I classified the KACH environent as coplex. A ajority of the respondents indicated that eight of

71 Deterining the ost ten potentially relevant environental sectors influenced-the KACH 62 environent. Table 3 suaries the results of the survey. The only environental sectors that failed to receive a ajority concensus as influential to KACH were Raw aterials and International. According to y criteria, I would classify the C KACH environent as coplex if five or ore of the external sectors were relevant to it. Since y survey shows that eight K sectors are relevant and influence KACH, I classified the KACH environent as coplex. Table 3 Suary of Environental Coplexity Survey rn X Z In Environental Sector Relevant to KACH Not Relevant to KACH Econoic conditions 2 1 Governent 3 Industry 2 1 arket 3 Huan resources 3 Financial resources 2 1 Technology 2 1 Socio-cultural 2 1 International 1 2 Raw aterials 1 2 Environental Change. y survey of environental change revealed that the respondents believe the environental sectors that influence KACH are dynaic. The survey of environental change indicated that a ajority of the senior anageent saple at KACH believes that the eight environental sectors that they perceived to influence KACH were all changing (Table 4). Since I defined an unstable environent as half or ore of external

72 Deterining the ost sectors selected as influential to KACH that are experienc-ing change, I labeled the change diension as unstable. Table 4 Suary of Environental Change Survey Environental Sector Stable Dynaico Econoic conditions 1 2 Q Governent 3 Industry 1 2 arket 3 Huan resources 3 Financial resources 2 Technology 1 2 Socio-cultural 1 2 Environental Uncertainty. y analysis of the level of environental uncertainty at KACH deterined that there is high uncertainty. Based on y survey of the senior KACH anageent using the environental uncertainty fraework, I deterined that the KACH coplexity diension is coplex and the KACH change diension is 63 C unstable. Using the Fraework for Assessing Environental Uncertainty (Figure 5), I found that the coplex and unstable environent at KACH equates to high uncertainty.

73 Deterining the ost Fraework for Assessing Environental Uncertainty- 64 Figure 5. The fraework deterines environental uncertainty by cobining environental coplexity and environental change. Environental Coplexity C Siple Coplex Environental Change Stable Low Low-oderate Uncertainty Uncertainty Unstable High-oderate High Uncertainty Uncertainty o C Note. Fro "Characteristics of Perceived Environents and Perceived Environental Uncertainty" R.B. Duncan, 1972, Adinistrative Science Quarterly, Sie. y analysis of the sie of KACH involved easuring the nuber of FTEs at KACH as of 31 Deceber 1989 and coparing this data with the organiation sie standards set by the OB. According to the Personnel Division, KACH had the following nuber of FTEs on 31 Deceber 1989: Table 5 Total FTEs at KACH as of 31 Deceber 1989 Officers 73 Warrant Officers 2 Enlisted 168 Civilian 172 TOTAL FTEs 415 According to the standards established by the OB, I classified KACH as a ediu sied hospital. The OB standards define a ediu

74 Deterining the ost sied organiation as one with an eployent level of people. KACH had 415 FTEs as of 31 Deceber 1989; therefore, it is a ediu sied organiation. Technology. y analysis of the contextual variable technology C consisted of a two diensional assessent of the functions of the anaged care office. I described each of the functions first in ters of task coplexity and then task interdependence. I then K characteried the anaged care office entity in these sae ters based ṁ on y analysis of individual functions. Z Task Coplexity. I began the technology assessent by evaluating :i the coplexity diension. This diension categories tasks as either routine or non-routine and is based upon task variety and 65 analyability. I described each anaged care office function in ters of task variety and analyability. Then I had the DCA and the Chief of PAD verify y assessents to establish reliability (Appendix F). Using the routine versus non-routine diension fro the fraework below (Figure 6), I labeled the function as routine or non-routine. The following is a suary of y analysis of the anaged care functions and verification by the DCA and Chief of PAD for the coplexity diension.

75 Deterining the ost 66 Fraework for Departent Technologies Figure 6. This fraework cobines task variety and task analyability into a single diension called Routine versus Non-routine technololgy. Variety Low High o Low Craft Non-routine Analyabili ty High Routine Engineering Z Note. Fro " A New Approach to Design and Use of anageent Inforation" by R. Daft and N. acintosh, 1978, California anageent Review, ',2-92. FUNCTION: a. Conduct workload, utiliation and cost analysis to include 1AEPRS and RCAS data for the planning, ipleentation and onitorirg of a anaged care syste. VARIETY: HIGH ANALYZABILITY: LOW TASK COPLEXITY: NON-ROUTINE The nyriad cobinatiors of analyses that can be perfored using workload, cost and utiliation data will prevent the function fro becoing rote. oreover, the analysis involved with such data does not lend itself toward standard procedures to follow. The analyst ust rely on experience and knowledge to perfor such analysis.

76 Deterining the ost FUNCTION: b. Identify optial ethods of delivering-health care 67 to all beneficiaries in a anaged care syste. The anaged care syste will include Partnership agreeents, VA-DoD sharing agreeents, DHCPP, Alternate Use of CHAPUS Funds and other initiatives which C axiie the use of the TF resources. VARIETY: HIGH ANALYZABILITY: LOW Z TASK COPLEXITY: NON-ROUTINE Nuerous internal and external factors exist that will affect the (n application and extent of the various anaged care initiatives at KACH. This will create a great deal of variety in the perforance of the task. Since the optial delivery of health care depends on each hospital's individual situation, there are no foral standards or guides to assist in the process. The anaged care office personnel ust rely on their own knowledge and understanding of the various anaged care progras. FUNCTION: c. Responsible for developent of stateents of work for contract purposes and agreeents which support the, VA-DoD sharing agreeents, DHCPP, Alternate Use of CHAPUS Funds and the Partnership progra. VARIETY: HIGH ANALYZABILITY: TASK COPLEXITY: LOW NON-ROUTINE

77 Deterining the ost While the stateents of work for the Partnership Progra are specified by HSC, there is considerable latitude for developing stateents of work for the other anaged care initiatives. Each of the initiatives will have different stateents of work. Since the C a developent of the stateents depends on the requireents of the 68 nd hospital, the collective wisdo, knowledge and experience of the people will be used to perfor this function. FUNCTION: d. Responsible for onitoring suppleental care expenditures and identifying cost effective civilian alternatives for suppleental care progra use. < X (I) VARIETY: LOW ANALYZABILITY: HIGH TASK COPLEXITY: ROUTINE The onitoring of suppleental care expenditures is a routine process and follows a prescribed process. FUNCTION: e. Responsible for negotiating agreeents-and contracts to support the, Partnership Progra, Suppleental Care Progra, Alternate Use of CHAPUS Funds and the VA-DoD Sharing Progra. Shall not perfor contracting officer representative duties in support of any contracting efforts. VARIETY: HIGH ANALYZABILITY: TASK COPLEXITY: LOW NON-ROUTINE

78 Deterining the ost The negotiation process for any of the anaged care facilities 69 cannot rely on standard procedures and is subject to a great any unexpected events. FUNCTION: f. Coordinate with the CHAPUS Fiscal Interediary, C OCHAPUS, and the CHAPUS Division at HSC for CHAPUS policy guidance, reiburseent policies and practices, special progra status and benefits changes. VARIETY: LOW ANALYZABILTY: HIGH 11 TASK COPLEXITY: ROUTINE The Health Benefits Advisor has standard procedures and several readily accessible references to consult regarding policies, reiburseent and eligibility. FUNCTION: g. Disseinate inforation to beneficiaries and providers regarding the CHAPUS and TF capabilities and policies. Provide inforation to beneficiaries and providers concerning health benefits progras available. These include but are not liited to CHAPUS, edicare, edicaid, VA benefits, civilian counity health resources, and services provided by charity and state agencies within the catchent area. VARIETY: LOW ANALYZABILITY: HIGH TASK COPLEXITY: ROUTINE

79 Deterining the ost The day to day requireents for this task are repetitious, and references are available. FUNCTION: h. Conduct continuous onitoring of the health care resources within the catchent area, including the ilitary counity, c in order to provide current inforation regarding the availability of services to beneficiaries and the TF. VARIETY: LOW Z ANALYZABILITY: HIGH TASK COPLEXITY: ROUTINE The procedures to survey and onitor the catchent area are routine and rely on established procedures. 7 x FUNCTION: i. Issue Non-availability stateents (NAS) and aintain the autoated NAS issuance syste in DEERS for the TF. Provide inforation to the coander concerning the nubers and reasons for issuance of NAS within the TF. Provide inforation to beneficiaries and providers regarding the requireents for._nas. VARIETY: LOW ANALYZABILITY: TASK COPLEXITY: HIGH ROUTINE The procedures to issue, onitor and report NASs are forally established and repetitious in nature. FUNCTION: j. Develop and aintain a utiliation anageent syste to onitor the progress of services provided under Partnership agreeents and other CHAPUS initiatives.

80 Deterining the ost 71 VARIETY: HIGH ANALYZABILITY: LOW TASK COPLEXITY: NON-ROUTINE Each anaged care initiative will have a separate utiliation a C anageent progra tailored specifically to the anaged care initiative. This will require understanding and experience and will have few standard procedures to rely on. Z FUNCTION: k. Ipleent and onitor Alternate Use projects. " x VARIETY: HIGH ANALYZABILITY: TASK COPLEXITY: LOW NON-ROUTINE Endless possibilities exist for Alternative Use projects. Few guidelines exist for the progra beyond deonstrated cost savings. Analysis for Alternate Use projects will not be routine nor will it be able to rely on foral procedures. FUNCTION: 1. Responsible for arketing the health benefit packages available to beneficiaries. VARIETY: HIGH ANALYZABILITY: LOW TASK COPLEXITY: NON-ROUTINE arket analysis and prootional capaigns can be quite coplicated and is not conducive to rely on established procedures or repitition.

81 Deterining the ost Based on y criteria, I classified the coplexity diension of 72 the anaged care office as non-routine. y criteria for classifying the anaged care office as non-routine was if six or ore of the 12 W tasks were labeled as non-routine. Since seven of the tasks were C labeled as non-routine, I classified the technological coplexity diension of the anaged care office as non-routine. Interdependence. Having evaluated the coplexity diensions of C Z the anaged care office, y next step in characteriing the departental technology variable was to assess the interdependence between the anaged care office and other hospital departents. As I discussed in the literature review, there are three levels of Z interdependence. The lowest level of interdependence is pooled, followed by sequential interdependence and then by reciprocal interdependence, which is the highest level of interdependence. I assessed each function of the anaged care office for its degree of interdependence aong other departents. Then I 4ad the DCA and the Chief of PAD verify y assessents to establish reliability (Appendix F). Once each function was characteried by its degree of interdependence, I ade an aggregate assessent of the technological interdependence for the anaged care office. The following suaries y data analysis for the interdependence diension: FUNCTION: a. Conduct workload, utiliation and cost analysis to include EPRS and RCAS data for the planning, ipleentation and onitoring of a anaged care syste.

82 INTERDEPENDENCE: Reciprocal Deterining the ost 73 This function will require extensive coordination aong clinical departents and adinistrative divisions. There will be frequentw exchange of inforation between the anaged care office and RD and a C a PAD to conduct the required analysis. Other departents and divisions > -4 ay have to be consulted to assist in interpreting workload and utiliing data. Z 1 FUNCTION: b. Identify optial ethods of delivering health care 4 to all beneficiaries in a anaged care syste. The anaged carex syste will include, Partnership agreeents, VA-DoD sharing agreeents, DHCPP, Alternate Use of CHAPUS Funds and other initiatives which axiie the use of the TF resources. INTERDEPENDENCE: Reciprocal The identification of optial ethods for delivering health care will require the anaged care office to coordinate aong the Coander, DCA, DCCS, PAD and PD. Other adinistrative divisions ust also be consulted. This process cannot be reduced to a successive, one-way flow of counication and coordination, but ust rely on a ulti-directional flow of inforation. FUNCTION: c. Is responsible for developent of stateents of work for contract purposes and agreeents which support the, VA-DoD sharing agreeents, DHCPP, Alternate Use of CHAPUS Funds and the Partnership progra. INTERDEPENDENCE: Reciprocal

83 Deterining the ost Developing stateents of work for the.:rious DoD anaged care 74 initiatives dictates the anaged care office to coordinate aong the DCA, DCCS, CSD, PAD, RD, QA and appropriate departent and service chiefs. The process for developing stateents of work necessitates a C ulti-directional flow of counication. FUNCTION: d. Responsible for onitoring suppleental care expenditures and identifying cost effective civilian alternatives for K The process of onitoring suppleental care funds is predoinantly a successive, one-way flow of inforation. The process originates with the request for Suppleental Care by the recoending physician, approval by the DCCS or PAD Chief, the appointent for the patient and coitent of funds by the Suppleental Care Clerk and the expense for funds by RD. FUNCTION: e. Responsible for negotiating agreeents-and contracts to support the, Partnership Progra, Suppleental Care Progra, Alternate Use of CHAPUS Funds and the VA-DoD Sharing Progra. Shall not perfor contracting officer representative duties in support of any contracting efforts. INTERDEPENDENCE: Reciprocal The negotiation process requires a two-way flow of inforation at a iniu. In addition, the anaged care office ust ake extensive coordination aong the departents prior to the negotiation process.

84 Deterining the ost FUNCTION: f. Coordinate with the CHAPUS Fiscal Interediary, 75 OCHAPUS, and the CHAPUS Division at HSC for CHAPUS policy guidance, reiburseent policies and practices, special progra status and benefits changes. C INTERDEPENDENCE: Pooled The Health Benefits Advisor norally acts independently to < perfor this function and does not need to coordinate aong other departents in the hospital. FUNCTION: g. Disseinate inforation to beneficiaries and x V providers regarding the CHAPUS and TF capabilities and policies. in Provide inforation to beneficiaries and providers concerning health benefits progras available. These include but are not liited to CHAPUS, edicare, edicaid, VA benefits, civilian counity health resources, and services provided by charity and state agencies within the catchent area. INTERDEPENDENCE: Pooled The Health Benefits Advisor also acts independently to perfor this function. No coordination aong hospital departents is required. FUNCTION: h. Conduct continuous onitoring of the health care resources within the catchent area, including the ilitary counity, in order to provide current inforation regarding the availability of services to beneficiaries and the TF. INTERDEPENDENCE: Pooled

85 Deterining the ost This function can be conducted independently without the 76 coordiiiation aong other hospital departents or divisions. FUNCTION: i. Issue Non-availability stateents (NAS) and ao aintain the autoated NAS issuance syste in DEERS for the TF. Provide inforation to the coander concerning the nubers and reasons for issuance of NAS within the TF. Provide inforation to < beneficiaries and providers regarding the requireents for NAS. INTERDEPENDENCE: Sequential At ties, there is a successive, one-way flow of inforation aong hospital departents before the Health Benefits Advisor ay issue a NAS. a -_4 x FUNCTION: j. Develop and aintain a utiliation anageent syste to onitor the progress of services provided under Partnership agreeents and other CHAPUS initiatives. INTERDEPENDENCE: Reciprocal Once the anaged care office receives the utiliation-data, it will likely consult various clinics and adinistrative divisions prior to the anaged care office final analysis. The developent of a utiliation anaqeent syste will require a ulti-directional flow of inforation for the anaged care office as well. FUNCTION: k. To ipleent and onitor Alternate Use projects. INTERDEPENDENCE: Reciprocal

86 Deterining the ost The ipleentation and onitoring of Alternative Use projects 77 will require the anaged care office to coordinate aong a variety of departents and divisions. FUNCTION: 1. Responsible for arketing the health benefit C packages available to beneficiaries. INTERDEPENDENCE: Pooled < The arketing function could potentially involve considerablek coordination aong the anaged care office and the other hospital ẕ 4 X departents. However, the arketing progra initially will be relatively independent and would require inial coordination aong hospital departents. Based on y criteria, I classified the interdependence level for the anaged care office as reciprocal. y criteria dictated that I classify the anaged care office by the highest level of interdependence that exists for any one function. The highest level of interdependence is reciprocal, and six of the functions exhibited this level of interdependence. Therefore, I classified the level of interdependence at the anaged care office as reciprocal.

87 Deterining the ost Structural Design odel. Once I had defined the orgariational 78 characteristics of the anaged care office for each of the four contextual variables, I listed the in Table 6 below: Table 6 anaged Care Office Profile anaged Care Office Environent: High uncertainty Technology : Non-routine technology, reciprocal7 (high) interdependence Sie ediu Goals : Dual focus - internal and external T Note. Adapted fro "What is the Right Organiation: Decision Tree Analysis Provides the Answer" by R. Duncan, 1979, Organiational Dynaics, 431. I then copared this table with the tables that delineate the organiational characteristics profile for the functional, product and atrix structures. The anaged care office organiational characteristics atched all four contextual variables for the atrix structure profile in the Table 7 below: Table 7 anaged Care Office versus atrix Structure Profile anaged Care Office Contextual Variables atrix Structures high uncertainty Environent high uncertainty non-routine, high Technology non-routine, high interdependence interdependence ediu Sie ediu dual focus Goals dual focus Note. Adapted fro "What is the Right Organiation: Decision Tree Analysis Provides the Answer" by R. Duncan, 1979, Organiational Dynaics, 431.

88 Deterining the ost The organiational characteristics of the anaged care office 79 atched only two contextual variables, environent and technology, for the product structure profile (Table 8). Table 8 o C a anaged Care Office versus Product Structure Profile anaged Care Office Contexutal Variable Product Structure < high uncertainty Environent oderate to high C uncertainty Z 4 non-routine, high Technology non-routine, high interdependence interdependence x ediu Sie large dual focus Goals external focus Note. Adapted fro "What is the Right Organiation: Decision Tree Analysis Provides the Answer" by R. Duncan, 1979, Organiational Dynaics, 431. The organiational characteristics of the anaged care office atched only one contextual variable, sie, for the functional structure profile (Table 9). Table 9 anaged Care Office versus Functional Structure Profile anaged Care Office Contextual Variable Functional Structure high uncertainty Environent low uncertainty non-routine, high Technology routine, low interdependence interdependence ediu Sie sall to ediu dual focus Goals internal focus Note. Adapted fro "What is the Right Organiation: Decision Tree Analysis Provides the Answer" by R. Duncan, 1979, Organiational Dynaics, 431. The organiational characteristics of the anaged care office atched all contextual variables of the atrix structure profile.

89 Deterining the ost Therefore, the Structural Design odel indicates that the ost 8 appropriate organiational structure for the anaged care office at KACH is a atrix structure. Discussion. The application of the Structural Design odel to the anaged care office and Keller ACH clearly illustrated that a atrix structure would be the ost appropriate organiational c < structure. The results of y data analysis were further substantiated by the three conditions for a atrix structure set forth by David and _ x Lawrence (1977, as cited by Daft, 1989). They developed three Z conditions to indicate when a atrix structure is appropriate. I have listed each condition and explained how the anaged care office and Keller ACH have et the conditions. CONDITION I: Pressure exists to share resources across product lines. The organiation is typically ediu sied and has a oderate nuber of product lines. It feels pressure for the shared and flexible use of people and equipent across those products. For exaple, the organiation is not large enough to have sufficient engineers to assign the full-tie to each product line, so engineers are assigned part-tie to several products or projects. Keller ACH eets this condition. Based on the criteria established by OB, I defined Keller ACH as a ediu sied hospital. Keller ACH does not have sufficient staff to assign full-tie eployees fro each functional area to each product or project. Nor do the products or projects warrant a full-tie staff eber fro each functional area. Therefore, the hospital ust share its personnel resources aong various anaged care progras.

90 Deterining the ost Organiational sie is an iportant factor in deterining 81 organiational structure. Conspicuous differences exist between large and sall organiations besides the obvious nuber of people eployed. Large organiations are characteried by greater decentraliation of decision aking and greater foraliation of policies and procedures. - Also, large organiations deand greater horiontal linkage than do sall organiations. Large organiations are ost appropriate for product structures. Sall and ediu sied organiations such as Keller ACH typically (n do not have sufficient functional staff personnel to assign full tie to each product line as required by a product line structure. Sall to ediu sied organiations norally identify with functional structures. ediu sied organiations are also appropriate for atrix structures. This is consistent with the findings of y data analysis for Keller ACH. CONDITION II: Environental pressure exists for two or ore critical outputs, such as for technical quality (functional organiation) and frequent new products (product organiation). This dual pressure eans that a balance of power is required between the functional and product sides of the organiation, and a dual authority structure is needed to aintain the balance. Keller ACH eets this condition. The dual focus ot the anaged care office suggests that a atrix structure would be the ost appropriate structure to aintain a balance between the dual internal and external focus of the organiation. Rather than choosing to place r x

91 Deterining the ost ephasis on either the internal or external focus, the DCA-decided that the anaged care office should have an equally weighted dual focus. CONDITION III: The environental doain of the organiation is both coplex and uncertain. Frequent external changes and high interdependence between departents require a large aount of coordination and inforation processing in both vertical and horiontal directions. < Keller Hospital eets this condition. The first part of the condition refers to environental uncertainty. The senior anageent of KACH indicated overwhelingly their perceptions of a coplex and changing environent. In addition, the literature reviews also attest to the coplexity and dynaics in the health care industry and the ilitary health care syste (Get, 1987; Gisin & Sewell, 1989). two easures of environental uncertainty indicate a high level of uncertainty exists at Keller ACH. Environental uncertainty is a strong deterinant of organiational structure. According to Daft's Contingency-Fraework for Environental Uncertainty and Organiational Responses (Appendix D), an organiation encountering high uncertainty should have an 82 These organic structure. An organic structure entails that decision-aking ability is decentralied and procedures are inforal. This paradig dictates that organiations encountering high uncertainty have any departents to serve as boundary spanners and buffers against uncertainty. The odel also suggests the organiations have any integration roles. Product and atrix structures consist of these C

92 Deterining the ost features and are norally associated with organiations fading high 83 environental uncertainty. Again, this is consistent the results of y data analysis for KACH. The second part of the condition refers to task coplexity and a C a interdependence. The nature of the functions of the anaged care office are coplex and require extensive coordination. The substantial analysis and coordinating function are non-routine. The high interdependence aong the anaged care office and the other hospital departents require considerable horiontal linkage. atrix and product organiations are best suited for non-routine tasks. Also, both of these organiations provide the requisite horiontal x Z linkage necessary for reciprocally interdependent organiations such as the KACH anaged care office. The anaged care office and Keller ACH eet all three conditions. This reaffirs y data analysis that a atrix structure is the ost appropriate organiational structure for the anaged care office. Organiational Alignent Phase The organiational alignent phase of y data analysis concluded that organiing the anaged care office directly under the DCA as a separate entity would be the ost appropriate organiational alignent. The following is a suary of y analysis of the organiational alignent. Prior to HSC establishing the ilitary-civilian Health Systes Branch, the anageent and coordination of the anaged care activities

93 Deterining the ost 84 at KACH were fragented along functional lines. No one pefson had responsibility for all anaged care activities. The PAD controlled the Health Benefits Advisor duties and Suppleental Care progra. The RD coordinated the DoD Sharing Agreeent Progra and the CSD coordinated the CHAPUS Partnership and DHCPP progras. This was C further coplicated by the KACH organiational structure in which the PAD and the CSD reported to the DCCS while the RD reported to thec DCA. This fragented approach prevented the developent of a coprehensive anaged health care delivery strategy. In Septeber, 1989 HSC established the CHSB. As one of its o x 'U priary goals, the CHSB is responsible for developing, coordinating and onitoring a anaged health care syste for the EDDAC. In accordance with the directive fro HSC and HSC Regulation 1-1, the CHSB is the title of the anaged care office that Keller ACH will ipleent as a atrix structure. HSC provided three additional anpower requireents and funding to staff this branch, in addition to shifting the HBA authoriation to this branch. However, the DoD hiring freee has prevented the actual staffing of this office. The HSC Regulation 1-1 stipulates that the PAD is to be aligned under the DCA. However, at KACH, the Coander decided to configure the PAD under the DCCS. The CSD is also under the DCCS. Therefore, the DCA is effectively reoved fro the direct policy and decision aking process regarding anaged care initiatives.

94 Deterining the ost 85 Proble: The CHSB is not organiationally aligned under the DCA, either as a branch of a division or directly under the DCA, as HSC iplicitly directed. Due to the coplexity of soe of the CHSB tasks and the nature of the work to be perfored, the effectiveness of C the CHSB ay be decreented as aligned under the PAD. Also, as anaged care becoes the doinant ode of delivery of health care, the < qenior anageent of KACH will be responsible for developing a coprehensive anaged care strategy for the counity. The PAD division chief will not likely be able to provide adequate guidance to the CHSB regarding anaged care analysis, strategy and planning. Nor Z will the division chief have a sufficient power base to sustain the requisite coordination aong the senior anageent, clinical departents and adinistrative divisions. Alternative 1: Do nothing (Appendix G). Let the CHSB reain aligned under the PAD and the DCCS. This alternative does not bring the DCA directly into the policy aking or decision aking process for the anaged care delivery syste. Not only is the DCA effectively left out, but the Chief of the PAD does not have the background, experience or understanding of the total anaged care syste to provide sufficient guidance to the CHSB. The analysis required is considerably difficult and not straight-forward. The Chief of the PAD is not likely to be able to assist the CHSB with this analysis. Furtherore, anaged care policy and strategy should be ade by the senior anageent of KACH. Decisions regarding the delivery syste of

95 Deterining the ost health care should not be ade by division chiefs. 86 Aligning the CHSB under the PAD unnecessarily adds a layer of bureaucracy for the CHSB to operate. The nature of the work to be perfored by the CHSB in developing c and coordinating a anaged health care syste will require extensive coordination. As I established previously, the CHSB is characteried by high interdependence. The CHSB ust coordinate aong the senior anageent, clinical departents and adinistrative divisions. The coordination by the CHSB requires a strong power base to facilitate the horiontal linkage across the ulti-disciplinary health care K x syste. Aligning the CHSB under the Chief of the PAD will not effect the requisite coordination. The Chief of the PAD will not be able to resolve ajor probles and will have to involve senior anageent to allay turf battles. Alternative 2: Align the PAD under the DCA (Appendix H). This alternative would bring the DCA into the policy and decision aking process for the anaged care delivery syste. However, as in Alternative 1, the Chief of PAD is not qualified to direct the CHSB operations. ost functional area chiefs lacks experience and understanding of a coprehensive anaged care syste, cannot provide adequate guidance and are not in a position to decide policy. As I said in y analysis of Alternative 1, a functional area chief has an insufficient power base to facilitate the extensive coordination required of the CHSB. Also, since anaged care policy and

96 Deterining the ost developent decisions beiong in the real of the senior anageent, 87 aligning the CHSB under a functional division creates an unnecessary layer of anageent. In addition to any of the sae probles as in Alternative 1, Alternative 2 is not likely to be acceptable under the current a Coander. COL Wolcott, the EDDAC Coander, realigned PAD under the < DCCS. This alignent will not change during his tenure as coander. Although he is scheduled to leave in August, it is uncertain whether the new coander will change the alignent. Alternative 3: Place the CHSB under the RD and leave the PAD x under the DCCS (Appendix I). This alternative would be ore acceptable than Alternative 2. Since the PAD would reain under the DCCS and only the CHSB would realign under the RD, the Coander would likely accept this alternative. Also, the alternative brings the DCA into the policy and decision aking process of the anaged care delivery syste. However, this alternative has the sae weaknesses as Alternative 1 and 2 regarding the alignent of the CHSB under a functional area division chief. Alternative 4: Place the CHSB under the DCA as a separate entity (Appendix J). This alternative also leaves the Coander's organiational alignent intact and would likely be acceptable to the Coander. It brings the DCA forally into the policy forulation and decision aking process for the anaged care delivery syste.

97 Deterining the ost Aligning the CHSB under the DCA resolves the probles associated 88 with placing the CHSB under a functional area chief. First of all, the DCA has a generalist background and a greater understanding of the anaged care delivery syste than a junior functional chief. The DCA a C can provide sufficient guidance to the CHSB regarding coplex analysis of workload and cost data. As part of senior anageent, the DCA can ake decisions and policies in concert with the Coander and the DCCS regarding the anaged care delivery syste. Also, the DCA's power base is strong enough to facilitate the extensive and difficult O X coordination that the CHSB ust ake. Recoendation: Based on y analysis of the four alternative organiational alignents for the CHSB, I recoend Alternative 4 as the best alternative (Appendix J). The coplexity of the tasks and nature of the work require experience, understanding and a generalist background and approach to supervise the CHSB. The DCA's position in the organiation will facilitate the CHSB coordination endeavors and expedite decision aking regarding the anaged care delivery syste. Conclusions and Recoendations Conclusions The purpose of this study was to deterine the ost appropriate organiational structure and alignent for a anaged care office at Keller Ary Counity Hospital, West Point, New York. I have concluded fro y data analysis that the anaged care office should be

98 Deterining the ost structured as a atrix organiation and aligned as a separate entity 89 under the DCA. GP: Based on y conclusions, I rejected the null hypothesis of y C o H = The organiational structure and alignent, as specified in the HSC Regulation 1-1 and the TDA for Keller ACH, < is the ost appropriate to coplete the stated ission and requireents of the anaged Care Office. Consequently, I accepted the alternate hypothesis of y GP: Ha = The organiational structure and alignent, as specified in the HSC Regulation 1-1 and the TDA for Keller ACH, is not the ost appropriate to coplete the stated ission and requireents of the anaged Care Office. -_4 I validated the organiational structure of the ilitary-civilian Health Systes Branch set forth by HSC; however, I concluded that the alignent of the CHSB should change fro a branch in the PAD to a separate entity under the DCA. Recoendations I recoend that the CHSB be structured as a atrix organiation that will direct all anaged care activities, CHAPUS services and Health Benefits Advisor duties. Furtherore, I recoend that the CHSB be a separate entity reporting directly to the DCA (Appendix J). The Chief of the anaged care office, titled the ilitary-civilian Health Syste Branch by HSC, will direct, supervise and coordinate all anaged care progras for Keller ACH. In essence, the Chief of the CHSB will be the progra anager for all anaged care progras including Partnership Progras, Suppleental Care,

99 Deterining the ost VA-DoD Sharing Progras, the DHCPP and the Alternate Use of CHAPUS 9 Funds Progra. eanwhile, the functional area anagers will retain responsibility for the supervision and evaluation of their personnel. Since the functional area anagers will retain supervision and rating authority, I recoend that the CHSB be organied as a W C c variation of the balanced atrix odel called a functional atrix. In < the functional atrix odel, the functional supervisors retain priary. authority, and project or product anagers coordinate product activities with dashed line authority (Appendix K). The conclusions of this study are applicable to HSC and the EDDACs that have the CHSB. y study validates the atrix organiation that HSC prescribed for the CHSB in HSC Regulation 1-1. Other EDDACs will find that a atrix organiation is the ost appropriate structure since EDDACs are likely to have siilar organiational traits as Keller ACH. That is, the goals and functions of their ilitary-civilian Health Systes Branch will parallel those of the CHSB at KACH. Therefore, the functions will be non-routine, and there will be high interdependence aong other hospital departents. The other EDDACs will also find their environent high in uncertainty. The sie ay vary aong EDDACs, but few EDDACs will have sufficient personnel resources to staff their CHSB with full Z tie staff fro the other functional areas. These traits indicate that a atrix organiation would be ost appropriate for other EDDACs for their CHSB.

100 Deterining the ost Also, other EDDACs will find that aligning their CHSB under the 91 DCA will iprove the effectiveness and coordination of their anaged care progras. By aligning the CHSB under the DCA, the EDDAC resolves the probles associated with placing the CHSB under a a Co functional area chief. The DCA has a generalist background and a greater understanding of the anaged care delivery syste than a < junior functional chief. The DCA can provide greater guidance to the CHSB regarding coplex workload and cost data analysis. As part of senior anageent, the DCA can ake decisions and policies in concert with the Coander and the DCCS regarding the anaged care delivery 'a syste which the functional chief could not. Also, the DCA's power base is strong enough to facilitate the extensive and difficult coordination that the CHSB ust ake. The EDDACs will find that the DCA's position in the organiation facilitates the CHSB coordination function and expedites decision aking regarding the anaged care delivery syste. The exact placeent of the CHSB has been a point of contention for any DCAs. There are divergent opinions for where and to who the CHSB should report. The unconventional organiational structure at KACH served as a catalyst to force the analysis of alignent of the CHSB at Keller ACH. While I believe y arguents for placing the CHSB under the DCA apply to other EDDACs as well, this subject should be further researched. A Delphi stuiy involving the DCAs should be conducted. The expert opinions and judgeents of the DCAs

101 Deterining the ost could be refined over this iterative process to reach a final 92 conclusion over the alignent of the CHSB in the Ary EDDAC organiation. Ipleentation o y recoendation for the alignent of the CHSB deviates fro HSC's prescribed organiational alignent as set forth in HSC Regulation 1-1. Therefore, a request for approval of deviation ust K be subitted to HSC's anageent Division, Deputy Chief of Staff for Resource anageent in accordance with HSC Regulation 1-1. The Z (n CHAPUS Division at HSC is the proponent for the CHSB and has x approval authority for this request. In the interi, once the CHSB becoes operational, the Chief of the CHSB should report directly to the DCA. The DCA will have rating authority over the Chief of the CHSB. The Chief of the PAD will retain functional responsibility for the HBA and Suppleental Care Clerk. The Chief of the PAD will provide advice and guidance regarding beneficiary eligibility and CHAPUS related atters to the HBA and Suppleental Car-- clerk. Currently, a anageent Analyst in the RD coordinates the KACH VA-DoD Sharing Progra. The Chief of the CHSB can either take control of the progra or continue to let the anageent Analyst coordinate the progra while receiving guidance and direction fro the CHSB.

102 Deterining the ost Office space for the CHSB should be identified and provided. 93 Also, office autoation, such as personal coputers, appropriate software packages and telecounications equipent should be identified for the branch and ordered now. Using the suggested job descriptions provided by HSC as a guide, job descriptions for the unfilled CHSB positions should be developed a a G) and recruiting actions subitted to hire people for these positions. r ẕ y 4 only other suggestion for the anaged care office at KACH X concerns a strategic plan for the eventual evolveent toward a CA environent. Throughout y developent of the goals and functions for the anaged care office, it was apparent that Catchent Area anageent is the wave of the future for DoD health care. I believe KACH should be proactive in this developent of CA by establish'ng a steering coittee. The steering coittee would be responsible for conducting broad base planning and an environental analysis. This will facilitate the hospital and its transition to CA when it is eventually expanded to other DoD hospitals. Closing Rearks Louis Henri Sullivan, a 19th century architect, said, "For follows function." The nature of the goals and functions of the ilitary-civilian Health Systes Branch dictate that a atrix structure aligned under the DCA is the ost appropriate structure and alignent for it.

103 Deterining the ost The atrix structure is a useful design that provides the 94 necessary vertical and horiontal linkages to the anaged care office. This will facilitate the efforts of the anaged care office to deal 'Vi a with the ulti-disciplinary hospital coplex. A atrix structure is not a panacea for all ills, nor is it suited for all clinical settings. However, accopanied by the alignent of the CHSB under the DCA, the atrix structure will enhance counication, coordination and anageent for the ilitary-civilian Health Systes Branch and its anaged care doain. a Q Cn q

104 Deterining the ost 95 References Aaron, H. & Breindel, C.L. (1988). The evolution toward "anaged" health care. edical Group anageent, 35(5), Congressional Budget Office. (1988). Reforing the ilitary Health a C Care Syste Washington, D.C. Daft, R.L. (1989). Organiation Theory and Design. (3rd edition). 6) New York: West Publishing Copany. Z Departent of Defense. (1985). DoD Instruction Personal Services Contracting Authority for Direct Health Care Providers. Washington, D.C. Departent of Defense. (1987). DoD Instruction ilitary-civilian Health Services Partnership Progra. Washington, D.C. Duncan, R. (1979). What is the right organiation structure? Organiational Dynaics, Fine, A. (1989). Consultant suggests establishing new hospital post to direct anaged care. odern Healthcare, 5. Fones, C. B. (1988). Integrated hospital structure offers best service at best price. Health Progress, Galbraith, J.R. (1971). atrix organiation designs. Business Horions, (14), Gelt, R. C. (1987). Draatic changes forthcoing in Departent of Defense health care policy and delivery echaniss. Health atrix, 5(l),

105 Deterining the ost 96 Gisin, G. J. & Sewell, B. C. (1989). Financial anageent in abulatory care: New initiatives for cost containent in the ilitary health care syste. Journal of Abulatory Care anageent, 12(2), Health Services Coand. (1988). Deonstration Proposal: U.S. Ary > Catchent Area anageent. Ft. Sa Houston, TX. Health Services Coand. (1989). Organiation and Functions Policy. Z HSC Regulation 1-1. Ft. Sa Houston, TX. 4 Hellriegel, D., Slocu, J. W. & Woodan, R. W. (1986). Organiational Behavior. (4th edition). New York: West Publishing Copany. Kongstvedt, P. R. (1989). The anaged Health Care Handbook. Rockville, D: Aspen Publishers, Inc. Larson, E. W. & Gobeli, D. H. (1987). atrix anageent: Contradictions and Insights. California anageent Review, 29(4), Lawrence, P. R. & Lorsch, J. W. (1967). New anageent job: The integrator. Harvard Business Review, Leatt, P. & Schneck, R. (1982). Technology, sie, environent, and structure in nursing subunits. Organiation Studies, 3(3), Litterer, J. A. (198). Organiations: Structure and behavior. (3rd edition). New York: John Wiley & Sons.

106 Deterining the ost 97 oreton, G. K. (1985). Hospital integration: Theory and practice. Health anageent Foru, Nackel, J. (1988). Copetetive advantage through organiational structure. Healthcare Executive, Neuhauser, D. (1972). The hospital as a atrix organiation. Hospital Adinistration, 17(4), C Office of The Surgeon General. (1989). CInforation Paper. Deonstration Projects - Ary. Washington, D.C. Shortell, S.. & Kaluny, A. D. (1988). Health Care anageent. (n (2nd edition). New York: John Wiley & Sons. Sall Business Agency, (1989). State of Sall Business Washington, D.C.: Solovy, A. T. (1988). U.S. Governent Printing Office. Finance departent reorganied for anaged care. Hospitals, Walker, A. H. & Lorsch, J. W. (1968). Organiational choice: Product vs. function. Harvard Business Review,

107 APPENDIX A V DEFINITIONS 1 -q (Io fl)

108 DEFINITIONS CHAPUS - cost sharing health insurance plan for ilitary dependents and retirees. Environent - that which anageent considers to be relevant or potentially relevant for organiational decision aking C Environental coplexity diension - refers to the nuber and dissiilarity of external eleents relevant to an organiation's operations Coplex environent interact with the organiation - any diverse external eleents Siple environent - only a few siilar external eleents influence the organiation Environental change diension - the change diension concerns the level of change associated with the environental factors Stable environent - reains relatively unchanged over a period of tie Unstable environent - has environental eleents that are subject to abrupt changes Fee-for-service - this financing echanis reibursed health care providers, including both physicians and hospitals, their costs or charges incurred in the treatent process Functional structure - activities are grouped together by coon function fro the botto to the top of the organiation such as Nursing, Surgery, edicine, and Radiology Goals - an organiational goal is a desired state of affairs that the organiation attepts to realie Goals: external focus - concern growth, innovation, product developent, adaptation to the environent and client satisfaction Goals: internal focus - concern efficiency and technical quality and specialiation -4q Cn

109 HO - pre-paid capitated plans that provide coprehensive health care for a specified period Horiontal linkage - refers to the degree of coordination and counication that exists across organiational departents Integrator - a person located outside the functional departents of several departents who is responsible for coordinating the actions C o anaged care - refers to any syste in which the anageent of health care delivery uses cost control echaniss atrix organiation - exists when both product and functional structures are ipleented siultaneously each departent. It is siilar to the use in of full-tie Z integrators or product anagers except that in a pure atrix organiation, the product anagers are given foral authority equal to that of the functional anagers. Balanced atrix - one in which the functional anager and product anager equally share direct authority over work operations Functional atrix - occurs when the project anager's role is restricted to coordinating the efforts of the functional groups with only indirect authority to expedite and onitor the work plan. The functional anagers are responsible for the design and copletion of their respective technical requireents. Project atrix - occurs when the project anager has direct authority to ake decisions regarding personnel and work flow activities. The functional anager is liited to providing services and technical advisory support. PPO - contractual arrangeents with providers or institutions in which they provide health care services at pre-established discounted fee-for-service prices Product structure - the organiation is based on organiational outputs. For each product output, all necessary resources are grouped within the departental structure Project teas - peranent task forces often used in conjunction with an integrator o Z n

110 Sie - the organiational agnitude as reflected in the nuber of people in the organiation Sall organiation eployees ediu organiation eployees Large organiation - 5 or ore eployees C: Structural Design odel - organiational structure is deterined by four contextual variables: environent, goals, technology and sie C) Task forces - teporary coittees coposed of representatives fro each departent specific project to deal or proble with a Z ẕ 4 Technology - the transforation process in which the knowledge, tools, techniques, and actions are used to transfor inputs into outputs X V Technological Interdependence - the extent to which eployees or departents depend on each other for resources or aterials to accoplish their task Pooled interdependence - the lowest for of interdependence and occurs when departents work independently of each other and work does not flow between departents Sequential interdependence - a serial for in which parts produced in one departent becoe inputs to another departent and is a higher level of interdependence than pooled Reciprocal interdependence - this level exists when the input flows back and forth between departents before an output is produced. Technological job task coplexity - defined in ters of routine versus non-routine and is a function of task variety and analyability Routine job tasks - defined as having low task variety and high task analyability Non-routine job tasks - defined as having high task variety and low task analyability

111 Variety - refers to the nuber of unexpected and new events that occur in the task process Analyability - refers to the degree that a function or task can be reduced to objective, established, coputational procedures to solve probles Uncertainty - a situation in which decision akers have insufficient inforation regarding environental factors C and have difficulty predicting external changes. It is a product of environental change and coplexity. -4 x (J)

112 APPENDIX B ACRONYS G) -4

113 ACRONYS AEDD Ary edical Departent CHAPUS CBO Civilian Health and edical Progra of the Unifored Services Congressional Budget Office CRI CHAPUS Refor Initiative < CSD Clinical Support Division DCA Deputy Coander for Adinistration X DCCS Deputy Coander for Clinical Services o C DHCPP DoD DRG FTE HBA HCF HO HSC KACH EDDAC EPRS CHSB TF NAS Direct Health Care Provider Progra Departent of Defense Diagnosis Related Groups Full Tie Equivalent Health Benefits Advisor Health Care Finder Health aintenance Organiation Health Services Coand Keller Ary Counity Hospital edical Departent Activity ilitary Expense and Perforance Reporting Syste ilitary-civilian Health Systes Branch edical Treatent Facility Non-availability Stateent

114 OCHAPUS OB OSD OTSG Office of CHAPUS Office of anageent and Budget Office of the Secretary of Defense Office of the Surgeon General-u PAD Patient Adinistration Division C PPO Preferred Provider Organiation o PSD Patient Services Division RCAS Retrospective Case ix Analysis Syste K RD Resource anageent Division Z 'V j rqi

115 C 'Ii APPENDIX C SURVEY QUESTIO1~jURE FOR ENVIRONENTAL COPLEXITY AND CHANGE -U -4 C) Z I" -4 I' 'C 'ii a,

116 Environental Assesent Environental Sectors Does it influence KACH? Is sector dynaic? a C 1. Industry 2. Raw aterials Q 3. Huan Resources X 4. Financial Resources 5. arket -4 V 6. Technology 7. Econoic Conditions 8. Governent 9. Socio-cultural 1. International O

117 46 PART TWO athe OPE~N SYSTE y' V'n C Edu4~AN1ZAFIQN 4, 14 N *,, vesp Z V&.1kZ ' EXHIBIT 2.1 An Organiation's Environent. The sectors and a hypothetical organiational doain are Illustrated in exhibit 2.1. Industry. Industry includes copetitors In the sae type of business. The recording Industry Is different fro the steel industry or the broadcasting industry. Industry influiences an organiation's sie, aount of advertising, type of custoers, and typical profit argins. r Industry concentration ay influence the aount of copetitive uncertainty for each organiation. 3 An industry with a few large copanies can be uncertain because the action of a large copetitor has great significantce. Exaples of industries with intense copetitive battles are the soft drink '