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Toward a theory of networks and network effectiveness: An analytical framework for the study of multilevel networks in health care service delivery

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TOWARD A THEORY OF NETWORKS AND NETWORK EFFECTIVENESS:
AN ANALYTICAL FRAMEWORK
FOR THE STUDY OF MULTILEVEL NETWORKS IN
HEALTH CARE SERVICE DELIVERY
by
Donna Jean Staal
A Dissertation Presented to the
FACULTY OF THE SCHOOL OF POLICY. PLANNING.
AND DEVELOPMENT
UNIVERSITY OF SOUTHERN CALIFORNIA
In Partial Fulfillment of the
Requirements for the Degree
DOCTOR OF PUBLIC ADMINISTRATION
May 2002
Copyright 2002 Donna Jean Staal
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UMI Number: 3073849
Copyright 2002 by
Staal, Donna Jean
All rights reserved.
___ ( B )
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UNIVERSITY OF SOUTHER. I CALIFORNIA
SCHOOL OF PUBLIC ADMI (STRATTON
UNIVERSITY PAli <
LOS ANGELES, C A L D F O J HA 90089
This dissertation, 'written by
under the direction o f h.&r... Dissertation
Committee, and approve* f by all its
members, has been pre.\ znted to and
accepted by the Faculty oi the School o f
Public Administration in p rtial fulfillment
o f requirements fo r the degr* ? o f
DOCTOR OF PUBLIC ADA TNISTRATION
\ . o
Dean
Dat e.
DISSERTATION C O ]
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DEDICATION
To Mom. In Loving Memory .
To Dad. Always Close in Heart.
For Your Wisdom. Encouragement and Unwavering Love
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ACKNOWLEDGEMENTS
I most gratefully acknowledge the collective wisdom and guidance of Ross
Clayton. Chester A. Newland and Alex W. McEachem. and thank each of them
wholeheartedly for their generous support and willingness to assist me toward the
achievement of my goals. I am especially indebted to Ross Clayton, who as Chair
of my dissertation committee, was an ever-available source of encouragement and
renewal during an intense research and writing process. I feel fortunate to have had
the benefit of his advisement, and have appreciated his diligence, thoughtful manner
and kind assistance in all matters. Special thanks is also given to Chester A.
Newland. who has taught me by his example o f professionalism and his display of
humility. and to Alex W. McEachem. for his kind and enthusiastic participation in
my dissertation experience.
There are many teachers who have indirectly informed this work effort.
These include authors who influenced and enlightened my thinking, especially
Laurence J. O'Toole Jr.. James D. Thompson. H. B. Milward and Keith G. Provan.
and Robert Agranoff and Michael McGuire. Their writings provided a stimulus for
the refinement o f my theoretical and research perspectives. Other teachers of
influence include members of the outstanding faculty of the School o f Policy.
Planning and Development, and the former School of Public Administration at the
University of Southern California. These professors enriched my academic
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experience and assisted in the honing of my scholarly skills, in particular, Robert P.
Biller. Jonathan A. Brown. Ross Clayton. Jeffrey I. Chapman. Howard P.
Greenwald. John J. Kirlin. John Laughlin. Chester A. Newland. Willard T. Price.
Gilbert Siegel. Roy L. Thompson, and Robert Tranquada.
This research could not have been successfully undertaken without the
commitment of the many healthcare executives and physicians who made
themselves available for research participation and consultation in spite of their
demanding schedules. I convey my gratitude to each of them, with special
recognition given to John B. Edwards for his practical assistance and kind support to
the research process in countless ways, and to Brett L. Johnson and Furrukh
Munawar for their professional insights concerning aspects of research
implementation.
The completion of this work effort celebrates the gifts of those near and dear
who extended their patience, support and consideration. For their faithfulness to me
during the project's evolutionary process and the phases of research and writing, I
wish to express my heartfelt appreciation to my mom who is now smiling from
above, dad. and to those who I am fortunate enough to call my lifelong friends. I am
forever appreciative to each of you for your willingness to listen and for the many
words of encouragement you generously gave to sustain my spirit.
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V
TABLE OF CONTENTS
DEDICATION ..............................................................................................
ACKNOWLEDGEMENTS .........................................................................
LIST OF EXHIBITS .....................................................................................
ABSTRACT ...................................................................................................
PREFACE ......................................................................................................
I. INTRODUCTION ............................................................................
The Changing Bureaucracy ........................................................
Institutional Redesign: Networks in Health Services Delivery
Focus of Investigation ...............................................................
II. THE THEORETICAL CONTEXT OF NETWORKS .................
Statement of Intent .....................................................................
Convergence of Theoretical Perspectives .................................
Systems and The New Logic ...............................................
Boundaries and Network Exchange .....................................
Network Analysis ..................................................................
Network Bureaucracy: Devolution and Governance ........
III. THE NETWORK PARADIGM:
TOWARD A THEORY OF NETWORKS ....................................
Definition and Characteristics ....................................................
Multilevel Nature of Networks ..................................................
Context of Network Formation ..................................................
Governance / Management Nexus .............................................
The Challenge of Governance ..............................................
Postmodern Administration and Management ....................
Beyond Traditional Leadership ......................................
Network Relations and Political Economy......................
Dynamism ..........................................................................
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IS
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vi
IV. NETWORKS IN HEALTH CARE SERVICE DELIVERY ................. 93
Historical Background ........................................................................ 93
The Socialization of Medicine ...................................................... 93
The Corporatization of Medicine .................................................. 97
Managed Care and Integrated Delivery ............................................ 104
Market Evolution and Impact ....................................................... 104
Integrative Structures .................................................................... 110
Typologies o f Networks ............................................................ 118
Integrative Processes ..................................................................... 125
Governance ................................................................................ 127
Management .............................................................................. 133
V. INVESTIGATING NETWORKS IN HEALTH CARE
SERVICE DELIVERY .............................................................................. 140
Analytical Framework ....................................................................... 141
Methodology ....................................................................................... 156
Research Sample ............................................................................ 156
Sample Selection Criteria / Rationale ..................................... 156
Sample Recruitment .................................................................. 159
Data Collection ............................................................................... 162
Instrument ................................................................................ 163
Procedures ................................................................................. 165
VI. RESULTS OF NETWORK INVESTIGATION ...................................... 168
Means o f Data Analysis .................................................................... 168
Findings .............................................................................................. 170
VII. DISCUSSION ............................................................................................ 204
Interpretation of the Findings ............................................................ 206
Implications for Postmodern Network Management ...................... 218
Directions for Future Research and Theoretical Exploration ......... 224
REFERENCES ..................................................................................................... 230
APPENDICES ...................................................................................................... 259
Appendix A. Core Propositions of Network Configurations ........ 260
Appendix B. IDN Interview Questionnaire / Discussion Guide .... 264
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v ii
LIST OF EXHIBITS
Exhibit Page
2.1 Comparative Dimensions of Hierarchy v. Network .............................. 40
2.2 Bureaucratic Governance: Networks v. Markets .................................... 42
3.1 Identifying Characteristics of Networks .................................................. 53
3.2 Cooperative Strategies in Network Configurations.................................. 57
3.3 Continuum o f Network Dynamics ........................................................... 63
3.4 Interorganizational Context of Network Formation ................................ 68
3.5 Stakeholder Analysis in Networks ........................................................... 88
4.1 Presumed Benefits & Inherent Weaknesses of Integration .................... 114
4.2 Typology of Healthcare Integrative Structures ........................................ 120
4.3 Challenges o f Network Management ....................................................... 135
5.1 Assumptions Concerning Network Complexity ...................................... 145
5.2 Analytical Framework for Multilevel Network Analysis:
Dimensions o f Network Variability ........................................................ 147
5.3 Criteria for Network Sample Selection .................................................... 158
6.1 Network Wheel Configuration ................................................................. 172
6.2 Organization Source Attributes of Network Influence ........................... 177
6.3 Mission Communication Modalities ........................................................ 181
6.4 Reasons & Related Contexts for Network Formation & G row th 182
6.5 Network Management: Form. Leadership Style & Proficiency ........... 188
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6.6 Frequency & Percentage Distribution for Decision-Making Processes ... 194
6.7 Facets o f Governance ................................................................................. 199
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ABSTRACT
TOWARD A THEORY OF NETWORKS AND NETWORK EFFECTIVENESS:
AN ANALYTICAL FRAMEWORK FOR THE STUDY OF
MULTILEVEL NETWORKS IN HEALTH CARE SERVICE DELIVERY
Institutional redesign has resulted from the emergent evolution o f networks
as a means of policy implementation in social services delivery, particularly in
health care service delivery. Multilevel, multiorganizational structures have come
to typify the postmodern era. changing the nature of bureaucracy, and challenging
traditional theories of organization and management. Yet. in spite o f the growth o f
netw orked contexts and present day administrative realities, the study of network
configurations has been sorely deficient.
This research addresses a theoretical and empirical void by raising the level
of administrative study and science into the realm of network action— a macro-
organizational level of analysis addressing organization sets and
interorganizational linkages. Converging theories applicable to networks are
coalesced toward a theory o f networks and network effectiveness: a network
paradigm w ith core propositions is put forward to organize a set o f network
principles to advance theoretical conceptualization and guide development of an
analytical framework for applied network study. The logic of networks focuses on
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X
multiple actors (organizations), their interrelatedness, context, and other
dimensions of variability.
Examination of the network milieu is accomplished by applying the
analytical framework for network study and analysis to integrated health care
delivery networks. The analytical framework identified seven broad dimensions o f
network variability for network decomposition: structural configuration and
complexity, congruence of missions, context, stability and cohesion, management
capacity, governance capacity, and performance.
Broad thematic conclusions are synthesized and implications for the
application of findings to public network management are discussed. Results
reveal that networks incorporate vertical hierarchical forms as a means of control,
while evolving a shared leadership capacity that has not been contemplated to any
significant extent within the organizational literature. Findings suggest that
management practice should be guided by a mix of the conventional assumptions
about hierarchy and ideas associated with postmodernism. Organizations must be
viewed as the structural determinants and subcultural dynamics of networks.
Directions for future research and theoretical exploration are contemplated.
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PREFACE
The writer has undertaken this exploration to draw attention to the
relatively neglected study of the ubiquitous emergence of networks in
administration. Considerable effort has been made to examine existing and
emerging theoretical perspectives and constructs to derive a tenable network
paradigm and core propositions in a manner that may stimulate further conceptual
refinement and verification through empirical research. Careful use of language
has been made to operationalize a definition of network and a model consistent
with postmodern thought and current trends in public administration.
The exploration o f networks has been examined broadly in theory and
practice, and specifically within the realm of health care service delivery. The
health care sector of social services delivery was chosen as a natural setting for the
study of networks, given the prevalence of networks in accomplishing public
delivery of this social good. Additionally, the writer's professional clinical and
management experience enabled a more complete and practical contextual analysis
of the empirical observations gained. It is for two purposes, to advance the study
and exploration of network characteristics and significance, and to raise the level
of administrative study and sciences into the realm of network action and analysis,
that this theoretical exploration and supportive research has been undertaken.
Networks may be viewed at a macrolevel of analysis as structures for
collective social action linking organizations to society. As the study of
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organizations spans levels of analysis between individuals and society, the study of
networks refines the level of analysis between organizations and society— beyond
organizational analysis to the analysis of interorganizational linkages. It is
anticipated that the significance of networks will continue to grow, and it is hoped
that room will be made within the organizational literature for the notion of
networks in every consideration of organized social action.
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CHAPTER I
INTRODUCTION
THE CHANGING BUREAUCRACY
The nature of collective action in the postmodern era continues to evolve as
the conceptualization of the organization as a singular entity expands to include
collaborative linkages or networks of social action. Whereas bureaucracy has long
been the hallmark o f study and a starting point for understanding organizations and
collective administrative action, it is now a less than adequate model to describe
the complex interactive dynamics occurring between organizational entities.
Instead, bureaucracy increasingly operates in a relational setting of networked
actors and entities which transcends formal hierarchies and the bureaucratic
paradigm.
Confronted with organizational dynamics and complexities which no
longer resemble the hierarchically-ordered bureaucratic model, public leaders and
managers find themselves immersed in the context o f vertically and horizontally
integrated organizations engaged in boundary spanning activities. These intra- and
interorganizational linkages create organizational embeddedness and the
lateralization of management limiting centralization and formal authority. As a
result, administrators and managers of networked enterprises need to exercise skill
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sets which rely more upon diplomacy, negotiating and bargaining to leverage
relationships and resources, and depend less upon rules and lines of authority.
They must mediate the challenges of interdependencies and a networked political
economy to achieve intended outcomes.
Research on network contexts has been a "neglected aspect of
contemporary public administration” (O’Toole. 1997b. 45). This "dearth of
research" and theory "has failed adequately to inform practice on important
concepts such as coordinating systems of governance, sharing resources and
accountability, and integrating organizational cultures” (Grubb. 2000. 275).
O'Toole stresses that "practitioners need to begin to incorporate the network
concept into their administrative efforts.” while challenging scholars to "conduct
research that illuminates this neglected aspect o f contemporary administration"
(O'Toole. 1997b. 45). O'Toole raises the need for serious treatment o f networks
in practical research agendas stating that "no descriptive information on the extent
to which administrators operate interorganizationally has been collected; neither
has systematic data on the proportions of public programs managed in multiactor
settings rather than within sole agencies [been obtained]” (1997a. 446).
Within the last few years, the public administration literature has resonated
with the call for new theoretical models to explain the developing multilevel,
interorganizational complexities of contemporary organizations within the public
arena (Agranoff & McGuire. 1998; Arsenault. 1998; Bardach, 1999; Boschken.
1998; Considine & Lewis. 1999; Kiel, 2000; Milward & Provan, 1998; Milward,
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Provan. & Else. 1993: O’Toole. 1997a; Overman. 1996; Peters & Pierre. 1998;
Provan & Milward. 2001; Sarason & Lorentz. 1998). These scholarly efforts
collectively suggest that the applied management assumptions o f the bureaucratic
paradigm, i.e.. linearity, equilibrium and stability, hierarchy and central authority,
be replaced, or at least expanded to recognize the importance o f network logic,
including: network governance, mutual interdependence, entrepreneurism and
neo-managerialism, contracting and agency, dynamism and adaptability,
"negotiated authority” (Selznick. 1996. 275), innovation and exchange relations.
Differing theoretical perspectives which logically converge on the study of
networks and networked contexts include: institutionalism and interorganizational
exchange relations (Boschken. 1998; Moe. 1990; Pfeffer. 1992: Pfeffer&
Salancek. 1978; Selznick. 1957: 1996): privatization and contracting (Cohen.
2001: Dudley. 1997: Ferris. 1993: Ferris & Graddy. 1994; Gilmour & Jensen,
1998; Johnston & Romzek. 1999; Nagel. 2001); policy implementation and public-
private partnerships (Ghere. 2001: Weiner & Alexander. 1998); public choice and
service contracting (Boyne, 1998; See also Gooden. 1998); new institutional
economics (Donaldson. 1990; Jensen & Meckling, 1976; Knott, 1993; Milward &
Provan. 1998: North. 1990: Waterman & Meier. 1998); governance and network
bureaucracy (Considine & Lewis. 1999: O ’Toole. 1997a; O'Toole & Meier, 1999;
Peters & Pierre. 1998a); democratic governance & hollow state (Milward, 1996;
Milward. Provan, & Else, 1993; O'Toole, 1997a; see also, Fredericksen & London,
2000: Kelly. 1998; Moe, 2001); multiorganizational systems and multinetworks
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(AgranofF& McGuire. 1998: Landau. 1991) chaos and complexity theory
(Goldoff. 2000: Kellert. 1993: Kiel. 1993. 1994,2000: McDaniel. 1997: Overman.
1996): social network analysis (Bonacich. 2000; Richards & Seary, 2000);
boundary theory and interorganizational culture (Hailey. 1999; Robertson. 1995):
interorganizational theory and health care management (Sofaer & Myrtle, 1991)
and implementation research and theory (Cline. 2000).
Research into the study of networked structures and processes within the
field of public administration has been limited, and as a result, ill-defined. The
lack of descriptive explanatory theory in this realm is evidenced by the varied
terminology used to describe exchanges and linkages between and among
organizations sharing a common governance, goal, or purpose. O'Toole defines
networks as "structures o f interdependence involving multiple organizations”
(O'Toole. 1997b. 45). Though a simplistic and all inclusive definition o f the many
network configurations which currently exist, it is a beginning from which to
further expand and differentiate the notion of networks.
The problem of network definition and classification is a weighty one,
which needs addressing in order to establish a common language for this evolving
area of study. Current nomenclature found referenced in the literature to describe
the interdependence of multiple organizations and the connectedness o f social
structures involves the use o f descriptors, such as. multiorganizational,
multiinstitutional. multilevel, multinetworked, interorganizational, interfirm, and
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5
transorganizational. followed by the more general terms of "organization."
“system." and "network."
Beyond the importance of network definitions and explanatory theory
development is the ubiquitous development of network linkages within
government and business enterprises. The networking impulse has been
accentuated by the expanded reach of administration into interagency ventures,
public-private partnerships, complex contracting arrays of privatization, and social
service delivery systems, particularly health care, which rely upon other
organizations as direct providers of services (O'Toole. 1997a). Thus,
understanding the nature and complexities of networks and their influence upon
the government's management of service delivery outcomes is essential as the
network perspective becomes pervasive in conducting public and private
enterprises.
The linking of an organization's governing mechanism, structure, or
resources, with another organizational entity, shifts the level of analysis concerning
the nature o f the organizational exchange beyond the organization itself. Rather
than examining exchanges which occur within organizations, the focus of analysis
shifts to the examination o f the linking aspects between and among organizations
and their impact, i.e.. the interorganizational connectedness referred to here as the
network context and network level o f analysis.
Within the field o f social psychology, network analysis has been conducted
by examining social exchange networks at the individual level o f analysis; a
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6
collection of social actors within a system is defined and studied to discern their
social position and their power status in exchange relations within the network.
The goal of the analysis is to obtain relational data in order to distill a description
of network structures and identify patterns in the set o f relationships; analysis
yields a multidimensional representation or network construct which may be
decomposed by further study (Richards & Seary. 2000).
Applying the premises of individual social network analysis to multi-
organizational or network analysis, requires researchers to examine network
considerations which entail managing relationships and processes between and
among organizational entities. For analysis purposes, the collection of social
actors would be the organizations engaged in exchange; and since organizational
exchange occurs as a function of organizational structure, management and
governance which define the parameters of exchange external to its structural
boundaries, these mechanisms ultimately become the focus of study, with senior
management becoming the representative organizational actors to undergo network
analysis. The set of interorganizational relational patterns disclosed by network
analysis, along with the position power status o f organizations within the network,
should yield valuable information for administrative practice and policy
implementation.
The network focus upon managing relations and processes has implications
for issues of governance and management's stated responsibilities to develop and
sustain a level of organizational competency. Resources must be acquired and
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7
managed inter- and intra-organizationally; i.e.. across organizational boundaries as
well as within the physical determinants of the organization's structure. Public
administrators and managers must manage these linkages with an understanding
that these new forms of organization are non-hierarchically ordered, often in flux,
and governed by contracted expectations o f compliance and outcomes. As a result,
network governance must be purposely facilitated and coordinated around resource
exchange in order to build a service community (Sarason & Lorentz, 1998).
The linking of organizations, i.e.. the transfer and sharing of autonomy and
responsibility, has uncertain effects upon network production processes and
outcomes, including efficiency, learning and innovation, governance and autonomy
and the political economy of their linked social constituencies once organizational
affiliations are consummated. For example, contracting and the formation of
public-private partnerships raise debates regarding government organizations in
that while state agencies retain policy control, government action is delegated to
the private sector. It may be argued that this transference o f control contributes to
the delegitimization of the state as both policy implementation and the flow of
information is controlled by private actors. The ‘blending' o f resources by the
parties involved creates interdependency in which the state's capacity for direct
control is replaced by a capacity for influence, weakening the linkage between
control and accountability (Peters & Pierre. 1998a. 225-226). This shift adds fuel
to the typical debate as to whether government supplied services are better than
privately supplied services. But the more critical issue of debate is whether the
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8
proliferation o f networked contexts and the virtual organizations created, are
appropriate and effective means for the use of public and private monies in the
delivery of goods and services.
Networked settings entail complicated linkages and processes that have
evolved primarily through ownership interest and contractual arrangements; i.e..
mergers and acquisitions, joint ventures and affiliations, and strategic alliances and
partnerships. These network structures each have their own governance or
authority relations that are influenced by vested interests and which may be
contractual, financial, ethical and/or political in nature.
In the acquiring or merging o f ownership and financial interests, the linking
of organizational complexity creates a diverse group o f stakeholders operating both
internally and externally at the nexus o f individual organizations within the
network. These stakeholder groups establish a political economy affecting the
process for achieving network purposes. As a result, the alignment o f goals and
interests dominates the processes of network decision-making, governance and
management.
Contractual arrangements linking organizations to a network specify the
intent, nature and scope o f the desired network exchange, and tend to focus on the
outcomes or products of the exchange relationship rather than the process or means
by which outcomes are achieved. The process is left to the discretion o f the
contractor. Contracts between organizational entities attempt to construct the
boundaries of oversight and management between the networked organizations.
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9
Determining the mechanisms o f accountability and monitoring to assure
compliance of the negotiated network becomes of crucial importance in order to
avoid any unintended consequences from the arrangement, including reduced
competition in service delivery and susceptibility to what Dudley (1997) refers to
as "'cozy contracting' and opportunism" (138). Still, regardless of how the entity
becomes integral to the network, the challenge of network administration is to
mediate interests and leverage network relations to maximize desired cooperation
to effect outcomes while minimizing the potential threats of incongruous interests.
In summary, bureaucracy continues to exert its influence upon
management, policy and organizational exchange. However, when the
bureaucratic paradigm is confronted with the increasing growth of
interorganizational exchange that is spurred by privatization, contracting and
entrepreneurism. its explanatory power diminishes considerably. The writer has
discussed the changing nature o f bureaucracy and the predictive insufficiency of
current institutional models and frameworks. It has been asserted here that the
emergent evolution of networks in public and private enterprise requires
theoretical exploration and study. It has been noted that certain theories logically
impinge upon the study of networks, and it is believed that exploring those
theoretical perspectives will provide valuable insight for the development of an
evolving network paradigm.
In the following section, a case for the changing nature of bureaucracy is
presented in the context of the healthcare services sector. The redesign o f
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10
healthcare institutions engaged in service delivery is attributed to the embracing of
network structures which are viewed as artifacts of the managed care movement.
INSTITUTIONAL REDESIGN: NETWORKS IN HEALTH SERVICES DELIVERY
Supported by public policies, networks emerged in health care to "manage
care" as a remedy to spiraling healthcare costs and expenditures. Yet. the premise
that networks can. and do more effectively manage health care capacity and
population needs than individual non-networked hospital and physician providers
remains uncertain. [Although] "managed care promised to cut costs, improve
quality and bring order to a chaotic, free-for-all healthcare system...those promises
have given way to a system in crisis with no clear path for the future" (Wolfson &
Bunis. 2001. paragraphs 2-3).
Managed care strategies did result in slowed growth of U.S. health care
expenditures as a percent of Gross Domestic Product (GDP) in the early 1990s
(Bodenheimer. 1999. 584). A period of stabilized health-spending growth of less
than 3 percent (adjusted for inflation) followed in the years 1995 through 1997.
However, spending growth once again accelerated to 4.5% in 1998 with
expenditures exceeding $1.1 trillion, representing 13.5% of the GDP (Levit et al.,
2000. paragraphs 1 -2).
Current expenditures for health care consumption have increased
considerably and are projected to total $2.2 trillion, and reach 16.2 percent o f the
GDP by 2008 based on NHE (National Health Expenditure) data through 1997
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11
(Health Care Financing Administration [HCFA], 1998). This is mainly due to
continued population growth and medical inflation, particularly in the utilization of
advanced medical technologies and pharmaceuticals. In addition, managed care
health plans have o f necessity begun to raise premiums to strengthen profit
margins.
The shift in institutional perspective from the focal hospital organization to
multiorganizational networks, is of obvious significance, though the specific
implications remain painfully uncertain. The freestanding, non-profit community
hospital no longer dominates, nor does the hospital itself dominate as an institution
of care. Most hospitals today, whether private or non-profit, are embedded within
or linked to multiinstitutional networks representing investor-owned enterprises,
public-private partnerships and non-profit alliances. As a result, the environment
of healthcare organizations consists of ongoing uncertainty and increasing
complexity, while the revised meaning of "organization" reflects fluidity in vertical
and lateral forms of organizing.
A manifestation of institutional redesign is the emergence o f multilevel
network arrangements known as integrated delivery networks (IDNs), also referred
to as integrated delivery systems (IDSs). integrated service delivery networks
(ISDNs) or community care networks (CCNs). These networks, spurred by
managed care policies, represent multiorganizational linkages which provide or
arrange for an integrated continuum of services to a defined population. These
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12
networks transfer and/or share financial risk, as well as accountability for the
health status outcomes of the population served.
Networks are integrated or configured to establish alignments between
hospitals, physicians, and payors, and may include a combination of linkages with
health maintenance organizations (HMOs). physician- hospital organizations
(PHOs). independent practice associations (IPAs), physician medical groups
(PMGs). management services organizations (MSOs). and managed care
organization (MCOs). By contractual agreement, payment for medical care
provision is generally prospectively arranged, and by design, medical care
providers are incentivized to affiliate or align with one another in order to integrate
cost, quality and marketing structures.
The redesign of institutional delivery' finds health policymakers wrestling
with issues related to antitrust laws, financial disclosure and laws against physician
self-referral, the detection of fraud and abuse, and regulatory initiatives to ensure
the quality of care and the protection o f patient rights and privacy. For example,
present day antitrust laws are grounded in the Sherman Anti-Trust Act o f 1890.
This "industrial-era legislation” was intended to limit monopolies of
conglomerates in the manufacturing sector and does not readily apply to integrated
health networks more than a century later (Hoyt & Beard. 1997, 1752). The heavy
regulatory' burden of compliance imposed by government, along with third-party
oversight of care delivery, is viewed by many providers as intrusive (Iglehart,
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13
1992. 963) and may actually thwart integrated networks in their goals to achieve
efficiency and effectiveness outcomes.
Issues concerning network management practices and accountability, and
how they influence the manner in which services are organized and delivered are at
the forefront of policy discussions. Network relations have replaced traditional
service modes (the dyadic relationships o f doctor-patient, and doctor-hospital).
bringing both patients and providers under a network umbrella in which neither
seemingly has direct influence or responsibility for outcomes. The outcome of a
care episode is one that reflects network capacity, making it increasingly difficult
to identify for patients, practitioners and institutions, who is to take responsibility
for episodes of care.
Interdependencies created by network structures make the network and its
individual network organizational components highly vulnerable. For example, if
the overall healthcare network achieves consistency in outcomes of a positive
nature, such as fiscal viability and quality care outcomes in patient care, the
network is considered performance effective and thrives. If, however, this
consistency is not achieved, but instead, negative outcomes dominate the
network's performance, the entire network will most likely suffer and either cease
to exist, or require restructuring, sometimes by outside support mechanisms.
Much like the adage, the network is only as strong as its weakest
organizational linkage. In some cases, entire networks can be severely impacted
by the failure of a component, such as an MSO that becomes insolvent while
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managing contracts and payments with payors on behalf of IPA and hospital
membership. Organizational members that threaten network performance and
viability may be divested or have their contractual affiliations severed in order to
stabilize or enhance network performance.
Though network members are in a position to benefit from shared resources
and technologies, members in the network are also vulnerable to spin off and exile
if they are viewed as non-essential or non-contributory to network goal
achievement. Changes in network composition are to be expected given the
interdependencies inherent in network structure and composition.
The failure of any part of a network may have repercussions upon the entire
delivery network as a whole. As health plans and provider organizations link to
provide care to an enrolled population, the financial risk for the care is transferred
downstream to subcontractors, though responsibility for the assurance o f care
remains somewhat ambiguous. This ambiguity is similar to concerns expressed by
the trend toward devolution or a hollow state1 in the delivery of health and human
services, in which the government procures rather than provides services (Milward
1 Reference to the hollow state may be found in the work of Milward (1996). Milward &
Provan (1998) and Milward. Provan & Else (1993). Usually the hollow state refers to the
contracting out of government services to networked organizations, largely non-profits inclusive of
private firms. However it may refer broadly to the hollowing out or "degree of separation between
a government and the services it funds” (Milward & Provan. 1993. 362). A parallel reference may
be made to the private sector b\ the term hollow corporation (Milward. Provan, & Else. 1993, 309)
in which a network of subcontractors are used and services are outsourced. As a result, the hollow
state relies upon networks as production capabilities are transferred to contractors o f the state or
corporation and /or their subcontractors as well. The notion o f hollowness also impinges upon
principal-agent problems (see Milward & Provan, 1998).
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15
& Provan. 2000) due to the lack o f production or service delivery capacities
(Milward. Provan & Else. 1993. 320). In these instances, public programs operate
through multiorganizational networks arranged by contractual linkages which in
effect creates a system of third party governance or what Kettl (as cited in
Milward. Provan. & Else. 1993.310) refers to as "government by proxy."
The exposure resulting from the networking o f health care systems, along
with ongoing financial strains, poses a threat of care disruption. Many network
delivery systems have found or will find themselves in the midst o f collapse from
insolvency related to unexpected claims and insufficient funds to settle them. This
phenomenon has been commonplace in the industry and is especially evident in the
state o f California which has experienced “an epidemic o f 132 medical group
failures" within the past five years (Glabman. 2000. paragraph 8).:
Healthcare providers and health plans continuously struggle to maintain
profit margins as the cost to manage and deliver care increases. Many major
HMOs and health insurers have announced that they must raise premiums in order
to maintain the current level of care benefits being provided. Some plans elect to
reduce the level of benefits in order to avert a premium hike. These measures are
an effort to compensate for profit losses which have occurred in spite o f the touted
integrated network structure to manage care and related costs.
* >
" In recognition of the threat of the failure o f networks to adequately ensure sufficient
financial reserves to assure claims payments, the State of California has established the Department
o f Managed Health Care, the first of its kind in the nation (Glabman. 2000, paragraph 8).
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Bankruptcies and bail outs of Health Maintenance Organizations (HMOs).
medical groups, and physician practice management companies have occurred in
managed care markets throughout the United States disrupting care and shocking
the healthcare delivery system. This phenomena fuels doubt as to whether
managed care networks are actually effective long-term vehicles for containing
utilization and expenditures. Equally unclear is whether such networks improve or
sufficiently maintain equitable access to care and the quality of care.
Premiums paid by employers for health plan benefits continue to rise at
double-digit rates according to a survey of 90 healthcare insurers reported in
Modern Healthcare; average premium increases were projected to be 14.2% in
2001. up from 13.7% in 2000 (Modern Healthcare. 2001. 17). Individual health
plan participants are forced to change their established provider relationships as
networks and network participants reconfigure themselves through vertical and
horizontal integration strategies designed to gain market share and/or stabilize
them against unforeseen market changes and financial losses.
Both publicly-funded federal and state health care programs have been
muddled in confusion as they seek the most efficient means for allocation of
resources and distribution o f health care services. Regulation has become
patchwork, with neither federal or state officials having a comprehensive plan or
approach for dealing with the healthcare industry’s problems. Assessing network
capacity and outcomes has been difficult as a result o f their multiorganizational
nature and interdependencies.
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The rationale for network formation and expansion is to engage in
cooperative forms of organizing among independent competitive entities to further
and achieve goals that a singular organization could not have otherwise achieved
independently. Consolidation of organizations into networks generally occurs in
response to market pressures: levels of vertically integrated care continua and
horizontally integrated hospital alliances are established to create greater
geographic expansiveness and further control points of access to services. The
presumption is that increased network capacity and market dominance will appeal
to health care purchasers and consumers because of the anticipated: (1)
efficiencies from economies of scale and concomitant cost reductions and lowered
pricing of services; and (2) enhanced consumer access enabled by expanded
networks of providers. In both cases, the presumption is flawed as neither
presumed benefit has seemingly been realized or empirically confirmed.
The implications of networks in social services delivery, particularly in
health care, have broad implications for public health policies and spending,
corporate influence and policy making, devolution, and governance. The shift in
organizational structure and thinking no longer is focused at the individual
practitioner and patient level, but at the interorganizational or network level.
Financial and quality outcomes of health systems and networks have been
emphasized in network growth and performance as opposed to the individual
revenue-generating capacities of hospitals and independent physician practices
which were the previous drivers in the delivery of health care. As the primary
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concern shifts to network performance as opposed to rewarding individual
organizational actors, this leads organizational thinkers by necessity, to a new level
of exploration and study.
FOCUS O F INVESTIGATION
The bureaucratic institutional form is altered by the ever increasing
presence of a heterogeneous population of netw orked organizational structures.
The reality is no longer one of an organization operating in relative insular fashion.
but one in which an organization engages in multiple, collateral boundary spanning
activities and interorganizational linkages.
Command and control mechanisms associated with bureaucracy are
being replaced by much more complicated relationships for the
delivery of health and human services. Nonprofits, firms, and
governments all play a role in the new world of devolved public
policy. This means that public services are jointly produced.
(Milward & Pro van. 2000. 359)
Networked settings are important contexts for administrative action; thus,
public administration should attend to “network-focused research efforts, each
aimed at addressing or redressing a void in scholarship'' (O'Toole. 1997b, 50-51).
Because network models shape social and financial policy, particularly in the
financing and delivery of health care, the increased networking of institutions in
the public, private and nonprofit sectors is of critical concern in public
administration as networks continue to develop as the preferred vehicle for
effective health care service delivery. Therefore a serious effort must be made to
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address the concepts and challenges of network constellations and linkages as
forms of public service deliver.'. The nature and characteristics of the "networked"
organizational model and its impact upon outcomes demands such investigation.
Obvious questions are raised as to the network model's implications for
governance and management, such as: accountability, diffusion of responsibility,
responsiveness, authority, dependency, reciprocity and cooperation (O'Toole.
1997a). Wilson's (1989) proposed standards for measuring the delivery o f public
services; namely, equity, efficiency, accountability and authority, are not readily
adapted to the study of network structures. This is because networks are hybrid
structures evolved under an "entrepreneurial management paradigm” which
generally opposes traditional elements of hierarchy, advocating instead for
"organizational disaggregation and managerial autonomy” (Moe. 2001. 306).
Entrepreneurism supports the commingling of private and public sector
interests, creating quasi-govemmental hybrid organizations with limited
supervision and accountability, often the very appeal of these hybrid structures
(Moe. 2001. 291). Dispersed authority and loose accountability replaces controlled
authority and tight accountability. Entrepreneurial values take hold, heavily
weighting the value of efficiency which is measured as performance-oriented
results.
The political economy and social constituency within and between
organizations emphasizes different skill sets for the leadership of network
configurations. These social actors implement the mechanisms for strategic
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2 0
network formation, governance and management oversight: and these actors'
actions are o f great consequence to network success or failure. In consequence,
research on the organization as a unitary entity, although valuable, is insufficient to
address the dynamics and complexities of network management which must
operate as supra-systems to the individual organizational entities within the
network's boundaries.
The current investigation addresses the phenomena of networks, bringing
to light the inherent potential and limitations o f these postmodern models of
interorganizational exchange. Fundamental descriptive tasks are undertaken to
expose the nature, complexities and dimensionality of networks. Through the
study of interorganizational structures, specifically, multilevel integrated networks
of health care service delivery, a tenable network paradigm is developed.
An analytical framework for network analysis is proposed as a strategy to
study health care networks. Through consideration of the literature, guiding
assumptions and propositions are developed; a conceptual framework is then
derived and applied empirically in the gathering of network data to explore
network characteristics and dimensionality. To add to our understanding o f the
nature and effectiveness of networks, the framework is premised upon a macro
level of organizational study examining network perspectives related to
multiorganizational integration and interorganizational action. Network data are
captured and organized to reveal the dynamic properties o f organizational
interdependence occurring within network configurations.
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Relatively few studies have analyzed organizations from a network
perspective. By examining the nature and mechanisms of networks which have
emerged within the health care industry, it is hoped that insights toward a theory of
networks, network effectiveness and improved service delivery modeling will
result. Theoretical discussion will address this evolving organizational archetype.
Additionally, by advancing descriptive-explanatory theory' of networks, a practical
agenda for their applications in organizational management, policy development
and implementation may be gleaned for the future.
This dissertation is organized into chapters, initially focusing attention on
streams o f administrative and organizational theory literature which logically
converge upon the study o f networks. A network paradigm is developed and
discussed along with propositions for network action. Incorporating these
theoretical constructs into an analytical framework for inductive research, the
networked context of health care service delivery is studied. Network analysis in
accordance with the study design is performed and the empirical evidence obtained
concerning health services networks in practice is analyzed and interpreted for its
significance and application to theory and practice.
To aid the reader, a brief synopsis of chapter contents follows: First, in this
introductory chapter, the necessity' of network research within the field of public
administration is underscored in light o f a changing bureaucracy which embraces
and motivates network development. Networks are viewed as institutional
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redesign as the evolving bureaucratic paradigm assimilates attributes of the
emerging network model of organizational exchange and service delivery'.
Institutional redesign is especially evident in the health care sector as managed care
policies reorganize care delivery into vast networks, a significant departure from
health care's institutional history.
Chapters II and III illuminate theoretical perspectives underpinning the
study of networks; a network paradigm and core set of propositions concerning
network action are put forward as a means to coalesce theoretical concepts for
applied network study. Specifically. Chapter II reviews the theoretical streams
within the literature which logically converge upon the study of networks, giving
consideration to postmodern thought, network exchange, and networked
bureaucracy arising in new public management; Chapter III builds on these
theoretical premises, and conceptually defines and organizes network
characteristics into a paradigm for study.
Chapter IV provides the historical foundation for the emergence of
networks within health care service delivery. The evolution o f medicine in the
United States is traced from socialization to corporatization, from private provision
to government provision, procurement, and devolution of healthcare service
delivery. Background is provided for understanding network formation, structures
and contexts within health service delivery; this material should help explain the
emergence of multilevel interorganizational networks, and the departure from this
industry's unitary hospital institutional roots.
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In Chapter V. an analytical framework for network study and analysis is
developed along with a methodology for investigating multilevel integrated
healthcare networks. An instrument for data acquisition is constructed to elicit
information concerning the dimensions of network variability delineated by the
research model, namely: structural configuration and integration complexity,
congruence of mission, context, stability and cohesion, management capacity,
governance capacity, and performance.
The subsequent and final two chapters relate the findings o f the data
analysis and review the empirical evidence obtained concerning health care service
delivery networks. Broad thematic conclusions are synthesized and implications
for the application o f findings in the postmodern era o f public network
management are discussed. Insights toward a theory of networks and the study of
service delivery model effectiveness in networked administration are offered along
with directions for future research and theoretical exploration.
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CHAPTER II
THE THEORETICAL CONTEXT OF NETWORKS
STATEMENT OF INTENT
Conceptual framing in the organizational literature has evolved through a
cycling of schools, wherein once dominant frames become challenged and are later
replaced by new schools of thought. Evolution of thought is associated with
societal development and reflects the culture and technologies o f a given time
period in society. Schools of thought in organization theory have cycled through
traditional-classical doctrines of scientific management, rational choice and
bureaucratic decision models, systems theories, organizational change and
decision-making processes and political models of human participation. These
theoretical streams as well as others, rise into and fall out of favor, but their
influences are often sustained and help to direct subsequent theoretical
development.
Advancements in technology invade today’s society, influencing the pace
of human life and giving a sense of immediacy and urgency to all that must be
accomplished. As the social organisms of society, organizations and institutions
assimilate societal inclinations, evolving in synchrony with technology and
demands to achieve goals efficiently, competently and with alacrity. The emergent
model of organization exhibits a heightened level of exchange complexity between
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organizations, giving rise to the presence o f multilevel, multiorganizational
networks. These network models typify the postmodern era and are viewed here as
the next level of analysis beyond the organizational perspective. Though the
paradigm o f networked action and its structural determinants is still emerging, the
foundations for its theoretical conceptualization may be discovered by drawing
from a number of existing theoretical perspectives.
Many theoretical perspectives logically converge upon the study of
networks. Implementation theorists have utilized instrument and game theory to
model the multilevel complexities of a networked structure (Cline. 2000. 281-282).
while others have investigated the dimensions of network characteristics and
service delivery' outputs (Agranoff & McGuire. 1998; Milward & Provan. 1998).
Sociopolitical and health policy studies have examined implications for networked
entities by exploring theories o f interorganizational relations (Sofaer & Myrtle.
1991). and models of stakeholder analysis and perspectives within highly
networked organizations and systems (Baker et al.. 1997; Blair & Buesseler. 1998;
Blair et al. 1996; Blair & Whitehead. 1988). The field of interorganizational
theory has also expanded to include the examination of networks viewed as
populations of organizations within an environment (Sofaer & Myrtle, 1991).
O’Toole (1997b) makes a case for both practical and research-based
agendas, pointing out that current forces within public administration actually
encourage the expansion and proliferation o f networks. For example, the
devolution of governmental functions and the delegation or sharing of
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26
responsibility for oversight have raised debate on matters of governance within
networked entities. Public sector service delivery regularly confronts decisions of
whether to form networks through privatization, outsourcing or the development of
public-private partnerships with non-governmental organizations. The strength of
agency interrelationships or "multiplexitv" o f networks (Scott. 1991. as cited in
Provan & Milward. 2001.419). prompts descriptive explanation and evaluation of
these interorganizational structures and processes. The exploration and blending
of theoretical perspectives becomes the presenting challenge in broadening thought
within the organizational sciences from a long-standing focus o f study upon the
organization as the unit of analysis, to one which embraces the multilevel network
as a unit o f analysis. It is necessary to evolve network concepts that are congruent
with present day administrative realities in order to effectively address policy and
implementation as they relate to these multiorganizational configurations.
This chapter considers established theoretical perspectives which converge
upon the study of networks. Selected theoretical constructs are examined in an
effort to consolidate a theory base and develop guiding principles or core
propositions. The propositions are derived from the direct application of the
theoretical premises discussed, and are developed in conjunction with the writer's
empirical observation of networks in practice. The propositions serve to coalesce a
set o f network principles and lay a foundation for a theoretical context of networks
which is applied toward a developing paradigm o f networks to be explored in
Chapter III. Although systematic empirical evidence has not established these
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propositions, these are plausible: they are introduced to serve as an intellectual
guide to initiate a theoretical framework that is open to refinement.
CONVERGENCE OF THEORETICAL PERSPECTIVES
Systems and The New Logic
Early theoretical constructs of classic systems theory were concerned with
self-contained organizational structures independent of external forces. This
insular model o f closed system thinking became inadequate as organizations came
to be viewed as dependent upon the environment for energic input. Theoretical
models then shifted to open systems thinking to deal with relationships, structure
and interdependence (Katz & Kahn. 1978; Thompson. 1967).
Unlike closed system theory, open system theory recognized the necessity
for the importation o f energy. Energic imports and product exports allowed for the
explanation of repeated cycles o f input, transformation of the input (throughput)
and product export (output). The acceptance o f the open systems model o f the
organization was an improvement over closed systems thinking which overly
concentrated on the organization’s internal functions and disregarded the
environment. The need to incorporate externalities and constructively deal with
the environment was considered essential by open system theorists in order for
organizations to counter entropy and preserve the character o f the system by
maintaining equilibrium in a steady state referred to as homeostasis. Thus, in an
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open versus closed systems conceptualization of the organization, homeostasis was
fundamental to the organization's survival and expansion (Katz & Kahn. 1978).
Stability and homeostasis are inherent constructs in the most enduring and
pervasive model for addressing organizational issues— bureaucracy or the
Weberian model of the hierarchical organization. The remnants o f Taylorism and
the industrial era and the Weberian model of bureaucratic control typify the
Newtonian paradigm o f a mechanistic realm in which linear relationships exist
between organizational components striving to maintain equilibrium. In contrast,
the new sciences of chaos and complexity drawn from the principles of quantum
physics, embrace an indeterminate realm o f human and social system behavior
which discounts these traditional views o f homeostasis and stability (Wheatley.
1992). ‘'Adaptation and change are what ensure survival and that survival does not
equal stability in form or function" which is "antithetical to rational. linear
approaches o f control" (Arndt & Bigelow. 2000. 36).
Application o f chaos theory to the context of health care service delivery
underscores this as the network becomes a whole, acquiring properties that
transcend the uniqueness of individual organizations which become members of a
complex adaptive network. The interactive processes which occur through
adaptation and interaction among networked organizations create turbulence as
well as disproportionate responses to actions taken which do not lend themselves
to rational, linear analysis.
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Chaos theory "has it roots in simple systems theory” (Overman, 1996,487)
and is concerned with "the study of complex, deterministic, non-linear dynamic
systems" (Kellert. 1993. as cited in Overman. 1996. 487). Chaotic logic and
systems involve non-linear relationships between relevant variables which possess
the potential for exponential relationships. More simply, the dynamics of
nonlinearity in chaos are such that the results are not proportionate to the cause,
i.e.. small actions in one system variable may disproportionately affect other
variables associated with the change variable (Kiel, 2000). Referred to as the
butterfly effect by chaos theorists, this amplified or lever effect upon
organizational systems and network components has been noted in the literature of
chaos and complexity theory (Kiel. 1994; 2000), and also by researchers of
organizations and management (Senge. 1990).
The "mean is always in a state of flux. The idea of a norm does not exist in
chaos theory” (Bernstein. 1996. as cited in Goldoff. 2000,2). Kiel’s examination
of complex administrative systems labels the temporal behavior of nonlinear
systems into four categories: 1) convergence to stable equilibrium. 2) stable
oscillation, 3) unstable and explosive, and 4) chaotic, the latter having attributes of
randomness due to adaptations which continually occur and are not necessarily
indicative of overall system destabilization or implosion (Kiel, 1993, 144-145).
Linear systems are typically stable and well-behaved, responding
proportionately and steadily to external shocks and environmental disturbances. In
contrast, chaos oscillates quite randomly within definable parameters; previous
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30
sequences of behavior are not retraceable. Thus the daily flow is unique but with
an underlying degree o f order and structure (Kiel. 1993. 593-594). Rather than
pure randomness, there is a different form or order (Arndt & Bigelow. 2000, 35).
Networks emerge to achieve joint production outcomes spurred by
economic and societal trends reflected in social and business enterprises, as well as
policy-making actions. Resembling chaotic, non-linear systems, networks often
blend elements of hierarchy and stability with those of ambiguity and
unpredictability, depending upon the network membership composition and the
strength o f the linkage or interaction.
Hierarchical elements in networks are often embedded in network structure
through vertical integration, ownership and controlling interests that wield
authority and provide mechanisms for oversight, control and stability. Multilevel
structures are often created, particularly in large networks which integrate
ownership and contract relationships with multiple organizations and affiliations.
An increase in network members increases the complexity and variability
which often contribute to change in a network's structural, governing and
operational configurations. The multiple dimensions requiring management
attention, along with changes in network membership, structure, and interactive
processes suggest that networks intrinsically possess a high degree o f fluidity and
dynamism, and a tendency toward instability and oscillations in performance
effectiveness which fit the logic offered by chaos theory.
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The work of James D. Thompson (1967) in conjunction with Chester
Barnard (1938) provides a foundation for chaos theory's application to the study of
networks. Each author recognizes that interdependencies exist in complex
organizations, and that each interdependent part exchanges something with other
component parts and the larger whole. As a result, the behavior of one component
affects others which are interdependent. Thompson refers to this as "the intrusion
of uncertainty" which may precipitate dysfunction, but through mutual adjustment
among the interdependent components, the "offending part" will either "produce a
net positive contribution or be disengaged, or else the system will degenerate"
(Thompson. 1967. 6-7).
The multiple variables and interactions within complex networks make it
inherently difficult to identify the amplifying or leverage points within complex
systems and networks. If however, the appropriate "lever" could be isolated, it
would then be possible to strategically alter an organization's processes and
outcomes by the manipulation (elimination or amplification) of the source
amplifier or lever. The current vision emanating from the sciences of chaos and
complexity focuses on the search for such levers to build capacity in order to create
networks that enhance the learning and adaptability of their collective
organizational components. Dennard (1996) reflects on "autopoieis" or the
phenomenon of self-organizing systems and interdependence as the co-creation
and co-evolution of sustained relations and environmental accommodation in
which the self-organizing process continuously transforms the system in synchrony
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with the environment while maintaining a certain structural integrity (497-498).
This is consistent with the concept o f learning organizations found in current
management nomenclature (Senge. 1990).
Proposition 2.1: Networks blend elements o f hierarchy and chaos. i.e.,
linear and non-linear systems respectively.
Proposition 2.2: Buffering and perturbations occur with uncertainty
throughout a network as a function o f continual adaptive, self-organizing
processes occurring among network components.
Boundaries and Network Exchange
Within the public administration and business literature, boundary
spanning differentiates between an entity (individual or organization) and its
environment. At the level of the individual, persons serve as the linking agents
between the organization and the external environment. Boundary spanning
actions or tasks are performed by an individual who interacts with organizational
members external to their immediate organization's environment. This mitigating
nature of boundary spanning between the externally-focused work setting and the
boundary spanner worker often causes spanners to have less exposure to and
influence within the organization to which they belong (Robertson, 1995).
At the level of the organization, organizations and institutions have to span
their perimeters engaging in boundary spanning activities for purposes such as the
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procurement o f resources, the exchange o f goods and services, protection and
buffering from external threats, and affiliation and/or coordination between
organizations. The organization must interface with the external environment to
gain access to resource inputs and markets for production outputs or services. The
crossing o f organizational bounds to combine resources for collaboration is
necessary for the building of exchange relationships and the required increase of
available resources to achieve institutional mission (Sarason & Lorentz. 1998. 39).
"Networks that succeed in crossing boundaries actually experience an expansion of
their resource pool" (Grubbs. 2000.278).
Network boundary spanning is typified by multilevel processes or work
actions occurring interorganizationally as well as transorganizationally. i.e..
between the organizations within a network and across networks of organizations,
respectively, to address the macro issues that cannot be dealt with by organizations
acting alone or independently. At the level o f the network, the focus becomes
organizational systems which mediate or buffer the effects between the collective
networked organizations and external networks and organizations.
Proposition 2.3: Networks engage in interorganizational as well as
transorganizational boundary spanning activity.
At the network level, spanning activities occur between organizations
within and outside of the network, as well as between networks. Individuals
representative o f their individual organizations or their network, as the case may
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34
be. operate interorganizationally across boundaries within the network to achieve
prescribed co-production outcomes, or transorganizationally with external
networks and organizations to achieve network purposes. An increase in boundary
spanning acts, and the establishment o f patterns o f such activities', implies
interdependencies which may give rise to the coupling of organizational entities
into networks. Within a network, boundary spanning facilitates the mechanisms of
communication, resource expansion, network influence and power structures.
In addition to applying boundary spanning concepts to network
configurations, existing theory also needs to consider the study o f boundary
spanning capacities within networks undertaken by the network leaders. These are
the persons designated to manage network externalities critical to network
preservation. The strategic relations function, growth and development, ongoing
coordination of operations and the pursuit of optimal network performance
outcomes and survival, all inherently fall within the purview of this rank of
persons. Thus, it is asserted here that network leaders should be viewed as
boundary spanners, mediating network variables and inter- and transorganizational
exchange relations. It is expected that the boundary spanning functions of the
network manager will increase as network complexity and capacity increases. This
has study implications for the skills set required by network managers.
1 The definition of boundary spanning here incorporates the assumption of frequency of
interaction with a measure of periodicity or regularity. Otherwise one would have to argue that
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35
Proposition 2.4: A network leader is the designated boundary spanner
responsible for netM’ ork exchange and exchange relations, and may be considered
a mediating variable or buffering element among network components affecting
network performance effectiveness.
Organizational theorists have conducted analyses of interorganizational
exchanges by reframing elements of organizational culture into the terms of
boundary and boundary spanning theories. The interior collectives or culture
within an organization are recast as the formation, change and maintenance of
boundaries (Hailey. 1999. 1).
Since boundaries often change or dissolve in accordance with a network's
linkages and purposes, a collective "network culture” may not be apparent or may
even appear to be non-existent. Boundarylessness implies the blurring of
distinction or demarcation in function, and flexibility in processes or the flow of
information among entities. Boundary demarcations between network members
may be fuzzy and indistinct due the absence or attenuation of clear authority and
governance mechanisms. Thus, the assimilation of networked organizations'
cultures into a realized network culture is a rather elusive notion as the nature of
the network itself creates difficulties in establishing cohesion among its members.
Additionally, network members may be unable, reluctant or find it unnecessary to
nearly all organization or network members engage in boundary' spanning based on minimal or
limited externally focused boundary spanning acts.
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modify their cultural identity to participate in network membership and purposes,
further derailing network cultural integration.
The maintenance of stability over time, and the required need for a
significant commitment of resources and leadership effort, together hamper
development of a network's culture. It may be that the network as a whole reflects
multiculturalism and engages in transcultural exchange as each member entity
spans its own cultural boundary distinctions. Boundary spanning contributes to the
development of a social structure with its own attributes and norms. For example,
spanners may conform more to externally rather than internally generated
performance expectations, i.e.. the impact of the internal work setting is lessened,
especially as it relates to in-person boundary activity, regardless of the location of
the activity (Robertson. 1995. 73). This cultural disconnection makes it difficult to
evolve a network culture with unified norms, values and congruency of mission.
The application of boundary theory to organizational and
interorganizational culture by Hailey (1999. 12) concludes that “boundary and
culture are inextricably intertwined." Hailey's (1999. 11) perspective which
considers boundaries as “the starting point o f culture.” affirms that the creation of
interorganizational boundaries (culture fragmentation) and internal organizational
meaning (culture integration) has implications for network cultures and leadership.
How to create and manage interinstitutional cultures in boundary spanning and
boundaryless leadership situations are questions which naturally emerge in the
bridging o f theory and practice concerning networks (Hailey, 1999,12).
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Proposition 2.5: Indistinct interorganizational boundaries contribute to
multiculturalism in netw orks rather than cultural cohesion or integration which is
dependent upon the degree to which cultural fragmentation persists among
network members.
Network Analysis
The network perspective views society as relational systems which are
comprised o f individuals, groups and organizations. The purpose of network
analysis is to examine the patterns of relationships, and seek to identify their
causes and consequences. Applying social network analysis concepts to the
interorganizational or network level requires observation and assessment of the
direct and indirect relationships between and among interconnected organizations.
Social and exchange networks, as well as organizational structures have
been examined using a methodology referred to as social network analysis in
which the connections between social actors are studied (Bonacich, 1995; Corra,
2000: Freeman. 2000; Hagen, Killinger. & Streeter, 1997; Lovaglia, Skvoretz,
Markovsky. & Wilier, 1995; Richards & Seary, 2000; Stevenson, Davidson,
Manev. & Walsh. 1997). Networks are analyzed in terms o f their flow, a reference
to the contents o f the network exchange or pass through relationships in the
network. Network relational data that “describes the set o f relationships among the
members of a system” (Richards & Seary, 2000) is gathered for analysis. The goal
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of analysis is to obtain a description of the structure of the system, identifying
communication and/or relational patterns such as tightly connected clusters
(cliques) or sets of persons with network relational patterns (structural
equivalence): develop a multidimensional construct of the network (Richards &
Seary. 2000. 1): or classify exchange networks by their power distribution structure
examined by the evidence of power dyads (Lovaglia et al.. 1995).
Tichv (1981) identifies four transactional contents o f exchange in analyzing
network data: (1) expressions of affect. (2) influence. (3) information, and (4)
goods and services. Tichv classifies organizational networks into three levels: a
cluster within a network: an organizational network: or an interorganizational
network. Properties identified by Tichy in terms of analysis examine the
aforementioned transactional content, the characteristics of linkages (e.g..
reciprocity, intensity), structural characteristics (e.g.. organizational density,
centrality, vertical density, stability, and connectedness) and also classify key
network actors (Tichy. 1981. 228-229).
Having its roots in anthropology, sociology, and social psychology, social
network analysis emphasizes the study of recurring social relations, interactions
and communication. Compatible theoretical perspectives o f network analysis
which examine organization sets, would include role theory (Katz and Kahn.
1978). e.g.. organizations viewed as having role sets, including coalitions and
formal departments, or exchange theory which deals with the dynamics of social
relations and interdependencies where the costs and benefits o f the exchange are
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contingent upon the actions of others. Community and communication network
research have also contributed to the conceptualization o f networks, though
information concerning influence and flow of information is lacking (Tichy. 1981).
Proposition 2.6: Networks are relational interorganizational systems o f
exchange comprised o f organization sets with discernible relational patterns o f
power, influence and communication.
Network Bureaucracy: Devolution and Governance
Public choice, the new public management, neoinstitutionalism and
organizational economic theories, public entrepreneurism. and interorganizational
theory have also considered the context of the network theme. In fact, these
theories have served to advance network development by embracing the themes
and issues of devolution: neomanagerialism and reinvention, public-private
partnerships and outsourcing, contracts and agency relationships, boundary
spanning, democratic governance and accountability. These perspectives provide
impetus for the creation of organizational linkages and networks. In particular, the
widespread adoption of the administrative strategies o f privatization, devolution,
and reinvention (Barzelay. 1992; Gilmour & Jensen. 1998; Osborne & Gaebler.
1993) has reconfigured the bureaucratic landscape. Yet. in relation to partnership
and collaboration associated with networks, "public administration theory had
failed adequately to inform practice on important concepts such as coordinating
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systems of governance, sharing resources and accountability, and integrating
organizational cultures" (Grubbs. 2000. 275).
Networks change the contextual assumptions o f bureaucracy, relaxing
authority relations and tight controls, in large part as a result of administration
operating "transnetwork" or laterally across network structures with negotiated
authorin'. Present experience demonstrates that administrators are currently
functioning within hierarchically established organizational positions embedded
within interorganizational networks. Exhibit 2.1 contrasts the dimensional shifts
required o f governance and administrative practices under hierarchy versus
network.
COMPARATIVE DIMENSIONS OF HIERARCHY V. NETWORK
HIERARCHY NETWORK
Organizational Interorganizational
Stability Chaotic Flux
Structural Resistance Structural Fluidity
Endogenous Locus Exogenous Locus
Tight-Coupling Loose-Coupling
Institution Contracts
Increased Inertial Effect Reduced Inertial Effect
Unidirectional Flows Multidirectional Flows
Centralization of Power Dispersion o f Power
Defined Authority Negotiated Authority
Defined Governance Shared Fuzzy Governance
Exhibit 2.1 Comparative Dimensions of Hierarchy v. Network
The transition from the conventional model o f hierarchy to the futuristic
model o f networks and alliances is highlighted by Kaluzny's (2000) thinking on
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future organizational configurations in health care. Through changes in control,
work design and structure. Kaluzny explains that hierarchy can be transformed
from top down, function-oriented, single-loop learning organizations, into network
models utilizing shared governance, process-oriented, double-loop learning
networked configurations. These models are often referred to as "high
involvement" (Lawler. 1990) or "learning organizations” (Senge, 1990).
Proposition 2.7: The dissemination ofpower and relaxation o f controls
within network structures permits transnetwork delegation and negotiation o f
administrative capacity, often resulting in ill-defined, shared, fuzzy governance
mechanisms.
The image o f network bureaucracy has been given consideration by
Considine and Lewis (1999) who identify the network bureaucracy as having a
"recognizable organizational character." This character is conceived in four
dimensions: source of rationality or administrative logic, method of control and
coordination, primary virtue or attractiveness o f network approach, and service
delivery focus (See Exhibit 2.2).
In Exhibit 2.2 network bureaucracy relies heavily upon non-hierarchical
controlled systems o f exchange relations emphasizing processes, competitive
behaviors and measured transactions occurring in market exchanges. The long
term nature of relationships required to build and sustain network performance
precludes ready measurement o f network exchanges since the focus is upon clients
and service delivery processes across organizational boundaries. Network
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BUREAUCRATIC GOVERNANCE: NETWORKS V. MARKETS
Source of
Rationality
Form of
Control
Primary
Virtue
Service
Delivery
Focus
Network Culture
Co-
Production Flexible Client
M arket Competition Contracts
Cost-
Driven Price
Exhibit 2.2 Bureaucratic Governance: Networks v. Markets
[adapted from Considine & Lewis (1999) p. 468]
bureaucracy is distinguished from market bureaucracy by contrasting the
interdependent nature of network coproduction with contracts as methods of
control and accountability. Within the health care sector, it can be argued that
there is no distinction between network and market bureaucracy, and that in regard
to managed care networks, there is a merging of both network and market
bureaucratic forms and principles.
As complex interorganizational arrays to execute public policy increase,
questions should be raised as to the maintenance o f democratic governance, framed
in terms of accountability (O'Toole. 1997a). The challenge of accountability and
responsibility in network coproduction arranged through contracts is well
documented in the literature discussing governance, privatization, and principal-
agent relations (Avery. 2000; Boyne. 1998; Considine & Lewis, 1999; Dunn &
Legge. 2000; Fredericksen & London. 2000; Gilmour & Jensen, 1998; Gooden.
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1998: Hague. 2001; Johnston & Romzek. 1999; Lynn. Heinrich. & Hill. 2000;
Milward. Provan. & Else. 1993: Portz. Reidy. & Rochefort. 1999; Sekwat. 2000:
Thompson & Elling. 2000; Verma. Mitnick. & Marcus. 1999) and the potential
effects of networked public administration and its implications for democratic
governance (Ferris. 1993; Ferris & Graddy. 1994: Milward & Provan. 2000;
O'Toole. 1997a) and issues which emerge in the integration of assets and resource
sharing in interagency collaboratives (Bardach. 1999: Sarason & Lorentz. 1998)
and alliance building (Arsenault. 1998).
Evidence for the opinion that networks are derivatives of the New Public
Administration (NPA) and its current New Public Management (NPM) or neo
managerialist agenda may be found in the assumptions of NPA / NPM (Kaboolian.
1998: Kelly. 1998: Terry. 1998: see also Lynn. 1998) which endorse devolution
and government reinvention. Government reinvention schemes encourage public-
private partnerships and entrepreneurism which advocate agency collaboration and
strategic alliance formation for process effectiveness, efficiencies and
performance. The concept of steering over rowing, and the pragmatic approach of
doing more with less is a philosophy that nourishes network development and
exchange for the co-opting of resources through collaboration and contracting.
Government transfers of authority to the non-governmental sector leave the
assurance of cost-benefit efficiencies and accountability for customer satisfaction
and effectiveness to private entities and market dynamics. The issue o f whether
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government-delegated acts by non-governmental entities or independent
contractors constitute acts of the state comes to the fore.
A Medicare advocacy case in Arizona against an HMO in 1996 (Grijalva v.
Shalala) applied the criteria of payment (who pays for the services), regulation and
oversight (who regulates and oversees performance), and the appeals process (to
whom is the appeal directed and who possesses the power to overturn prior
decisions). Evaluation against each of these criteria revealed that government
played a dominant role, determining that HMOs do in fact, act on behalf of the
state (Gilmour & Jensen. 1998. 254).
Proper control systems to guide agent actions while achieving compliance
with government intent should be instituted as safeguards: i.e.. "a reinvention of
accountability [needs] to accompany the reinvention o f government'’ (Gilmour &
Jensen. 1998. 255). Since services are funded by taxation but actual service
delivery functions are contracted out. the delegated decisions and quality outcomes
are ultimately state actions and remain the responsibility of a unit o f government.
Academic attention has been paid to hollow state delivery systems
(Fredericksen & London. 2000; Gilmour & Jensen. 1998; Milward. 1994,1996;
Milward. Pro van. & Else. 1993) reflecting ongoing concerns regarding
accountability, responsibility and responsiveness. Accountability methods are
imposed to delineate responsibilities with the goal o f responsiveness.
Accountability is “the obligation owed” and “the price citizens extract” for the
delegated powers o f responsibility entrusted to government (Dunn & Legge, 2000,
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74). Applying the logic of accountability and responsibility o f democratic
governance to networks is daunting because as Dunn and Legge point out, a
workable plan of accountability with defined responsibility must both empower
and constrain administrative capabilities.
Sarason & Lorentz (1998) support the goal o f providing a sense of
responsibility to achieve meaningful public outcomes. The authors' viewpoint is
to assign responsibility congruent with skills, interests and values, replacing the
superior/subordinate answerability inherent in organizational charts by self
organizing managers or "network coordinators"’ able to account for the work
efforts of diverse groups.
Much of the research discussing privatization, entrepreneurship and
contracting considers only the pitfalls of the contractual relationship utilizing an
organizational economics framework. Waterman and Meier (1998) critically
examine principal agent theory and conclude that the model needs further
expanding to account for the multiple principals and agents and the myriad of
relationships occurring in the present networked administrative world. Whereas
the agency relationship deals with accountability for outcomes, administration in
networks deals with a shift toward an administrative structure that diffuses
responsibility and makes responsiveness uncertain (Milward & Provan, 1998).
Hague (2001) asserts that the recent market-driven mode o f governance
contributes to a lack of transparency in the public-private transactions created due
to the shifting of public service functions to the indirect activities of regulation,
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oversight, and performance evaluation. This is a departure from the tangible
public service function of direct distribution and delivery o f goods and services.
The often intangible, immeasurable and ambiguous performance of contractors
provides fuel for debate against the blind adoption of market methods in the
delivery of public goods.
The erosion of publicness in public service diminishes government’s direct
role and weakens public accountability mechanisms. This is demonstrated in the
delivery of social services and health care as market values have realigned the
focus of the public service mission from citizen wellness to an emphasis upon
efficiency measures and cost-expenditure reductions. The business-like approach
kindles contracting and network development. Government's response is
delegation and oversight as responsibility for care delivery is relegated to matters
of contract enforcement and agent compliance.
Government often engages the private and nonprofit sectors as partners in
social service delivery. The issue at hand is the degree of accountability to the
government and the degree of autonomy retained by the organization receiving
public funds. Experience, trustworthiness and flexibility o f the nonprofit agent
make an attractive contracting partner for the government (Ferris, 1993). Thus, the
delegation of autonomy to a trustworthy subcontractor is preferred because
assurance of contractual compliance are the dilemma inherent in social service
contracting.
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The changing patterns of government relationships through public-private
partnerships promote the advancement of market type relationships as noted by the
accelerated growth in the contract provision of welfare services by for profit firms,
particularly in hospital care, outpatient and clinic care as well as the spectrum of
social services. Ferris and Graddy (1994) raise serious concerns with the
marketization of the American welfare system and the potential decline in quality
resulting from services being provided from organizations driven by a profit
motive. The concern being that for profit firms would siphon off affluent
customers with the ability to pay leaving the disadvantaged with neither sector to
turn to for the delivery of services (Salamon. 1993). Subcontracting or outsourcing
as a way of life is occurring in both the public and private sectors. In the case of
government contracting, references have been made to government being
performed by proxy or the hollow state: similarly, subcontracting in the private
sector would result in the hollow corporation (Milward. Provan & Else. 1993).
Conventional wisdom presupposes that networked organizations or systems
will generate efficiencies in production by eliminating redundancy and duplicative
efforts. For example, it is assumed that the linking o f entities confers economies
of scale and marketing benefits which permit reduced transaction costs and
improved distribution channels or access to goods and services. It is also assumed
that geographic dominance enables a purchaser of health sendees to assume a level
of consistency and quality in the delivery of care. These assumptions concerning
integrated network models of managed care have not fully been realized, and have
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been disputed, or found to be exaggerated, inconclusive or false (Bazzoli, Dynan.
Bums. & Lindrooth. 2000; Dranove, Durkac. & Shanley. 1996; Miller & Luft,
1994b; Sullivan. 1999. 2001; Walston. ICimberly, & Bums. 1996).
Recent performance research within the field of public administration and
the health care industry has challenged the conventional stance on the presumed
production efficiencies of networked organizations and systems. Boyne's (1998)
review of local public service contracting disclosed that evidence for lowered
spending and increased efficiency in the outsourcing o f municipal supply is
flawed; he contends that the underlying assumptions of public choice theory
remain untested and therefore inconclusive. In the field o f health administration.
Dranove & White (1996) evaluated multihospital system performance using the
system as the unit of analysis. Their conclusions were that “integrated hospital
systems are more likely than their nonintegrated hospital counterparts to have
unusually high administrative costs” and "systems do not. in general, exhibit
production efficiencies" (Dranove & White. 1996, 102). These authors offered
two explanations concerning systems* efficiencies: (1) either systems formation
helps inefficient hospitals to achieve average production efficiency or (2) systems
formation has no impact upon production efficiency, but instead promotes
marketing efficiency.
Proposition 2.8: Network accountability involves shared governance
between networked entities which increases the cost and complexities o f oversight
and compliance monitoring.
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Are networks in keeping with democratic principles? Are they effective
and appropriate interorganizational forms for the accomplishment o f public goals?
Do the effects of the hollow state and hollow corporations enable greater
efficiencies and resource capacity? Do managers have the necessary tools for
mediating the administrative and operational needs of networked organizational
capacities? Is oversight and monitoring of delegated production and outcomes
sufficient in networked entities?
Many questions remain as yet unanswered. According to O’Toole, "the
emergence o f networks in public management is not a passing fad" since “complex
networks are not only relatively common, they are also likely to increase in number
and importance" (O’Toole. 1997b. 46. 47). Still, in spite of the growing
importance o f networked action in public administration, a network paradigm or
cohesive model of network effectiveness has not been identified. For the most
part, practitioners remain inclined to guide research by the ineffectual assumptions
inherent within bureaucratic hierarchies; this renders the validity of any results
somewhat questionable as to their application within the realm of networked
administration.
The following chapter builds on the converging theoretical foundations
previously discussed and attempts to address the void in theoretical
conceptualization concerning networks. In Chapter III, the nature and
characteristics of networks are elucidated and additional propositions concerning
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network characteristics, dimensions and processes are proposed to advance
network conceptualization. Empirical research applicable to network theory
development is culled from a review of the literature and woven into the chapter's
discussion which organizes theoretical premises into a network paradigm for
exploratory study.
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CHAPTER III
THE NETWORK PARADIGM:
TOWARD A THEORY OF NETWORKS
DEFINITION AND CHARACTERISTICS
Networks "comprise the broader institutional context for administrative
actions'” (O'Toole. 1997a. 445). Yet. in spite of the growth of network contexts
and current administrative experience encompassing them, the study o f networks
and their related effects has been sorely deficient. In addition, there has been
limited research dealing with the basics o f network definitions and their associated
properties or characteristics.
Evidence o f this neglect is observed in the lack o f shared terminology
concerning networked entities. The terms networks and multinetworks, along with
the descriptors multiorganizational. multiinstitutional, interfirm,
interorganizational. transorganizational and systems, have been used
interchangeably to describe the very nature o f networks: the linking o f multiple
organizations, interacting between and among one another spanning their
individual organizational boundaries.
Within the field o f public administration, networks have been defined as:
"structures o f interdependence involving multiple organizations or parts thereof,
where one unit is not merely the formal subordinate o f the others in some larger
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hierarchical arrangement...network excludes mere formal hierarchies...but it
includes a very wide range of structures in between” (O’Toole. 1997b. 45);
complex, multiorganizational arrangements formally or informally connected, for
coordination and interorganizational problem solving; “interdependent
relationships based upon reciprocity and mutual trust w'here self-interest is
sacrificed for the common good" (Agranoff & McGuire, 1998. 70, 89.
respectively) and: “patterns of two or more units, in which not all the major
components are encompassed within a single hierarchical array” (O’Toole &
Meier. 1999. 508). In each of these definitions, it is suggested that networks be
viewed as patterns of connected units or interdependent structures arranged to
some extent, in a hierarchical array.
Implicit then in the notion of network is the concept o f interconnectedness,
i.e.. the linking or crossing o f multiple parts into a net or structure thereby creating
interdependencies and exchange. The American Heritage Dictionary' defines
network as “an openwork fabric or structure in which., .wires cross at regular
intervals." “resembling a net in consisting o f a number o f parts, passages, lines, or
routes that cross, branch out. or interconnect.” and also, “a group or system...”
{The American Heritage Dictionary, 1982. 838). For purposes o f clarity and to
achieve consistency in interpretation, the operational definition of network applied
here is: interdependent organizations and/or coalitions o f shared interest, formally
or informally linked or aligned for purposes of achieving economic, political or
social purposes.
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"Four characteristics of networks are proposed: distinctive components,
interconnectedness, interdependence, and dynamism (see Exhibit 3.1).
IDENTIFYING CHARACTERISTICS OF NETWORKS
D istinctive Com ponents
Interconnectedness
Interdependence
Dynamism
Exhibit 3.1 Identifying Characteristics of Networks
Proposition 3.1: A network structure comprises individual organizational
members each having distinct capacities to exchange (distinctive components).
A network consists of distinctive components or separate parts coming
together to achieve an outcome, much like wires coming together to make a circuit
to conduct electricity, threads woven together into rope, or routes joining to form
an interstate highway network. These components possess distinct capacities for
network contribution and exchange. At the level of network analysis, the
distinctive components o f the social system are the organizational members that
are wholly distinct and separate, yet link or align to form a cooperative "whole” or
network.
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Proposition 3.2: Network components are woven together or coupled by
forms o f control including, ownership interest, shared governance, and/or contract
(interconnectedness).
The aspect o f interconnectedness is the actual linking, crossing and
weaving of parts into a structure. The structure may be loosely or tightly woven or
coupled.1 For example, tight weaving or coupling of network configurations is
facilitated by organizational linkages resulting from ownership interest/control and
integration strategies, and is strongly observed in vertical top-down authority
arrangements; Loose weaving or coupling is structurally more fluid as interactions
are arranged and endure according to need. Loose coupling includes
organizational alliances, affiliations or outsourcing agreements usually arranged
for specific purposes and/or terms. To a degree, the durability o f the entire
network structure depends upon the solidity of the weave, i.e., the degree and
durability of the interconnectedness or coupling among the distinctive components,
rather than the strength of any individual component apart from the whole.
1 Coupling has been referred to as a causal concept related to authority and control,
particularly evidenced in superiors to subordinates within hierarchies. Tightly coupled entities refer
to hierarchically or vertically-ordered systems; loosely coupled systems have flat, horizontal
linkages which self-organize and self-regulate without central authority (Landau, 1991, 5). The
writer here includes the concepts of ownership interest and contractual relationship, suggesting that
ownership linkages result in tighter coupling, whereas contractual linkages generally provide for
fluid, looser coupling to a network as durability of the linkage is contingent upon the specific terms
of the contract.
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Proposition 3.3: Network circuitry is established by a discernible pattern
o f boundary spanning activity resulting from dependencies (interdependence)
between the network s distinctive components.
Interdependence among two or more organizations to achieve intended
network outcomes is the initiating and distinguishing factor in developing network
circuitry. Repeated, discernible patterns of boundary spanning exchange suggest
dependencies which trigger interorganizational coupling. However, simply
“connecting" or engaging in exchange across organizational boundaries does not
infer that a network has been created, or that a network structure is in place. To
conclude otherwise would be presumptuous as many organizational entities engage
in boundary spanning activities without integrating into networks. The need for
ongoing interdependent activity in order to attain network goals must be present.
Organizations merge, become nested or embedded within other organizational
structures, and align or link to add value or complementary attributes to the
network whole. This permits goal attainment in a manner that neither o f the
entities could achieve nor achieve as well, apart from network participation. This
interconnectedness reflects coproduction in network outcomes and requires
interorganizational coordination and collaboration.
Proposition 3.4: A network functions in a state o f continual change and
adaptation, influenced by energy flows andforces that impinge upon the network
(dynamism).
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Typifying a network configuration, dynamism is characterized by fluidity
and flux resulting from a synergistic multiorganizational membership. Network
circuitry dynamically conducts energy among and between network components,
creating dynamism as members seek to exchange energy and exert the forces of
their influence upon one another internally, as well as externally beyond network
boundaries. This exchange makes networks dynamic by design, as they
continually import and export flows o f energy among network entities.
Proposition 3.S: Cooperative strategies (contracting, coopting, and
coalescing) result from netw ork interdependencies and serve to align
organizational capacities necessary for network coproduction.
Thompson's work. Organizations in Action,(\961). provides a perspective
on complex organizations and interdependencies that permits inclusion of
networked organizational capacities. Thompson's writing states that “complex
organizations ‘acquire' dependence when they establish dom ains... [and that] in
the management o f this interdependence, organizations employ cooperative
strategies.. .the organization must demonstrate its capacity to reduce uncertainty
[caused by environmental elements] and must make a commitment to exchange
that capacity [with other organizations]” (34). These assertions readily apply to the
postmodern phenomena of interorganizational arrangements or networks.
Thompson elaborates on the cooperative strategies employed by
interdependent organizations, stating that certain strategies are more constraining
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upon future decision-making and require greater organizational commitment than
others forms o f cooperation. He presents three levels of cooperation or a
"negotiated environment" from least to most constraining: contracting, coopting,
and coalescing. These concepts relating to interdependent organizations as
discussed by Thompson, are merged with network logic and reframed in Exhibit
3.2 to depict cooperative strategies within network configurations.
COOPERATIVE STRATEGIES IN NETWORK CONFIGURATIONS
CONTRACTING COOPTING COALESCING
e.g.. virtual networks. e.g.. coventures, alliances e.g.. ownership mergers.
outsourcing & partnerships acquisitions
Least Constrained => Most Constrained
Least Vested Interest => Most Vested Interest
Least Integration Most Integration
Structural Fluidity Structural Resistance
Loose Coupling Tight Coupling
Exhibit 3.2 Cooperative Strategies in Network Configurations
Cooperative actions emerge to address interorganizational dependencies.
Thompson views contracting as the least constraining form o f cooperation since
the contracting parties are only committing to contract terms without commitments
to future decisions or participation in exchanges. This ability to retain a degree of
separation makes contracting parties less able to exert significant influence within
the network.
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A postmodern example of this least constrained behav ior is the popular
implementation of outsourcing or contractual networks formed to integrate (albeit
loosely) the supply and delivery chains in government and private industry. These
arrangements offer less stability than other cooperative mechanisms and result in
structural fluidity as contracted agents may more easily disengage or sever
relations from a network through termination of a contract, either by fulfillment or
breach of the contract's intent. Additionally, since contractors do not have any
ownership interest in the network enterprise, they are free agents able to act
according to self-interest without the usual constraints and considerations that
vested ownership involvement possesses.
More constraining than contracting as a form of cooperation is the strategy
of coopting.2 Coopting applied to network configurations would permit the
coopted entity to have participation in governance and/or oversight control. Thus,
freedom as to future decision-making becomes somewhat constrained as it now
hinges upon the input of the coopted entity. An example o f coopting behavior
would be shared governance processes between merging or aligned organizations.
Coopting enables a weaker organization to handle its needs o f dependence
(Thompson. 1967. 36). Much like the expressions "keeping your enemies close’'
and "if you can't beat them, join them," coopting permits collaboration between
' Coopting refers to the assimilation of outside elements or new organizations into an
existing structure to reduce uncertainty and threats to organizational stability and existence
(Selznick as cited in Thompson, 1967, 35).
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the politically strong and weak while avoiding subordination to or domination by
the stronger entity.
Coalescing involves the highest degree of commitment where merging
partners become highly vested in the future joint enterprise. Coalescing unites
separate entities into a whole and is the most constrained form of cooperation
given the high future commitment inherent in the fusion o f organizational intent
and resources into unified coproduction. Theoretically, network coproduction and
coalignment of organizations achieved by coalescence of ownership, such as by
merger or acquisition, would create the tightest of interorganizational coupling,
with the greatest structural resistance and stability. In coalescence, it is the fusion
of ownership that establishes tight coupling and permits stability, along with the
creation of management and oversight superstructures at multilevels which offer
elements of hierarchical control.
MULTILEVEL NATURE OF NETWORKS
Networks by nature are multilevel interorganizational structures of varying
complexity and may include embedded or nested organizational systems, vertically
integrated levels of organizations, and horizontally related or laterally organized
networked systems. Network composition, scope, size, "depth’’ or the extent of
network partners (Agranoff & McGuire. 1998,68). and "density” or the degree of
connectedness among network components (Milward & Provan, 1998.211)
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increase as the number o f partners coupled to the network increases and layers or
levels are added.
Multilevel networks transcend formal vertical hierarchies according to their
particular structural arrangement and may be distinguished from them. Whereas
vertical hierarchies possess the "formal authority to compel" (O'Toole & Meier
1999. 508). networks lack this inherent characteristic. The formal structure of
functioning hierarchies provides for superior-subordinate channels o f authority
which tend to stabilize and buffer the organizational arrangement. This formal
authority flows unidirectionally. with defined governance and control mechanisms
providing relative stability and an inertial effect of resistance to external
influences, instability and change.
In contrast, a key attribute of networks is the attenuation o f authority
relations, with multidirectional flows contributing toward a diluted, negotiated
authority as each network partner is a distinctive component arranged vertically in
a superior-subordinate hierarchical array, or positioned to relate horizontally to
organizations with a similar function within the network. The alignment and
integration o f vertical and/or horizontal organizational arrays contribute to the
multilevel nature of network.
Holm (1995) provides a “nested” perspective concerning institutional
interconnectedness which may be applied to networks. Holm submits that
institutions are nested within systems that are interconnected and multilevel in
nature; each level simultaneously possesses the capacity to act, and qualitative
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breaks exist between higher and lower levels of action which are hierarchically
ordered (398). When applied to institutional networks, this suggests that a higher
level may serve as a buffer, absorbing disturbances while reducing or alleviating
impacts to lower levels. This first-order level determines the legitimacy o f actions
initiated at the lower levels, thus the authority of subordinate levels is subject to
limitations by the superordinate levels (400-401).
When two or more interdependent organizations link into a network,
complexities and uncertainties emerge which a single organizational entity does
not encounter. How then do networks attain coordination in the absence of
hierarchy and in the presence of dispersed authority? Traditionally, hierarchy is
viewed as the means of coordination among components due to the linking of these
components to hierarchical superiors. In multiorganizational settings such as
networks, coordination becomes more critical. Each distinctive component of the
network can potentially become a barrier to effective network coordination.
Networks with multilevel vertically and/or horizontally integrated
structures have difficulties coordinating, integrating and managing levels
throughout the network. To compensate for these structural inefficiencies,
networks rely upon processes o f influence and negotiation as the means to unify
purposes. Large complex organizations traditionally incorporate hierarchical
structures and command/control mechanisms to generate stability and
predictability. However, the overall lack of unity and conformity by wholly or
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partially autonomous network components fuels network instability and
unpredictability, making network management a significant challenge.
Networks blend elements o f linearity, i.e., hierarchy, and complexity, i.e..
multilevel couplings and integration. As a network develops or acquires attributes
of hierarchy, it resembles a networked hierarchy and behaves more like a
bureaucracy. Although networked hierarchies cannot completely shed the chaotic
influences of their network structure, they may benefit from the increased stability
and order derived from any nested hierarchical components.
Proposition 3.6 Loosely coupled networks manifest multidirectional flows
with multilevel structures, contributing to dynamic flux with greater instability’ and
susceptibility to change; whereas tightly coupled networks exhibit unidirectional
flows and vertical hierarchical structure contributing to static resistance with
greater stability and reduced susceptibility to change.
Along a modeled continuum o f network dynamics as contrived by this
writer (see Exhibit 3.3). movement toward expansive multilevel multidirectional
network configurations brings with it informal authority requiring negotiation,
decentralization of processes and shared governance. Multilevel arrangements
increase network depth, density and dimensionality3 making network cohesion and
loyalty more difficult as interorganizational tension from vertical and horizontal
3 Dimensionality refers to the variance in strategic intent among networked partners
(Agranoff & McGuire. 1998. 68) which includes the political economy in network formation— the
strategies of stakeholders in which networks form.
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connections and diverse capacities at each structural level contribute to continual
change and adaptation. If however, a multilevel network has nested components
exhibiting strong attributes of hierarchy with centralization and defined
governance processes, overall network dynamics will approach static resistance,
leaning toward stability and predictability. In the case of loosely coupled network
components such as contracted entities governed through negotiated authority and
decentralization of processes, overall network dynamics would approach a state of
dynamic flux, leaning toward chaos and unpredictability.
CONTINUUM OF NETWORK DYNAMICS
Vertical Hierarchy Multilevel Integration
Formal Central Authority Informal Negotiated Authority
Defined Governance Shared Governance
Centralization Decentralization
STATIC RESISTANCE DYNAMIC FLUX
Tight Coupling Loose Coupling
Stability
Chaos
Unidirectional Flows Multidirectional Flows
Exhibit 33 Continuum of Network Dynamics
Each organizational member o f a network may be more or less vulnerable
to the internal and external forces at work within the network. Network
participation, individual organizational power and positioning are factors that can
bring about changes in structural fluidity. Structural fluidity includes the coupling,
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decoupling, nesting and assimilation of singular or multilevel organizations into a
larger network whole and requires adaptability, flexibility and tolerance on the part
of the networked entities.
CONTEXT OF NETWORK FORMATION
The process of joining organizations into a broader context of networks is
not a new or rare occurrence for the public or private sectors. In the public arena,
acts of government play a key role in the context of network formation and
expansiveness. As precipitating factors, government programs, political
imperatives, policy agendas and regulatory controls, have collectively stimulated
network solutions. Increasingly broad and more complex public outreach advances
the coupling o f nongovernmental entities together with agencies. Preferences for
limiting government involvement in combination with ambitious policy planning
have encouraged complex implementation in which the responsibility for
achievement o f objectives is distributed among the many agencies and
organizations, creating interagency collaboratives and partnership linkages
consistent with network configurations (O’Toole, 1997b, 46-47).
Networks have become the primary organizational setting for policy design
and execution (Agranoff & McGuire, 1998; see also Chang et al., 1999; Finch,
1999) and their formation and proliferation have been encouraged by public
policies and administrative practices (O’Toole, 1997b, 46). Examples of
governmental climate advancing network development may be found in the policy
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rationale and implementation dynamics supporting privatization, public-private
partnerships and outsourcing in health and social welfare services programs in
which contracting and agency have reformed service delivery (Avery. 2000; Chang
et al.. 1998; Diamond, 1999; Finch. 1999; Frank & Gaynor. 1994; Gold & Aizer.
2000; Halverson. Mays. Kaluzny. & Richards. 1997; Jennings & Ewalt. 1998;
Johnston & Romzek. 1999: Romzek & Johnston. 1999; Weiner & Alexander.
1998: see also Chi. 1999; Dranove & White. 1987: Grubbs. 2000: Moreno &
Hoag. 2001).
Within the private business sector, interorganizational linkages and
alignments such as acquisitions, mergers, joint ventures and the establishment of
conglomerates under a holding corporation have long been integral business
strategies. Excepting conglomerates which are composed of heterogeneous, highly
diversified businesses linked by ownership to an umbrella holding corporation,
efforts to create network linkages strive for mutual interchange in a context of
coproduction with specific intent or gain. Unlike conglomerates which amass
unrelated organizational capacities, networks are formed to establish a network
capacity that is homogenous in purpose and interdependent in producing network
outputs.
The reasons precipitating network formation and the context from which
networks form, differ between the public and private sectors. After studying
organizational growth and differentiation. Raadschelders makes a distinction
between the public and private sectors’ responses. In the private sector, growth
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and divisionalization are usually consequences o f a selected strategy seeking
geographical expansion for new markets and products. By contrast, public sector
growth occurs in response to citizen demands for services and results in increased
geographical penetration of existing rather than new markets, as is generally the
case within the private sector. Both sectors respond to growth similarly, creating
divisions with autonomous organizations or agencies (Raadschelders. 1997. 438-
439). When applied to network formation occurring within business and
government, though the stimuli for network formation in each of these sectors may
differ, the response to growth similarly results in the development of some form of
network configuration.
Network formation occurs for time limited periods, for specific project-
based outcomes, or for long term advantage. The decision to create
interorganizational networks varies according to contextual conditions and
influences within and upon the organizations to be linked (see Exhibit 3.4).
Whether the result o f planned internal growth strategies or competitive
countermeasures, network emergence happens within a context and occurs to
develop, expand and/or protect the reach and success o f the enterprise. For
example, networks may develop to acquire a market presence, reduce competition,
or acquire technologies and needed resources.
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Proposition 3.7: Network formation may be proactive or reactive on the
part o f the organizations involved and varies in accordance with organizational
contexts o f strategy, environment, function and structure.
Organizational contexts matter in the formation o f networks since every
organization possesses a unique set o f characteristics and circumstances which
influences the processes o f network membership and the integration of
organizational components. Four contexts which should be considered in relation
to network formation are delineated as follows: strategy, environment, structure
and function (see Exhibit 3.4).
A primary context of network formation is Strategy—the strategic intent
and dimensionality or variance of strategic intent between potential network
partners. The strategic context may be considered a proactive influence upon
formation as analysis o f this context involves consideration of the intent of the
parties involved, along with differences between ownership or the management
intents to achieve a planned outcome such as growth, or the sharing of resources
prior to network formation and inclusion.
The context of Environment may be considered a reactive influence upon
formation as it examines external conditions and forces already present in the
environment, including business and political climate, stakeholder preferences and
influences, industry trends, competitive pressures or economic conditions, events
and changes in priorities. The existing climate of network formation, especially a
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climate of political or ethical expediency, serves as a stimulus for the linking and
aligning of entities in the service o f a common cause or to achieve explicit
outcomes. It is important to consider the context of environment in network
formation. In particular, analyzing stakeholders’ postures as to their support or
INTERORGANIZATIONAL CONTEXT OF NETWORK FORMATION
CONTEXT
Strategy
(Proactive formation)
Environment
(Reactive formation)
Function
Structure
intent, dimensionality of goals & objectives, opportunism
exchange relations
business and political climate, industry trends,
competitive pressures, economic conditions, events,
and priorities, government policies & regulation,
citizen demands for services
planned actions of coproduction or exchange
organizational depth & density, multilevelism.
governance & management capacities to be integrated
or restructured
Exhibit 3.4 Inter-organizational Context of Network Formation
threat to the future networked enterprise (Baker et al, 1999: Blair et al.. 1996)
would disclose the vested and often competing interests of stakeholders in network
decision-making and action-taking. Knowledge of such matters would be of
obvious benefit before organizational coupling and future network undertakings.
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Examining the context of Function involves consideration o f the actions to
be undertaken by coproduction efforts or exchange capacities within a network's
boundaries. By giving thought to the distinctive capacities each organization
contributes or exchanges, such as resources, goods or services, a more
comprehensive picture of the benefits and costs to be realized by coproduction will
assist in the determination of whether to construct a netw ork.
Finally, analysis of the context o f Structure of the proposed network
provides a look into depth, and density issues, along with the existing and
combined structures of governance and management in the organizations
considered for network membership. The number of organizations in the
network— depth, and the intensity of interconnectedness between individual
members— density, requires that governance and management structures be
carefully dissected for evidence of redundancies, deficiencies, and overlapping
jurisdictions. Once coupled into a network arrangement, oversight mechanisms to
mediate and coordinate the functions of existing structures o f governance and
management may be formed: it may also be necessary to streamline or reorganize
the preexisting governance and management capacities brought into the network.
GOVERNANCE / MANAGEMENT NEXUS
Governance may be defined as the mechanism contrived to provide order
and coordination for network purposes and outcomes; the possession o f authority
and legitimacy in decision-making and the ultimate responsibility for the
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management oversight and accountability of an enterprise. It is the mechanism or
"means for achieving direction, control, and coordination" (Lynn. Heinrich. & Hill.
2000. 234) for a network o f public service providers in accordance with their
coproduction intent.
Management is the instrument of governance and may be considered a
channel for communicating and directing network purposes and actions.
Governance confers management with powers of authority, control, discipline,
oversight, influence and direction over the affairs of an enterprise, and holds
management accountable for the performance of the enterprise. Governance and
management are vitally intertwined and their nexus is essential for the creation and
sustenance of networked action.
Proposition 3.8: The governance/management nexus is the primary
conduit for interorganizational and transnetM’ ork cooperation and collaboration,
and congregates the expertise responsible for managing netM ’ ork capacity and
actions toward planned outcomes.
Governance is the nexus for management and vice versa. The network's
ability to manage governance, collaborative relationships, and resources on a broad
scope and scale is considered its "capacity" (Agranoff & McGuire. 1998, 85-86).
Networking capacity differs from single organization capacities to govern and
manage: it requires a diverse skill set to engage in interorganizational collaboration
(Agranoff & McGuire. 1998). Networks operate inter- and /rartsorganizationally.
demanding expertise and knowledge in negotiation, strategy, finance, operations,
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contract management, communications, resource acquisition and utilization,
project implementation and collaborative relationship building. Through the
governance/management nexus, networks are able to congregate the needed
expertise for running a network enterprise.
Unfortunately, when organizations determine to link and align with one
another, structural integration, cultural assimilation and capacities o f governance
and management are details often neglected or left to be dealt with until after a
linkage has formally taken place. The effectiveness o f governance/management
capacities becomes dependent upon careful consideration of the differences
between the new members’ governance/management capacity and existing modes
of governance/management already in place within the network.
In the subsections that follow, facets of governance and management are
explored independently to facilitate certain discussions. It is important to
recognize however, that the nexus of governance and management activity and
purpose is symbiotic in nature, and that the energy flows between these
mechanisms tie network authority to the organizational contexts of network
performance. The governance/management nexus is the conduit for
interorganizational and transnetwork cooperation and collaboration, and is
therefore the essence o f network action.
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The Challenge of Governance
Proposition 3.9: Networks seek stable shared governance, adopting both
centralized and decentralized structures with informal ad hoc powers assumed by
a network s distinctive components.
Due to the presence of multiple nodes of management exchange and
coordination among network units, networks are less likely to have strong
centrality in power and authority. Authority is delegated and often "divided”
(Romzek & Johnston. 1999. 107) to provide for needed network coordination in
accordance with the situation or decision context. Shared governance structures
emerge to provide for oversight and accountability of network performance.
As networks expand to integrate hierarchical structures of corporate,
divisional or regional organizations, they can acquire multilevel hierarchies with
established levels of control. In this way. networks and subnetworks come to
resemble bureaucratic hierarchies forming joint governing bodies which act as the
formal authority to oversee multiple network components. These newly formed
governance structures come to be perceived as the legitimate authority for the
network.
Networks generally adopt both formal-centralized and less formal-
decentralized patterns o f decision-making authority and oversight in which
governance may be shared among the management of the various distinctive
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network components. Administrative teams, coalitions, and committees are
common forms of governing the network. In addition, decentralized ad hoc
decision-making powers may informally organize to address a particular situation
or context.
For example, in health care IDNs (Integrated Delivery Networks), both
centralized and decentralized governing boards and joint operating committees
may form in multiple combinations with or without ad hoc mechanisms.
Examples include: single central board with decentralized subordinate boards or
governance committees; representative single central board with ownership and
network member representation from hospitals, physicians, medical groups, and
IP As; representative central board of ownership interests with decentralized
representative subordinate facility governing boards in combination with or
without executive operating committees and community advisory boards. These
examples are neither exclusive nor exhaustive as the structure and processes of
governance evolve in consideration of the contexts of network evolution and
maintenance.
Proposition 3.10: The modes o f governance selected by networks are
influenced by organizational components occupying dominance-power positions
within the network.
The power position among organizations within a network has relevance to
selecting the mode of governance for the entire network (Savage, Taylor, Rotarius.
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& Buesseler. 1997.15). It is important to identify the most dominant network
member to examine its mode of governance for similarities and differences
between its governance and (a) the adopted modes o f governance already operating
within the network and. (b) the governance of newly acquired organizational
components within the network. Those network components which dominate4
over network matters or possess a perceived or actual power5 advantage over other
member components, will be in the strongest position to inject their mode of
governance into network structure and processes. Still, regardless of any existing
dominance-power connections, the goal for the network is to arrive at a stable
governance solution. A stable solution despite unequal organizational power
within a network is indicative of a strong overall power structure in the network
(Lovaglia. Skvoretz. Markovsky. & Wilier. 1995).
Proposition 3.11: Network governance seeks stabilization through
mechanisms o f accountability and cooperative effort.
The processes of governance assign responsibility and confer powers of
oversight and accountability to one or more governing bodies o f an enterprise; the
governing body may in turn delegate these and other implementation powers to
4 Dominance is defined here as exercising the most influence or control over the decision
making agenda or outcomes.
5 Power refers to the perceived or actual capacity to exert influence or control over
outcomes; power may derive from informal consensus or formal legitimate authority (Bowditch &
Buono. 1990, 157), i.e., higher-order levels within the network, political currency, expertise or
distinctive competencies, financial strength, or resource munificence.
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management. Governance structures which delegate responsibility and provide for
limited or indirect accountability are generally viewed as being weaker than those
with strong direct accountability and responsibility mechanisms in place. Thus,
direct ownership and control over an enterprise provide greater accountability
because of the clear authority and responsibility which accompanies ownership.
Single governing boards are a good example of a unified governance
structure with concentrated decision-making power. This form of governance
provides a defined and centralized structure which is most effective in single
organizational hierarchies. The single board structure alone is less than practical
however in expansive networks with multiorganizational composition having
diverse governance capacities. Instead, decision-making in such networks is
widely dispersed through the interplay and actions of multiple governing boards
and bodies, including oversight boards and operations committees. The results of
this sharing of governance can be fuzzy and result in decision-making which is
prone to delays or held hostage by intervening politics. Ambiguity concerning
authority, responsibility and accountability may also complicate decision
processes.
The institutional features of network governance are similar to those
adopted by corporations since many networks are also under a corporate umbrella
or are in partnership with corporate structures. Typical structures include a board
of directors, dominated by a chairperson and outside directors, with internal
directors represented by corporate officers. This traditional corporate governance
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arrangement is considered to be a relatively weak governance structure due to it’ s
diluted at-large shareholder ownership separated from daily control and legal
responsibility for actions taken by the corporation. Hence, shareholder
corporations wield indirect and delegated powers as ownership is dispersed widely
and responsibility and accountability is delegated to the executive board in concert
with management.
Within corporations, strong governing mechanisms are encouraged to keep
management self-interest in check. This is to minimize management’s potential
for shirking and self-interested opportunism as predicted by rational economic
theories o f man. Adopted by agency theory, this perspective runs counter to a
stewardship perspective wherein management is appointed as a steward or trustee
of corporate assets seeking collaboration to effect successful network outcomes
(Donaldson. 1990).
Whether steward or agent, problems associated with self-interest must be
mitigated. Networks as well as corporations are vulnerable to malfeasance given
that ownership and control are attenuated by the structure and composition o f the
enterprise itself. It is the ’separation o f ownership and control' that is at the root o f
the problem of agency (Jensen & Meckling, 1976, 334). In the structural
configurations of networks, ownership dilution occurs with multiple owners,
investors and partnerships, and is further complicated by contract components that
are detached from ownership and control mechanisms.
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Contract networks are especially problematic for governance as
responsibility for direct production or service delivery is delegated to contractors
and accountability becomes more ambiguous and difficult to ascertain. Except for
the contract performance accountability which requires monitoring and oversight,
there is little incentive to facilitate collaboration and cooperation benefiting
network endeavors. Contract partners are rarely, if ever, integrated into network
culture and climate even though they can substantially impact the success o f the
network enterprise.
Agency relationships prevail in contract networks as multiple principals
contract for services with multiple agents to deliver or manage services. The
principal-agent relationship is devoid of an ownership linkage and inherently lacks
the legitimate authority to direct the methods employed by contractors in
fulfillment of contract obligations. As a result, governance and accountability
become fuzzy and somewhat removed as the primary responsibility for the
management of production is delegated to the agent.
Governance serves as a powerful tool for promoting community
accountability across a wide array of community stakeholders and delivery
organizations, such as public health departments and health provider networks,
insurers, businesses, local government agencies and community groups. The
challenges for this type of partnership governance are to overcome turf and
territoriality issues (Jennings & Ewalt. 1998; Romzek & Johnston, 1999; Weiner
& Alexander. 1998); as well as the challenges o f the geopolitical boundary of the
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community served (Weiner & Alexander. 1998). This goal is achieved by
cooperative relations which align the strategic intent and interests of partnering
organizations with those of the network. In this way. network components are
mutually incentivized.
Weiner and Alexander's (1998) investigation of governance in public-
private community health partnerships found that governance-related issues posed
substantial barriers to stability'. Three clusters o f governance challenges were
identified: (1) turf and territoriality issues—diverging interests of partner
organizations and ambiguity over responsibility and jurisdiction: (2) community
accountability—defining and operationalizing accountability in governance; and
(3) growth and development— coping with partnership changes (Weiner &
Alexander. 1998. paragraphs 10. 79).
Grappling with how to make governance a shared responsibility within the
network community while determining the extent to which each network
component should be represented with a voice in network governance is a
particular challenge with interorganizational arrangements. In considering network
effectiveness in the public sector. Provan and Milward similarly relate the
following:
Most problematic is the fact that multiple
organizations require dealing with multiple sets of
constituencies. The joint production of services may
satisfy clients with multiple needs, but it may also
raise substantial problems regarding resource
sharing, political turf battles, regulatory differences,
and the like. (Provan & Milward, 2001,416)
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Stable interorganizational governance is a difficult challenge in network
configurations as the form and channels for authority and control are structurally
influenced. Absent direct ownership and control, the currency for stability and
predictability within networks becomes cooperation. To the extent that the
governance/management nexus can achieve increased cooperation transnetwork,
greater stability and predictability results.
Postmodern Administration and Management
Beyond Traditional Leadership
The organizational literature routinely addresses the obvious, which is to
say that organizations are social systems that have organized around a common
mission or goal to achieve specified purposes. The literature is replete with
discussions o f open versus closed systems o f human organization, social system
components, i.e., roles, norms, and values, and effective strategies for managing
both internal and external organizational environments through the art and science
of skilled leadership.
Evolved around hierarchical principles inherent in the enduring Weberian
model of the bureaucratic organization, traditional notions o f leadership and
management are viewed as providing the vision, strategy, goals and mission of an
organization; they also serve as the final authority for allocating resources, and
ensuring discipline and coordination for goal attainment by organizational
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subsystems. Such traditional thought has guided government agencies in the
administration o f public programs under a single agency. However current
dealings o f interagency and intergovernmental administration involve the coupling
of tw o or more agency units into a network for the administration o f complex
public programs and services. These arrangements occur in complicated settings
that are characterized by interdependence and interchange among unequal partners
(Romzek & Johnston. 1999). These arrangements manifest a form o f leadership
beyond those in most hierarchical government settings.
As the present institutional form of public administration transitions, it is
reasonable to expect that the traditional constructs of leadership and management
are also undergoing simultaneous revision. The reality for postmodern
administration and management is no longer one of the unitary institutional forms
concerned with internal operations and external threats and influences.
Increasingly, administrators face the management and implementation of programs
and services with a scope of operations occurring through a network of
organizational actors. Resource acquisition and management within network
boundaries and across network nodes of exchange have now become routine in
policy implementation.
In practice, the traditionally regarded overt acts o f leadership in the sense of
leading, guiding and directing others do not readily apply in the management of
networks. Instead, it is the less obvious, indirect aspects o f leadership which are
manifested by the network administrator or manager; namely, influence,
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partnering, brokering, collaboration, facilitation, coordination, negotiation,
mediation, bargaining and compromise. Managers who are extensively involved in
networking may be characterized as being "like the hub o f a multispoked
wheel.... connected to all o f the spokes— each representing a different strategic
task: each consisting of networks of different composition, scope, and size: and
each with its own set of management challenges and responsibilities" (Agranoff &
McGuire. 1998. 69). According to O'Toole and Meier, network management
derives it challenge "from the uncertainties and complexities of the structurally
ambiguous setting itself' (O'Toole & Meier. 1999. 511).
Proposition 3.12: Network leadership takes the form o f a coalition
exercising a collaborative style to integrate interorganizational capacities into a
network economy.
Within a network structure, leadership is more likely to be accomplished by
negotiation processes among managers or leaders of the network units or
organizations comprising the network. Whereas a hierarchy wall tend toward
executive-centered leadership, networks' patterns of leadership emphasize a
collaborative style with negotiation and compromise among levels of management,
both vertically and horizontally. Dahl (1961) refers to this form of leadership
influence as a coalition of chieftains in which agreement must be reached through
the negotiating capacities of the chiefs. Ad hoc leadership committees often
materialize to broker resources, conduct decision-making and coordinate network
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strategy and operations. Insofar as leadership is able to successfully integrate
interorganizational capacities into a functioning exchange, greater stability and
predictability in network performance will result.
The networked context itself has implications for the tasks of
administrative leadership. The purview of the administrator's responsibility
transcends the internal management of subsystems operations, and expands to
include the complex dynamic o f exchange relations, complex contractual
arrangements, the political economy of multinetwork coalitions and interest
groups, public-private partnerships, entrepreneurial venture partners and integrated
service delivery systems linking various interorganizational sociotechnical
systems. The systematic study of these complex contexts has lagged behind actual
management practice in multiorganizational operations.
Management becomes "more crucial in networks than in more structured
hierarchies" (O'Toole & Meier. 1999. 505) because networks possess more
elements of internal and external complexity. The structurally induced complexity
in networks introduces ambiguity, uncertainty and instability, reducing the inertial
effects of network actions. Greater instability combined with reduced inertial
effects necessitate increased management capacity to urgently adapt network
capacities and processes to projected or actual performance fluctuations. By
contrast, increased inertia within hierarchies reduces the need for urgency and
expediency, theoretically requiring less management resources than networks.
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Network Relations and Political Economy
Proposition 3.13: Network management occurs in an expansive political
economy o f multilevel relations sustained through cooperation and negotiation.
Increasingly, public administration and management occur in a highly-
charged relational setting involving stakeholders with mutual interdependence and
blurred lines of authority and communication. Achieving a cooperative framework
among these stakeholders is important not only for achieving collective purposes,
but also to develop and implement strategies to prevent entropy since networks
dissipate considerable energy in daily operations and performance maintenance.
Thus, developing and sustaining network relations is a formidable responsibility
and an essential task of management.
Effective network relations are achieved through an environment of
interorganizational cooperation established by effectual “coalition-building
through communication" (Cline. 2000. 566). Cline's discussion of a regime6
model of management implementation is applicable to the sociopolitical context o f
networks where management must strive to alleviate conflict, disparate interests,
turf, territoriality, and non-cooperation. As the key social actors in boundary
spanning positions, managers naturally advocate for cooperative relationships and
6 A regime is a political framework for collective decision making comprised of a guiding
set of rules, norms and procedures (Cline, 2000, 556). An implementation regime framework
within network settings “operates on the assumption o f dispersed authority” (Cline, 2000, 565).
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84
the nurturing of partnerships, becoming successful transnetwork negotiators.
Managers are responsible for the effective monitoring o f service delivery outputs
and oversight in conjunction with governance mechanisms. In performing a public
service through distribution of public goods, they must keep in mind the ideals of
democratic governance and distributional equity.
Management in public organizations is particularly burdensome and crucial
in networks because “its impact is conditional [s/c] on structure and [is] often
nonlinear in form" (O'Toole & Meier, 1999. 505). The network manager’s
purview o f responsibility and interactions includes not only the level at which the
manager is positioned within the network, but expands to include
/mraorganizational interactions at super- and subordinate levels if hierarchically
configured, as well as /nferorganizational and transnetwork interactions, both
vertically and horizontally.
The sheer number of network actors results in key differences between
managing relations in networks as opposed to hierarchies. Within networks,
managers must broker and sustain relationships which rapidly multiply with each
new linkage; each additional network component adds complexity to their own
levels. With each additional level, interconnections must be made for coordination
and negotiation, as well as channels for the delegation o f authority and conduct of
management. According to O’Toole and Meier, the expansiveness o f networks
increases the number of relationships to a maximum equal to the square of the
number o f members (O’Toole & Meier, 1999. 520).
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85
By contrast, hierarchy serves to limit the number of relationships.
Specifically, the total number o f actors increases proportionately to the number of
actors at each level, and with each additional level, the total number of
relationships to be maintained by management reduces. For example, assuming a
single performance level within a hierarchy with one actor designated as the
superior, the total number of relationships can be expressed as (n - 1). where (n)
equals the total number of actors, and (n - 1) represents the number of subordinates
(number o f actors minus the manager) (O'Toole & Meier. 1999. 519-20).
The many relationships to be nurtured and tended to by management
require setting up a political economy to achieve network outcomes. Similar to a
singular organization's structure, there are internal and external stakeholders, as
well as stakeholders that interface between the network and external environment.
At the network level o f analysis, stakeholders consist of distinctive component
organizations and clusters or grouping of organizations, internally, at the network
interface, and outside o f the network's boundaries. For example, the internal
stakeholders in a network consist o f the distinctive components, i.e.. organizations
owned or allied, and contract partners. External to the network would be
stakeholders that have the potential to impact the network and its components,
such as competitors and suppliers. At the interface or boundary between the
network and its environment, stakeholders will include professional accrediting
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86
and regulatory bodies, and governmental agencies. There must be administrative
innovation and responsiveness to the combined stakeholders' needs.
Balancing the competing interests of stakeholders becomes a primary
focus for network administration. The administrative challenge is to seek
congruence of intent and decision-making in order to minimize potential threats to
cooperative network growth and action. Leadership must first identify pertinent
stakeholders and solicit their input and cooperation before collaborative decision
making can effectively occur. It is therefore common for managers of
organizations within a network to experience uncertainty as to the formal decision
making processes for matters affecting the network.
Multilevel and multinetwork management require skills and tools to
effectively mediate the competing interests of network stakeholders. Ultimately,
with respect to stakeholder participation in the network, the goal is to maximize
congruence while minimizing the consequences of incongruity (Baker et al.. 1999.
paragraph 16). Stakeholder analysis and management strategies serve as necessary
tools to assess network constituencies and determine a course o f administrative
action to aid in network decision-making.
The emergence of integrated multiprovider systems or integrated delivery
networks (IDNs) in health care contributes to a web of complexity that would
benefit from stakeholder analyses, i.e., the identification of key stakeholders,
diagnosis of stakeholder participation, and development of stakeholder
management strategies (Blair et al.. 1996. 7). A number of authors have addressed
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87
stakeholder perspectives specifically within the healthcare setting applying
stakeholder analyses to hospital mergers (Baker et al.. 1999). the medical group
industry (Blair & Buesseler. 1998; Blair et al.. 1996). and integrated delivery
systems/networks (Blair et al.. 1996; Savage et al.. 1997).
To discern the divergence of stakeholders' vested interests.7 a stakeholder
analysis may be performed to assess the underlying intent in support or opposition
of network undertakings (Baker et al.. 1999). Stakeholders may be categorized as
being supportive or non-supportive. a "mixed blessing", or a marginal “suboptimal
fit" with regard to their cooperative intent (see Exhibit 3.5). Blair et al.'s (1996)
depiction of a stakeholder's potential for threat may be either high or low and is
matched in combination with high or low potential for realizing cooperation.
Blair et al.'s strategy for managing medical group stakeholders within IDNs
is to find the "optimal fit" for each of the potential combinations. Strategies for
each stakeholder category are suggested: supportive stakeholders should be
involved and encouraged to actualize their overall high potential for cooperation;
non-supportive stakeholder strategy requires defensive posturing in recognition of
the overall high potential for threat; mixed blessing stakeholders would require a
collaborative strategy employing protective measures to minimize the relative
Vested interest generally refers to legal rights of ownership, authority or control which
are held or may be transferred. Blair et al. assert that vested interests motivate stakeholders to
action in accordance with such interests which may be contractual, financial, ethical or political in
nature (Blair et al.. 1999. paragraph 16).
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potential threat to network cooperation and goal attainment; and lastly, the
suboptimal or marginal stakeholders can be safely monitored as their potential for
either cooperation or threat to the network is low.
STAKEHOLDER POTENTIAL FOR THREAT
HIGH LOW
Stakeholder HIGH Mixed Blessing Supportive
Potential for
Cooperation
LOW Non- Marginal/
Supportive Suboptimal
Exhibit 3.S Stakeholder Analysis in Networks
Note. Typology adapted from Challenges in Health Care
Management: Strategic Perspectives for Managing Key
Stakeholders, by 3. Blair & M Fouler (1990) as cited in Blair et al
(1996.9),
Dynamism
Application o f the analytical paradigm of nonlinear dynamics to network
structures has implications for network management. The chaos metaphor as
advanced in public administration by Douglas Kiel, provides a basis for applying
the language of complexity to explain network behavior within its contexts of
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strategy, structure, function and environment. Network management benefits from
the adoption o f new language borrowed from the new sciences of chaos and
quantum theories.
Proposition 3.14: Dynamic equilibrium or stable oscillation in a network
is a function o f management s ability' to dampen uncertainty and smooth
fluctuations.
As previously discussed, the dynamics of linear systems typify
periodicity— predictable motion, whereas nonlinear dynamics exhibit cycles of
stable oscillation mixed with instability and episodic destabilization. Nonlinear
systems engage in self-organizing behavior, adapting and self-adjusting in order to
achieve a dynamic equilibrium. It is the difficult task of network management to
maintain this degree of equilibrium within the work system in order to smooth the
dramatic troughs and peaks evoked by the demands upon the network. The chaotic
fluctuations which occur in networking are random and devoid of pattern, injecting
uncertainty into management processes. Thus, the flow o f energy and the conduct
o f activities on a daily basis is multidirectional as opposed to unidirectional as in
linear, hierarchical flows.
As networks move away from linear hierarchy, they become more open to
influences and shock from within and outside the network. The challenge of
management is to dampen the uncertainty and rise above the dynamic complexities
o f an ambiguous setting. The brokering of ideas and mediation of competing
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90
interests act to buffer or counteract instability. To attain and sustain dynamic
equilibrium, active buffering and leveling of influences8 and/or exploitation of
opportunities needs to occur.
Minimizing the impact of oscillations involves the dampening of the
external and internal network disturbances threatening to overwhelm network
capacity and stability. Kiel advocates for the examination of “attractors" which
move a system away from stability toward change and new levels of performance.
The attractor is an abstraction of the energy flows within a temporal space.
Identifying the attractors permits management to respond to fluctuations by either
damping or permitting the change to occur (Kiel. 1993. 600-604).
The structural complexity of networks makes for multiple nodes or
connecting points for management action to occur; for example, vertically, from a
higher to a lower level, and horizontally from a lateral position or stem dyad9 of
strength to one of weakness in another organizational entity or vice versa. Hence
there are multiple intersecting points for management contacts to ensue.
When considering a network level of analysis, it is interorganizational
action that is observed, and further, it is the actions of management which
8 Thompson ( 1 967, 21 -22, 24) distinguishes buffering or the absorption o f environmental
fluctuations, from smoothing or leveling which involves efforts to reduce environment fluctuations.
9 The work of Lovaglia et al. (1995, 13) classifying power types/differences in exchange
networks uses the stem-dyad to describe a relationship set between two network actors or
components where the low power position of the dyad is identified as the ‘degree I position.' The
stem dyad is connected to only one other network actor which has the potential for high power or
occupies a high power position when connected to the network.
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91
represent the perspective of an individual organizational component to other
distinctive components and tc the network as a whole. Stated differently, there are
multiple nodes of management within a network structure, and it is management
that is responsible for the buffering or absorbing influences at their level of
performance, and smoothing1 0 or attenuating influences which shape overall
network stabilization.
It is easier to study management in a single organizational entity than to
study management in networks. Multiple intersecting nodes of management
exchange and continual oscillation make it difficult to determine the best practices
for managers to employ. The evolution which networks undergo involves the
processes of formation, assimilation, adaptation, integration and potential
disintegration. *'We must conclude that there is no one best way, no single
evolutionary' continuum through which organizations pass; hence, no single set of
activities which constitute administration'’ (Thompson, 1967. 162). This is
particularly true concerning the multidimensional aspects of network management.
The foregoing chapters have presented the theoretical context o f networks
through a review of the literature and empirical research applicable to network
1 0 Smoothing or leveling is a concept denoted by Thompson (1967) that involves reducing
fluctuations in the environment which create demands upon organizational resources, input and
output transactions. Through organizational learning and recognition o f patterned fluctuations,
adjustments may be forecast so that environmental influences on performance can be minimized.
Though reduced fluctuation is possible, Thompson asserts that smoothing o f demand is seldom
possible (21-22).
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theory development and testing. Propositions to guide network study were
dev eloped in consideration of these theoretical premises, and a tenable network
paradigm was discussed.
In the next chapter, the study of networks moves away from theory and
supposition to specifically examine the evidence of networks in practice in the
deliv ery of health care services. The emergence of networks is discussed against
the historical backdrop of medical services provision from the era of socialization
to the present day corporatization of medicine evolved around the marketization of
managed care and the subsequent development of integrated delivery networks.
Dominant integrative network structures and key integrative processes are
reviewed.
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CHAPTER IV
NETWORKS IN HEALTH CARE SERVICE DELIVERY
HISTORICAL BACKGROUND
The Socialization of Medicine
During the previous two centuries, medical care service delivery in the
United States has been incrementally shaped by events and influences, including
health crises, political mandates, private interests, advances in technologies, and
most importantly, an adherence to individual liberty and limited government
involvement in private affairs. It is the latter influence that contributes to the
ongoing conflict between viewing medical care as a social good and safety net to
members o f society requiring government assurances and intervention, and
protecting the American citizen's preference for individual liberties and enterprise
without government intrusion. This unresolved conflict has been largely
responsible for the indecision as to whether to unite the U.S. healthcare deliver)'
system under a singular universal scheme.
Medicine has always been humanistic in practice, but “it has never been
utilitarian” (David. 1999. 1082). Attempts to unify the delivery system under
universal delivery and payment provisions for all citizens have failed, and as a
result, the American health care system has evolved incrementally in response to a
host of political, economic and societal pressures in its methods of financing,
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provision and organization o f health care services. Whereas in the nineteenth
century the social organization of health care relied upon charity and the enterprise
of the individual, twentieth century health care has evolved around the
development of hospital organizations as institutions of care spurred by the
developments o f science. Physicians looked to the hospital environment for
administering to the seriously ill in a place where advancing technologies could be
accessed.
The socialization of medicine was advanced by the impact of World War II.
which resulted in organized health services for the military and the creation of the
third party payor which grew the health care insurance industry. Much like the
pooling of resources and individual efforts necessitated by the war, society was
willing to accept a third party as the fiscal intermediary for the pooling of societal
resources against medical-financial events.
During the latter half o f the twentieth century, U. S. health care delivery
experienced major structural reorganizations. First, in response to the adoption of
the federal strategy to build delivery capacity to enable equitable access to health
care facilities and services, the government became the major source of seed
funding for hospital construction and medical research. Then, in the 1960s, the
federal government further advanced the social organization o f medicine by
passage of the government-sponsored Medicare and Medicaid health insurance
programs. With these, the American society acknowledged health care as a
collective social good to be equitably contributed to and distributed among the
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95
poor and aged population. By implementing these programs, the federal
government's role had been refocused as a buyer or purchaser of health care
services (Hailey, 1994), in an era when more services were considered better than
less (Iglehart. 1992).
By the early 1970s it was clear that the U.S. government was in the
business of health care planning, financing and distribution. In 1972. Medicare
entitlement coverage was extended to the disabled. In 1973, Congress passed the
HMO Assistance Act which a) required employers with more than 25 employees to
offer HMO coverage if local plans were available, and b) provided grants and
loans for the development of HMOs. Later, the enactment of the Employee
Retirement Income Security Act (ERISA) of 1974 impacted self-funded health
plans not previously subject to federal mandates, by guaranteeing that covered plan
employees receive "covered" health benefits.
The 1980s witnessed a tripling of federal health services expenditures,
giving rise to what is often referred to as the era o f cost containment. Strategies
were undertaken to slow expenditure growth by implementing prospective
payments in the form of set fees for hospital care. Known as the Medicare
Prospective Payment System (PPS) and established in 1983, PPS utilized a
standardized classification payment system, referred to as Diagnostic Related
Groupings (DRGs), to reimburse hospitals for inpatient care according to specific
diagnoses. This change triggered cost-based competition over service-based
competition as reimbursement mechanisms became prospectively-based on
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diagnoses rather than retrospectively-based on costs of care. Whereas costs and
service utilization were incentivized under retrospective cost-based
reimbursement, cost reduction and decreased utilization of services became
incentivized under the new scheme of prospectively reimbursed care based on the
severity of diagnoses.
Changes in the organization of health services delivery generally follow
changes implemented in health care financing and reimbursement. Cost
containment policy initiatives began to motivate the health care industry’s search
for new ways to compete by innovation and reduction of inefficiencies. Under
these competitive pressures, the health care sector looked to other industries for
strategies and processes considered successful, including: downsizing and
reorganization, upsizing and consolidation (merger mania), outsourcing, process
engineering, just-in-time inventory management, and the formation of networks
and alliances (Herzlinger, 1997; Laffel & Blumenthal, 1989; Ozatalay. Proenca &
Rosko. 1997).
The application of business management innovations coupled with
prospective reimbursement incentives, altered the health care industry’s core value
premise from delivering optimal quality services regardless of cost, to delivering
adequate quality service at reduced or controlled costs. This emphasis upon
limiting and managing service utilization constituted a profound process change as
cost efficiencies weighed against patient care benefits became integral to medical
care decisions.
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The final decades of the twentieth century had seen a fundamental shift
toward the managing of costs, where health care had become a commodity or
service subject to free-market mechanisms. U.S. health care had been reconfigured
by the principles of managed care and consequent organizing around integrated
delivery networks/systems—health care had emerged as a business enterprise.
Supported by diversified financing mechanisms, corporate America and for profit
investor-owned enterprises fostered the trend toward consolidation and the
networking o f health care providers to realize cost efficiencies. The
corporatization of medicine had arrived. This trend has continued through to the
present 21 st century.
The Corporatization of Medicine
There would be little disagreement that the free market approach to health
care delivery has been the driving force behind managed care, which in turn has
fueled the corporatization of medicine. Managed care has been "the high water
mark o f the free market approach to health care financing and delivery”
(McManus. 1999. 273). The influences o f corporatization are the maximization of
productivity, minimization of prices, optimal allocation o f resources and efficient
distribution of transaction costs (Duffy, 1999).
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The American Medical Association defines managed care as the
control o f access to and limitation on physician and patient
utilization o f services by public or private payers or their agents
through the use of prior and concurrent review for approval o f or
referral to service or site of service, and financial incentives or
penalties. (Iglehart, 1992,965)
Interestingly, Medicare law prohibits federal control or supervision over the
manner or practice of medicine in the delivery o f medical services. Yet. despite
this, both state and federal governments have instituted policies to reduce
Medicare expenditures, while incentivizing the managed care delivery model. The
managed care restrictions on utilization and medical care decision-making have
advanced the corporatization of medicine.
Corporatization encourages the building o f a corporate culture. This
change in mission from health care as a social good to an economic good impacts
the mission o f healthcare providers. Many physicians would argue that the
corporate emphasis deprofessionalizes their practice o f medicine, undermines the
physician-patient relationship and diminishes their autonomy by subordinating
clinical judgments to managed care dictates.
Delivery networks comprised of hospitals, medical groups and other
institutions are often owned by corporations which are geographically spread over
several states or regions. These corporations actively congregate providers into
regional netw orks to enable economies of scale, increase bargaining power, and
gain geographic dominance. Networks influence clinical service demand and
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99
consumption. Patient care as a social good has become subject to economic
purpose and investor ownership.
Managed care networks as a means to organize and deliver care have been
grasped with a sense of urgency by healthcare providers who recognize the
vulnerability of the singular organization with finite resources in a managed care
marketplace. Brown (1996) affirms that the consolidation trend toward networks
is spurred by fears of investor-owned chains that have access to equity markets and
present a threat of market dominance. Individual hospitals and other provider
organizations merge or affiliate themselves as a defensive maneuver to assure
organizational survival and the securing o f market strength and positioning.
Rises in costs and changes in the financing o f health care have considerably
impacted the once independent freestanding hospital. Not having the size or
economic strength to possess sufficient bargaining power to forge relationships in
the managed care networks, hospitals align themselves in schemes with other
providers, including other hospitals, medical groups, and IP As. What results are
healthcare superstructures or integrated delivery networks (IDNs) composed o f
multiple organizations and interorganizational linkages.
Effectively displacing the hospital organization as the pivotal site for the
access and delivery of health care, the managed care paradigm dramatically alters
the organizational dimensions of care delivery. Whereas the management and
delivery o f health care services were once the domain o f freestanding provider
organizations (usually individual physician practices and hospitals), services are
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100
now under the purview of the health care network in which the MCOs (Managed
Care Organizations) of a health care network manage the provision and delivery of
care. This is achieved through complex arrangements made among network
entities to manage and/or restrict the delivery of care in accordance with the agreed
upon service utilization guidelines specified by contract.
Empirical and observational research evidence supports the notion that the
impetus o f managed care is the factor responsible for transitioning hospitals from
stand alone status to network membership (Jantzen & Loubeau. 2000). Healthcare
networks organize around multiple contractual linkages involving providers with
payors, and payors with employers and consumers. The networks rapidly form
capturing provider services through contractual arrangements and offering
incentives such as prepaid or capitated care to limit service utilization.
In capitated arrangements, a provider's remuneration is based upon the size
of the network (number of patient enrollees) multiplied by an agreed upon monthly
payment rate per enrollee. These incentives shifted the locus of control over
access to and delivery of care, forcing consumers to predetermined network entry
points o f provider access rather than allowing them a free market choice as to
hospital and physician.
The restructured organizational landscape o f health care delivery has
sensitized the healthcare environment to the policy issues o f consumer access,
quality and costs o f medical care. In support of managed care cost-cutting
solutions. U.S. healthcare policy initiatives, private sector, and federal and state
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101
agencies have each played and continue to play a role in accelerating the
corporatization o f medicine through the growth of networks. Network formation
has been encouraged as the method for reducing public healthcare expenditures.
Enrollment of eligible beneficiaries into federally qualified HMOs and state
sponsored Medicaid managed care plans has resulted. Enrollment in Medicaid
managed care has become mandatory in many states, with more than 50 percent of
the U.S. Medicaid population enrolled into managed care (Landon & Epstein.
1999. 1769).
Government sponsored managed care contracts involve linkages with non
governmental organizations; accountability for service provision is transferred
from the public to the private sector. These non-profit or private organizations
either assume the management of public service programs— “carve-outs.” or
undertake responsibility for the actual service delivery o f public programs—
"carve-ins" (Beinecke. 2000. 139).1 By 1996. the Health Care Financing
Administration (HCFA), now known as the Centers for Medicare and Medicaid
Services (CMS), had approved Medicaid waivers in forty-two states permitting
state Medicaid programs to contract out the delivery of services to managed care
networks such as HMOs (HCFA, 1996, as cited in Beinecke, 1999,140) which in
1 HCFA refers to “carve-outs" as contracts by MCOs with entities to which management functions
and responsibility are delegated and assumed by the contracted entity for services provided. In state Medicaid
agency contracting with MCOs. services are not considered delegated and the MCO is not accountable for the
specified contracted services (HCFA. September 28.1998. QISMC. Domain 4: Delegation).
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102
turn may subcontract responsibilities to other provider networks for service
provision.
This propensity toward integration and network expansion as the means to
control the health care marketplace corporatizes health care management and
medical practice. The consumer-patient” s traditional means of access to the
provider and the provider's traditional means of direct service delivery have been
altered. Professional autonomy in clinical service decisions has become subject to
corporate influence and control, giving impetus to physician and provider
initiatives to control the monopolistic behaviors of dominant health insurers who
restrict access to medical services.
Organizing medicine under market pressures has created the need for
market-based arrangements in which physicians and hospitals enter into
contractual agreements to a) manage risks, b) control costs and c) join forces for
acquisition of managed care contracts. Aligning the interests of physicians with
hospitals in formally structured contractual arrangements is referred to as a
physician hospital integration strategy. As a result o f such strategies, relationships
between hospitals and physicians have also been dramatically affected in recent
years. Analysis o f the 1993 ProPac (Prospective Payment Assessment
Commission) Survey of Hospital-Physician Relationships concluded that one third
of hospitals have joint ventures with members of their medical staff, 90 percent
have physicians involved in capital budgeting, and greater than 40 percent
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103
compensate physicians for executive / administrative functions (Bums, Morrisey.
Alexander. & Johnson. 1998. paragraphs 24-25).
Numerous studies have been made of physician perceptions and the impact
of managed care upon the physician's role and practice o f medicine (Conway. Hu.
& Daughterly. 1998: Emanuel & Dubler. 1995: Hoff. 1999: Kocher. Kumar. &
Subramanian. 1998: McLaughlin. Konrad. & Pathman. 1997: Morrisey,
Alexander. Bums. & Johnson. 1999: Schneller, Greenwald. Richardson, & Ott,
1997: Warren. Weitz. & Kulis. 1999: Williams. Zaslavsky. & Cleary. 1999).
Physician experience ratings with managed care organizations have suggested that
satisfaction with a health plans' organization, operations, use of financial
incentives and coordination of care are plan specific, with increased use of rules
and regulations rated least favorably by physicians (Williams. Zazlavsky. &
Cleary. 1999).
Warren. Weitz. and Kulis' (1999) survey of physicians found that managed
care significantly impacted physician satisfaction, work setting and conditions.
These authors observed that participation in managed care usually leads to
increased patient care loads, negatively affecting physician-patient relationships:
clinical decision making was influenced by third party payor authorizations and;
work setting and related conditions have an added managed care "hassle factor"
associated with decreased overall satisfaction.
Managed care was initially championed as a mechanism by which health
care expenditures could be reduced through the close monitoring of health care
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104
utilization and preventive public healthcare strategies. In fact, managed care was
lauded for slowed inflation in health care costs during the period from 1993-1997.
Utilization monitoring intrinsic to the managed care model requires that service
delivery be newly organized so that both providers and the supply o f patients from
the marketplace can be channeled and controlled. What has transpired is an
evolution away from institutional hierarchy toward interorganizational design
linking multiple organizations' competencies and capacities in order to achieve
required market controls. This emergent network structure now serves as the basis
for controlling supply, demand, and access to the medical services delivered.
MANAGED CARE AND INTEGRATED DELIVERY
Market Evolution and Impact
Managed care evolved as a mechanism to reduce health care expenditures
by the close monitoring o f health care utilization. Designed to deliver seamless
health care while sharing risk for the controlled utilization of resources, managed
care has evolved expansive integrated networks to achieve broad capacity and
presumed service delivery efficiencies. Increases in network size and density
permit the negotiation o f provider contracts at significantly discounted fees.
The evolution of the managed care market has been the most significant
change in U.S. health care delivery since the advent of Medicare in the 1960s and
the implementation of the DRGs in the 1980s. Managed care's approach to market
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105
development involves geographic penetration by the health plan, and the garnering
of market share and dominance. The managed care rationale is to achieve market
share dominance within a geographic area through a high enrollment base of both
providers and consumers of care. Then, by integrating providers and payors into a
managed care network with strict utilization controls, the medical loss2 ratio of
healthcare claims paid per patient care episodes would be reduced, resulting in the
maximization o f profit to the health plan and providers depending upon the
severity of need and demand for services in a given care population.
As a managed care market matures within a given geographic area, there is
a noticeable progression toward increased shifting o f financial risk from health
plans to providers. This evolution has been observed to occur in four generations
or phases of market development (Beinecke. 1999: Krieger. 1996). In phase one of
market development, health plans seek to enroll a critical mass o f plan participants
so that volume discounts may be offered to area employers. Health plan network
development is highly fragmented and loosely coupled with preferred provider
organizations (PPOs) dominating; the assumption o f financial risk by physicians
and hospitals is limited or non-existent. Integrated delivery networks control less
than 20 percent of the patient population at this time (Krieger. 1996. 1096).
: Medical loss ratio refers to the portion of the healthcare premium paid out on medical
care claims compared to premium fees collected. Some insurers have changed this expression to
medical care ratio in an effort to present dollars paid out in the more positive light of “care” as
opposed to “loss."
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106
The market eventually progresses into phase two. where developing HMOs
and IPA networks introduce the primary care physician as "gatekeeper.'0 Through
use of the gatekeeper system and close monitoring of utilization through case
management, cost savings can be achieved. Plan payors demand global fees or the
bundling of services and the compensation of physicians and hospitals based on a
capitation scheme. In addition, clinical protocols and benchmarks are negotiated
and established as guidelines for provider practice behaviors. Phase three
evidences greater managed care penetration with market power shifting to payors
as they selectively conduct physician profiling for utilization patterns and network
participation.
Phase four reveals fully integrated delivery networks (IDNs) with the
market controlled by a few dominant payors and providers assuming full risk under
a capitated scheme: primary care is exclusively capitated (paid monthly stipend per
enrollee) and specialists' fees are generally discounted. Capitation gives strong
economic incentives to reduce care expenditures since providers are fully at risk
for medical care costs. If utilization is below' the capitated amounts paid, unused
monies for care may be retained as income to the provider.
J In exchange networks, ‘gatekeeping’ refers to the ordering of social relations and control
over access to valued relations and advantages; this structural social ordering involves deference to
more knowledgeable colleagues (Corra. 2000). Applied to health plan networks, the primary care
physician is assigned the role of gatekeeper, controlling referrals and access to more specialized
physicians and costly services.
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At this stage of market evolution, health plans, also referred to as managed
care organizations (MCOs) become less concerned with physician utilization
because the plan's insurance risk has been transferred in its entirety to providers.
More recently in the evolutionary process, provider networks have begun to
backlash against MCOs. declining to assume full risk capitation due to the
financial pressures and capital reserves required to function as a risk insurer of
health care. Instead, they are forcing HMOs to reverse the trend of capitation by
refusing capitation and accepting fee for service discounting.
Managed care plans are similar to indemnity insurance in that they collect
premiums and distribute reimbursements to providers. However, they are uniquely
different in that they redistribute or transfer risk for the costs of care delivery by
contractual agreements which organize the managed care network. The MCO
structure integrates the financing aspects of medical care with the deliven' aspects
of health care, blurring the boundaries between provider and payor while raising
issues o f conflict of interest. The interest of a payor of medical services is to limit
care while minimizing expenditures per enrollee. while providers have
traditionally been motivated to optimize care in spite of costs. Herein lies the
conundrum.
The result is an exchange and blending of traditional roles; insurers
assuming a role o f influence in clinical decision-making traditionally reserved for
healthcare practitioners, with providers assuming the role of financial risk taking
normally in the domain of the insurer. This interplay of roles places physicians
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into the conflict o f being both physician and insurer o f health care delivery. The
implications for this new role include claims underwriting for their medical group,
making actuarial forecasts, and developing sophisticated information systems to
track clinical and financial outcomes.
Physicians are the critical actors in a managed care network as they have a
dominant influence over the nation's health care expenditures. Nearly 75% of
U. S. physicians contract with MCOs (Krieger. 1996. 1095). Physicians therefore
are the means by which managed care achieves profit maximization as well as cost
savings. In a managed care network, financial risk is redistributed and transferred
to the physician provider, creating fiscal incentives for physicians to reduce
medical service utilization so as not to exceed prepaid contract amounts negotiated
with the managed care plans. These incentive structures become the basis for
controlling the costs of medical care.
A careful assessment of a capitated payment arrangement requires business
acumen and skills that most physicians simply do not have. This ill-preparedness
has resulted in numerous failed physician practice ventures which are premised on
the provider risk-assumption model and its inherent conflicts. Physicians, by
training, learn to manage care, not to manage costs and risks. For health plans, the
center of gravity is funding, whereas for physicians, it is health care delivery
(Trespacz. 2000. paragraph 12).
In spite of the conflictual roles assumed by provider and insurers, public
and private entrepreneurs have advanced managed care strategies, undertaking the
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development o f IDNs ranging from loosely integrated contractual networks to
tightly integrated vertical and horizontal system linkages having varied ownership
interests. Unlike the multihospital systems formed during the 1970s and 1980s.
current healthcare integration strategies are distinguished from their predecessors
by their emphasis upon accountability for clinical and fiscal resource utilization of
enrolled health plan populations.
Efforts to increase the accountability of MCOs and keep their potential for
market monopolies in check have spawned numerous regulatory controls
impacting the integrated environment. As an example, antitrust law has become
particularly important in rural areas where few hospitals exist. Since integrated
networks naturally attempt to control market population through high enrollment
to offer volume discounts, market activities related to pricing and the practice of
fair trade need review to assure against antitrust violations. Other regulatory
interventions deal with laws against self-referral, physician contract “gag clauses"
regarding financial incentive disclosures, any-willing provider laws requiring
health plans to permit provider participation, and the protection of patient rights
and privacy.
Prior to 1980, the majority of public health services were “under-
regulated;" their focus was on quality of care under clinician control. By the early
1980s care increasingly became regulated, healthcare deliverers focused upon data
based cost control monitored by the funders o f care (Beinecke, 1999, 150). More
recently, researchers have concluded that the current regulatory climate to protect
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the public health and interest may actually impede the efforts o f integrated delivery
networks from achieving improved quality o f care and overall reduced costs (Hoyt
& Beard. 1997. 1754).
Apart from the regulatory constraints already in place, the question remains
as to how far the process of consolidation and integration can advance before these
networks exert substantial influence and monopoly. Some would argue that
monopolies have already occurred in certain markets in spite o f oversight efforts to
control against them.
Integrative Structures
Multilevel network formation is the direct result of public health and
corporate integration strategies embracing organizational consolidation and
network solutions in the delivery and management of healthcare services. The
impetus for this integration has its roots in the financial strains evidenced in the
ongoing struggle on the part of health plans and providers to negotiate fees and
services for care to a defined population while maintaining adequacy in the
provision of care and an acceptable profit margin.
Shortell, Kaluzny, & Associates define an organized delivery system as “a
network of organizations that provides or arranges to provide a coordinated
continuum of services to a defined population and is willing to be held clinically
and fiscally accountable for the outcomes and health status o f the population
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served" (Shortell et al.. 1993.448). The integrative structures are manifested in
IDNs which are interorganizational alignments permitting levels o f integration
vertically, establishing a care continua. and horizontally, expanding the provider
base geographically. Network structure becomes the basis for controlling the
supply of patients and access to services.
Health plans integrate hospitals and physician providers, i.e.. medical
groups. IP As. MSOs. into provider delivery systems by managing utilization
through case management systems, and financing services through contracting
vehicles which triangulate the purchasers, payors and providers of care. Managed
health plans come in a variety of prototypes, each posing varying degrees of risk
assumption for the provider. The influence of managed care has birthed a broad
range of plans including. HMOs. PPOs. POS (point of service) and managed
indemnity. It is rather rare to find the previously traditional unmanaged indemnity
health plans covering Americans today.
Today, most investor-owned and large community hospital networks have
an integrated delivery approach. Facing considerable fiscal challenges, hospitals,
particularly the non-profits, have sought partners in order to maintain
independence and financial solvency. The integration o f service delivery is
achieved through the linking of organizational structures into a functioning
network. These linkages may be either tight or loose, and occur in either
horizontal or vertical patterns. In horizontal integration, a merger, affiliation or
alliance is made between organizations providing comparable services, such as
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hospitals linking to hospitals, or physicians linking to a medical groups or PPO
networks. Horizontal integration allows providers to expand the extent o f their
reach geographically to capture a portion o f market share beyond their current
reach. This integration resonates with large employers who desire health benefits
offering choice and a broad base of geographic accessibility to physicians and
hospitals for their employees.
Horizontal integration also facilitates economies o f scale, the obtaining of
price concessions through volume purchasing of services and supplies, and enables
hospitals to consolidate disease-specific clinical services and programs, such a
cardiac care. By expanding horizontally through mergers and affiliations with
complementary hospitals and facilities, market leverage is increased and
consumers presumably have increased access to comprehensive care.
Similar to the manufacturing and industrial sectors, vertical integration in
health care seeks to integrate phases of the production process. In manufacturing,
this is achieved by consolidating upstream suppliers or downstream distributors to
increase market dominance and strength (Walston, Kimberly. & Bums, 1996).
This vertical integration results in greater control over resources needed for
production and distribution channels.
In health care, the upstream and downstream o f production are
representative o f care levels along a continuum of health care services. Each level
of care is provided by specialized health care facilities and/or professionally
trained providers based upon a patient’s care needs. Vertical integration in health
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care consists of network building through acquisition, development or linking of
facilities, programs and providers to offer a continuum o f care for patients. The
continuum of care enables increased patient entry points to and transfers between,
different levels o f care from acute care ICU and medical/surgical settings, to
subacute skilled nursing settings, post-acute and outpatient treatment facilities, all
within a single network. Offering comprehensive vertical continua enables
providers to channel patients within the network without having to discharge or
transfer the patient to a level of care not offered by the provider. By integrating
these levels through acquisition of these services into a hierarchical flow, the
network integrates various facilities vertically.
Exhibit 4.1 represents the writer’s efforts to enumerate and contrast the
presumed benefits and inherent weaknesses of integration. Derived largely from
business sector successes with integration strategies, the presumed benefits of
integration stand in contrast to the apparent weaknesses since disclosed by
researchers examining integration within the health care sector. For example, a
number o f researchers doubt the presumed efficiency benefits to be gained from
integration, concluding that there is limited empirical evidence to support the
contention that production efficiencies do result from vertical and horizontal
integration strategies (Bazzoli, Dynan, Bums, & Lindrooth, 2000; Dranove,
Durkac, & Shanley, 1996; Walston et al., 1996; see also Bums, Morrisey,
Alexander. & Johnson, 1998 and Brown, 1996).
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PRESUMED BENEFITS & INHERENT
WEAKNESSES O F INTEGRATION
Benefits
Reduced production/service delivery costs
Reduced duplication of services through consolidation
Economies of scale; purchasing economies
Efficiency gains; increased productivity
Increased market share, power and dominance
Improved allocation and utilization of resources
Increased financial performance
Enhanced reputation and marketplace name
recognition
Weaknesses
Increased production/service delivery costs related to
unpredictable demand, information systems
management and compliance monitoring
Increased inefficiencies
Increased financial risk and risk of bankruptcy to
owners/investors
Increased turbulence with high probability of
divestitures; More difficult to unwind
Unrealistic expectations for performance
Questionable benefits, i.e. price reductions, to the
local community
Exhibit 4.1 Presumed Benefits & Inherent Weaknesses
of Integration
Integration may lead to decreases in delivery costs related to purchasing
economies gained; however these are offset by increases in costs related to the
unpredictable demand for healthcare services, and the costs related to compliance
monitoring and the development o f network information systems for the gathering
and sharing of clinical and financial data. Similarly, rapid market consolidation
may initially eliminate duplication of services and increase production efficiency.
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but consolidation may not translate to price reductions at the local level. This
results in unrealistic expectations for integration and sets up the potential for
financial risks and turbulence.
The empirical evidence also questions the efficiency benefits o f owned
vertical integration* (Walston. Kimberly. & Bums. 1996) and phvsician-hospital
integration and risk sharing resulting from capitation (Bazzoli et al.. 2000).
Integrated health plans do appear to generate the expected benefit o f significantly
lower hospital utilization rates; however the results of improved quality outcomes
are unsubstantiated (Miller & Luft. 1994b). The initial gains in efficiency and cost
effectiveness achieved through consolidation are neutralized by integration
complexities. Substantial increases in information management and quality/cost
monitoring are required in networks, creating an especially onerous burden of
oversight and contract compliance monitoring. As a result, there are unusually
high administrative costs associated with network integration. Entire businesses
have recently developed to collect and organize provider and payor contract data
for the sole purpose o f analysis and monitoring o f contract terms and status of
compliance.
Still, vertical models of integration have been emulated as being successful.
Owned vertical models include the well-recognized HMOs of Kaiser Foundation
4 Owned vertical integration signifies the use of ownership as the primary vehicle for a
vertical integrative strategy (Walston, Kimberly & Bums. 1996. 83); vertical integration may also
be achieved through the utilization of other vehicles, such as contracting and/or partner affiliations.
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Health Plan. Inc.. Group Health Cooperative of Puget Sound and Sutter Health
Systems. Kaiser's exemplar, a group model HMO. includes three parts: Kaiser
Health Plan o f subscribers and providers, the Kaiser Permanente Medical Group of
physicians (an exclusive provider organization or group model contracted to the
Health Plan), and the nonprofit Kaiser Foundation which owns the hospital
facilities o f the network. Though ownership provides for a tighter integration
linkage with higher degrees of commitment and cooperation than contract
networks generally do (see discussion o f cooperative strategies in Chapter III),
empirical evidence has cast doubt suggesting greater inefficiency effects with each
o f these models (Walston. Kimberly. & Bums. 1996).
Examples of non-owned contract virtual networks include PacificCare and
HealthNet where provider integration is achieved by contractual linkages without
any ownership of provider assets. These large HMOs do not benefit from the
tighter coupling offered by ownership linkages. Still, network models may be able
to capture the advantages of vertical integration without the liabilities of ownership
if contracts are stable and long-term, and an active ownership interest is present.
Regardless of the lack of unequivocal evidence demonstrating the
presumed benefits and efficiencies achieved by integrated delivery models, health
care providers continue to adopt integrative structures considered in vogue in order
to be perceived as innovative and competitive. An example of this “copy cat”
phenomenon is the example of the now-failed physician practice management
industry. The PPMC (physician practice management company) business model
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was to acquire the assets o f physician practices, employ the physicians, and assume
practice management to achieve better management of MCO contracts resulting in
profitability. Acquisitions happened at such a frenetic pace that proper due
diligence w as often sidestepped and the whirlwind of market activity which
resulted contributed to the overpricing of assets and the ultimate collapse of the
enterprise. Once the darling of Wall Street investors, the PPMC became a pariah
as the healthcare industry became littered with bankruptcies and failed ventures.
The three largest PPMCs. MedPartners. PhvCor and Healthcare Partners have
suffered such fates, scrambling to unwind acquisitions and physician salary
agreements to restructure or salvage operations.
The successes of integration in the industrial sector were assumed to be
transferable to the health care sector. This was a flawed core assumption in the
managed care movement as the production outputs in health care. i.e.. patient
wellness, involve a very different process than those characteristic o f industrial
production. First, there is unpredictable demand in health care cycles o f
production, making needed resources more difficult to forecast, plan for and
manage. Business inventory strategies of JIT (just-in-time) for example, cannot
occur in a hospital that must have all needed supplies for any number o f
unpredictable medical emergencies. Second, the production output itself is not a
clearly ascertainable product in which quality control errors can be readily detected
and measured. The outcome of wellness involves both objective clinical and
subjective patient data, the latter being a measure of satisfaction with the level of
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care received and the level of recovery attained or expected. In manufacturing,
quality' control detects and even expects a percentage o f defective outputs
considered acceptable, whereas there is a zero tolerance policy for medical error in
health care service delivery outputs. Third, the high degree o f professionalization
and specialization in health care leads to asymmetry of information between
providers, consumers and payors, contributing to principal-agency problems.
Finally, the historical separation between clinical care output (physician decision
making) and administrative control (management) is contrary to industrial output
which is directly subordinate to the decisions of management.
Typologies o f Networks
Managed care networks link healthcare providers to each other, as well as
to the pavor or Financing systems of managed care organizations (MCOs).
Services delivered by providers and the supply of patients from the marketplace
are reorganized to be controlled within the confines of an organization. Unlike
traditional hierarchical structures, network structures emerge from the complex
structuring of contractual relationships.
Managed health care has developed its own language, with widespread
adoption of terms and acronyms representative of integrative structures and
processes. The numerous organizational classifications of managed care models
are bewildering. Typically, classifications into a respective type are based upon
the type o f provider organization linkage, such as physician or hospital, the degree
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of risk assumed by the provider, and the nature or strategic intent o f the network
formation, e.g.. the provision of management services or medical services.
In Exhibit 4.2. Typology of Healthcare Integrative Structures, the writer
presents common delivery model classifications referenced frequently within the
health care literature. These are briefly reviewed in the discussion that follows.
Perhaps the most recognizable model of service delivery networks created
by managed care is the health maintenance organization (HMO). Representative
of both vertical and horizontal linkages. HMOs are generally categorized as one of
the following:
1. Staff model - the health plan owns the hospital(s) and directly
employs physicians; no assumption o f provider risk as physician's
are paid by salary; tight integration and management o f care; (e.g.
The Group Health Cooperative of Puget Sound);
2. Group model - the health plan contracts with one or more integrated
multispecialty medical groups on an exclusive basis; less integrated
than staff model; physicians generally work on a full-time basis;
also known as prepaid group practice (PGP) HMO (e.g., Kaiser
Foundation Health Plan's exclusive arrangement with the Kaiser
Permanente Medical Group);
3- Network model - similar to group model except health plan contract
is made directly with physicians through their groups, MSO or IPA
networks and are not exclusive to the HMO; providers are able to
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TYPOLOGY OF HEALTHCARE INTEGRATIVE STRUCTURES
DELIVERY MODEL CLASSIFICATION
HMO (Health Maintenance Organization)
Subclassifications: Staff Model
Group Model
Network Model
IPA model (Independent Practice Association)
Mixed Model
PHO (Physician Hospital Organization)
PSN/O (Provider-Sponsored Network i Organization)
MSO (Management Services Organization)
PPO (Preferred Provider Organization)
PMG (Physician Medical Group)
PPMC (Physician Practice Management Company)
STRATEGIC ALLIANCES:
Subclassifications: Shared service arrangements
Joint programs/ventures
Outsourcing and management contracts
Umbrella shared governance
Public-private partnership/public health agency
networks
Exhibit 4.2 Typology of Healthcare Integrative Structures
contract with multiple HMO plans and MCOs (e.g. PacifiCare
Health Systems and HealthNet);
4. IPA model - similar to network model; IPA serves as the
contracting representative for physicians typically in smaller
independent group and self-employed, solo practices; loose
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linkages exist with single specialty or multispecialty representation
depending upon local market need: physicians may contract
exclusively and become ‘married' (e.g.. Hill Physicians Medical
Group. San Ramon. CA) or be ‘unmarried' and able to contract
simultaneously with multiple parties as well as other IP As
(Shenkin. 1995. paragraph 8). Physicians may be paid on a
discounted FFS (fee-for-service) basis or a set dollar amount on a
per capita basis (capitation) to provide agreed upon services
(specific as in primary care only, or global capitation inclusive of
comprehensive care and pharmaceutical drugs) (Dudley & Luft.
2001. paragraph 11).
5. Mixed model - mixed health plan contracting with physician medical
groups and solo practitioners, with or without exclusivity in the
same area (e.g. Prudential Health Care Plans. Inc.; Boston-based
Harvard Pilgrim Care).
A Physician Hospital Organization (PHO) is a separate legal entity jointly
formed and owned by a hospital and physicians who are members of the hospital's
medical staff. The key purpose is strategic: externally strategic to create a united
front for competitive contract bidding and marketplace positioning; internally
strategic to enhance medical staff loyalty and participation. Some hospitals elect to
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acquire physician practices outright in forming the PHO. while others provide
management and support services to physician enterprises often through a MSO.
PHOs are a significant contributing factor to the development of managed
care netw orks and multilevel network formation. PHOs are joint ventures in
which physicians and hospitals coventure together for specific projects or
purposes, e.g. establishing a specialty program, surgical center, laboratory, or home
health agency, linking for managed care plan access and increased geographic
coverage: financial risks are shared allowing for increased physician-hospital
linkages. These PHO ventures recognized by the 1995 American Hospital
Association Guide are categorized into eight distinct PHCAs (physician-hospital
contractual arrangements): closed and open PHO. MSO. foundation model, equity
model, group practices without walls. IPA. integrated salary models (Kocher,
Kumar & Subramanian. 1998. 39).
An outgrowth o f the PHO is the provider sponsored organization or
provider service network (PSN/O). Established by law enacted in 1997 by
Congress. PSN/Os permit direct contracting by providers with the government for
the provisions o f services to government-insured Medicare patients (Tindall,
Williams, Helmer. & Ripoll, 2000, 17); strategic intent is to facilitate provider-
operated health plans. As a further evolved PHO, PSN/Os add the responsibility of
insuring medical care. Like the HMO, the PSO is able to contract directly with
employers as well as with Medicare. Interest in forming PSN/Os has generally
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been cool due largely to the perceived regulatory hurdles which must be overcome
in the insuring of medical care.
Similar to PHOs. MSOs and PPOs are contracting frameworks constituting
legal and administrative structures for managed care. The MSO provides for joint
physician-hospital contracting with managed care organizations, and practice
management services. Such services include managing the contracting and claims
payments with health plans for hospitals and their physician partners.
The PPO is yet another contracting vehicle representative o f horizontal
integration: it obtains contracts with physicians through medical groups or PMGs.
which are then contracted to health plans. PPOs build networks o f individual
physicians and are hybrid models emphasizing contracts with physicians that
discount medical fees between 10 and 30 percent or more: service utilization
controls are in place (Tindall et al.. 2000, 5).
Strategic alliances trigger network formation to accomplish specific
purposes by the aligning parties. Managed care plans as well as public health
agencies participate together in a wide spectrum of alliances and partnerships
depending on their strategic objectives, functional accomplishments and structural
characteristics desired for the shared environment (Halverson. Mays. Kaluzny. &
Richards. 1997). There has been a “very strong effort to move patients with public
sector insurance [i.e.. Medicare, Medicaid] into managed care programs” (Tindall
et al. 2000, 7).
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Health care organizations also increasingly develop strategic alliances such
as joint programs, shared services, umbrella organizations, health agency networks
and mergers to accomplish organizational purposes (Leatt & Barnsley. 1994).
Private entities engage in ventures and strategic alliance formations, mergers and
contracted relationships to compete in the new medical marketplace (Brown.
1996). As many hospitals have experienced reduced utilization and overcapacity,
they have sought consolidation into national alliances and regional networks in
order to enhance their bargaining position with insurers and improve operational
efficiencies (Levitt. 2000). Similarly. PMGs (physician medical groups) have been
organized as contractors with PHOs. MSOs. employers and HMOs. and have been
the target of acquisitions by physician management practice companies or PPMCs
as discussed earlier. Together, these forces have resulted in a restructuring of local
service deliver}' as provider competition has been reduced or eliminated.
By creating alliances within managed care, organizations are able to offer a
more comprehensive range of services delivered through networks promising the
benefits of greater consumer access. Strategic alliances assume the dynamics of a
loosely coupled network along an imagined continuum (refer to Exhibit 3.3.
Chapter III). Like their HMO counterparts, strategic alliances are a form of
managed care which can assume varying levels o f risk.
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Integrative Processes
The previous section dealt with the integrative structures which serve to
integrate healthcare providers with payors and insurers through various vehicles of
ownership and contract. These integrative structures create the legal framework
and administrative boundaries for the networking of interorganizational operations
and actions, and provide the necessary infrastructure to support managed care
contracting. Bums et al. assert that integrated delivery is the provider response to
the restructuring demands of managed care, namely, greater efficiency and
accountability in service delivery (Bums et al.. 1998. 70). Structures of
integration. HMOs. PHOs. IP As. MSOs. etc.. should be considered distinct from
the processes of integration which include the operations and performance
mechanisms of the network enterprise.
The primary integrative processes within networks involve processes for
governance and management, the sharing o f information, and the orchestration of
methods and procedures to achieve the network's strategic goals, objectives and
established performance criteria. Processes which integrate physicians into
hospital and payor schemes are concerned with administrative and economic
integration, and often emerge in synchrony with the managed care penetration
occurring within a given market. Clinical processes relate to care coordination
across service lines, quality improvement and monitoring.
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The impact o f integrative processes cannot be underestimated as they
evolve the managerial infrastructure establishing network interconnectedness,
utilization of resources, and performance capacities. Specific integrative processes
may include physician liaison programs and participation in capital budgeting,
physician compensation schemes, clinical and financial information integration,
hospital provision of management services and clinical benchmarking programs.
Of these, the most prevalent area of process integration within healthcare networks
is the sharing of cost information financial data engaged in by 41-89 percent of
hospitals, along with the active participation of physicians in the capital budget
process (Bums et al.. 1998. paragraph 13).
Integrated delivery networks tend to resemble global matrix firms which
span multiple geographic marketplaces and offer multiple products, shifting the
focus from structural design to process management (Bum et al.. 1998. paragraph
7). The integrative processes which emerge provide the link between structure and
performance outcomes, as well as the means by which collaborative purposes can
be attained. The discussion which follows provides an overview of the primary
integrative processes o f governance and management which have naturally
developed within health care delivery networks as organizations have coupled to
operate as a network. As previously noted, a nexus between governance and
management exists to establish the '‘working” network infrastructure in a managed
care environment.
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Governance
Prior to World War I, traditional governance in health care delivery
centered around governing boards o f voluntary community hospitals where board
members were influential, wealthy and able to meet their civic obligations to serve
members of the community in need o f health care services. Board members were
engaged in acts o f trusteeship and stewardship to preserve the hospital assets
donated. Considerable authority over the hospital's daily operations, including
staffing, was concentrated solely in the governing board.
Historically, the decisions concerning medical service delivery within a
hospital have been exclusively delegated to physicians, who as medical staff
members are held accountable for the care provided to patients. This medical
model of decision-making was traditionally separated from matters involving
finance and administration. Physician responsiveness to patients was a natural part
of the medical process, along with patient trust bestowed by the principal-agent
dyad which existed between the physician and patient.
In the latter part o f the 20th century, the growth and service complexity of
hospitals increased so as to require expertise beyond a typical board's
administrative capacities, particularly in the area of financial management. As a
result, the governing board gradually came to assume an oversight role,
relinquishing the management o f daily operations to an assigned manager or
administrator. The manager's focus was to drive patient revenues and maintain the
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financial viability of the organization. Fiscal authority was delegated to hired
administrative personnel who reported enterprise performance to the board, and as
a result, service revenues from patient care gradually supplanted philanthropy as
the primary source o f funding. In addition, physician autonomy became somewhat
subordinated to administrators as they increasingly had to solicit and answer to
administration concerning patient care issues.
A further shift in matters of governance came in the late 20th century with
the entry of managed care. The IDN emergence that began in the late 1970s and
early 1980s. revised the long-standing history of hospital governance in health
care. The medical staff was to provide professional peer review and oversight
regarding clinical matters, while the administrative organization was responsible
for the efficient operation and management of the institution. The distinctive
healthcare governance dichotomy between administrators and physicians,
managerial and clinical decision-making was solidified.
Under managed care, governing boards continued to defer to the medical
authority of physicians, holding them accountable for patient care outcomes. But
at the same time, boards gradually restricted the clinical decision-making authority
of physicians through the adoption of prescribed practice guidelines agreed upon in
managed care contract mechanisms. The medical and healthcare management
literature is replete with evidence concerning physician workforce issues,
physicians* responses to, and perceived or actual effects of managed care, i.e.,
deprofessionalization, reduced autonomy, dissatisfaction, role conflict, and altered
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129
physician-patient relationships (Dudley & Loft. 2001; Emanuel & Dubler. 1995;
Warren. Weitz. & Kulis. 1999; Williams, Konrad & Scheckler et al.. 2001;
Wolinsky. 1993; see also McLaughlin. Konrad & Pathman. 1997).
In 21st century health care delivery, the loci of control and authority in
healthcare rests with the medical staff (physicians), administration / management,
and the governing board of the healthcare facility or IDN. Because physicians are
technically subordinate to the governing board, the challenge of the governance
process is to manage the independence of physicians who possess the expert
medical knowledge lacking by administration and members o f the governing
board, while recognizing the existence of separate lines of authority held by
medical professionals and administrative management.
With network integration, the governing power evolves into a shared
collaborative process where board members and trustees, physicians and
CEO/administrators work toward network outcomes. Weil’s (2001) analysis of
survey data compiled by ACHE (American College o f Healthcare Executives)
found that CEOs prefer to adopt the role of intermediary between medical staff and
the board; an overall consensus as to the key roles of governance was lacking
(Weil. 2001.87).
Though it prevails as the “economic engine” for IDNs. '‘ the acute care
hospital is not the epicenter of healthcare.. .98% o f healthcare encounters occur
outside the traditional hospital” (Ehrat. Hollerman, & Sutton, 1996, 5). The
integrative complexity of IDNs alters governance; it has become representative of
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multiinstitutional investor ownership as well as regionally and nationally-based
networks of facilities' operations. "Health care organizations have grown
increasingly complex, and the traditional forms and practices o f governance— even
at best— may no longer be adequate to manage issues that must be dealt with
today" (Savage et al.. 1997. 18).
With integration, the hospital no longer hosts the medical staff, but instead
partners with physicians, sharing the needs and responsibilities of network
delivery. Governing bodies have become less localized with regionalized and
nationalized boards in multilevel corporate structures. Consequently hospital
governance structures also have become corporatized, i.e.. increasingly
accountable for the assurance of quality care and bottom-line financial viability
with diverse and expanding populations. The focus and accountability of
governance extends beyond the confines of a hospital, or even the organizations
within a network, to the constituency of community populations served by a given
network.
The governing body of a healthcare network is held legally accountable for
assuring the appropriateness and quality of the patient care delivered to a given
population. Legal mandates have been passed holding governing boards
accountable for the fiscal soundness and medical quality of the services rendered at
a healthcare facility. This emphasis on accountability has elevated the significance
of governance in countering the effects of dispersed power and authority within
expansive networks. In addition, mandates furthered the need for and
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131
establishment o f a role o f the CMO (Chief Medical Officer). Medical Director or
physician executive responsible for the oversight of the medical aspects o f care
delivery and medical services utilization across populations served by a network.
Because the institutional environment for governance has changed as a
result of the prevalence o f network settings, "the age of the network physician”
requires the shared and collaborative participation of physicians in network
strategy, decision-making, financial management and oversight. Though a degree
of separation between the administrative and clinical decision processes persists,
the long-standing dichotomy between clinical and management perspectives has
been tempered by managed care dicta which force the merging of financial and
clinical practice issues, and the collaboration o f the managerial and medical
leadership.
Networks have made it acceptable and even necessary for physicians to be
involved in governance, e.g., influencing strategy, policy and capital expenditures,
as network member hospitals, physician medical groups and payors, together
become the agents responsible for the coordination and delivery of care to patients.
The "physician executive” role definition has emerged to describe physicians’
integrative roles in governance and management of healthcare networks. This
executive role is distinguished from the more traditional hospital-bound titles of
chief of staff or department chief of medicine, in that it is a formal manager
position within the context o f delivery systems (Schneller et al., 1997,92-93). The
physician executive represents a role adaptation o f the medical leadership within
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healthcare facilities that has been precipitated by managed care structures and
processes.
The responsibility of network governance processes is to demonstrate
responsiveness to constituents, establish oversight, and elicit accountability inter-
and transorganizationally. But what factors contribute to achieving these
directives toward effective governance within networks? Stumpf (2001) found
that governance type or structure influenced the processes of culture, productivity
and patient outcomes; findings were that traditional hierarchical, bureaucratic
governance processes cultivated passive-defensive cultures, whereas positive
influences were found in shared governance structures involving participatory
management (Stumpf, 2001. paragraphs 33-34). These results were based on the
examination of governance within hospital settings; whether these findings would
translate to governance within network settings is unclear.
Results from investigative surveys of nearly 1500 community hospitals
demonstrated that integrative processes to assimilate physicians associated with
managed care are prevalent, and that these integrative processes concerning
physician-hospital governance and management may be more important than the
integrative structures or IDN network vehicles themselves which lack management
infrastructure (Bums et al.. 1998, 70-71).
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1 ^
1
Management
The working hypotheses for managerial action in health care service
delivery have substantially changed during past decades. Managers during the
1950s through 1990s were primarily skilled in the administration of an acute-care
hospital environment. This environment was characterized by easy access to
resources, physician clinical autonomy, fee-for-service reimbursement and low
product price sensitivity.
By the late 20th century, healthcare administrators were acquiring skill sets
to deal with networks and integrated multilevel systems. The environment then
until now', has been highly competitive requiring business acumen comparable to
financial executives within the corporate sector. Resource shrinkage, reduced
physician autonomy in clinical decision-making, and the introduction of capitated
or prepaid managed care service delivery reflect the changes in the healthcare
environment which transcend former managerial competencies.
Postmodern healthcare management necessitates skilled change agents able
to navigate in an environment of mergers, divestitures, and other forms of
reorganization. In addition to requiring skills to manage network dynamics, health
care managers, including physician-managers, must be adept at understanding both
clinical and non-clinical matters as they relate to the sustenance and growth of the
healthcare network. Network leaders are the bridge between the clinical and
business functions within a network, serving as interorganizational linking-pins;
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134
they are key to the communications functions considered essential to effective and
strong network relations and cooperation yielding greater network stability.
Postmodern administrative management in general, and healthcare
administration in particular, must deal with the forces shaping networks.
Kaluzny's (2000) "Commentary: Organizational directions for the millennium:
What needs to be done!" identifies forces redirecting the managerial and physician
reconfiguration of existing healthcare organizations:
1. Isomorphism: healthcare organizations taking on the characteristics of
industrial sector organizations:
2. Outcomes: cost efficiency and evidence-based management focus:
3. Information technology: access to and integration of clinical and
administrative data;
4. Deprofessionalization: erosion o f professional autonomy due to the
commercialization of health care via managed care;
5. Random changes: differences in adaptation o f existing organizational forms
(Kaluzny. 2000. 30).
The nature o f networks is one o f adaptation. In response to the forces
enumerated by Kaluzny. IDNs have "learned" and adapted by evolving clinical and
fiscal accountability for the defined populations they serve. According to
Barnsley. Lemieux-Charles, & McKinney (1998) the integrative process derives
from predisposing factors (e.g., culture and perceptions) and enabling factors (e.g..
skills and resources) and the reinforcement of activities which encourage and
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135
reward learning (19-20). The “context” for learning requires a level o f stability
that seems to be lacking in many IDNs (Barnsley et al., 1998, paragraph 15).
Instability and random changes in conjunction with mergers and acquisitions
require smoothing in order for stability and learning to occur. Knowledge must be
shared, disseminated broadly, assimilated and integrated into network decision
making processes.
Networks present unique management challenges not encountered by
wholly-separate or single organizations. These challenges as proposed by the
writer are listed in Exhibit 4.3. Management must design, establish, integrate and
maintain effective governing mechanisms for achieving business, clinical,
community and public accountability. Governance must be appropriate,
responsive to and responsible for individual organizational component, as well as
collective network performances. This is especially challenging as component
members o f the network may have been acquired having different and conflicting
methods o f oversight and accountability.
CHALLENGES OF NETWORK MANAGEMENT
♦ Integrate shared multiorganizational governing mechanisms
♦ Mediate effects of multiculturalism
♦ Recognize part-to-whole relations and purposes
♦ Manage complexity of multilevel organizational structures and processes
♦ Navigate within and manage a diverse political economy
Exhibit 4.3 Challenges of Network Management
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Multiculturalism and any negative consequences o f cultural fragmentation
must be mediated in support of the overall mission of the network. Though
organization components each offer the network a distinct contribution in terms of
capacity, competency and culture, the recognition of the part-to-whole relationship
of organization component roles in achieving network ends is a first-step necessity
for network managers. It is a significant managerial adjustment to realize that
individual organization goals and preferences may be sacrificed in order to attain
network purposes. At times network component preferences are subordinated to
the greater good or mutually agreed upon network strategy to achieve network
outcomes. Building a network culture to create and sustain a particular focus is no
small task, and requires an alignment of purpose among cooperative network
components.
A paradox in managing health care networks uncovered by Schneller
(1997a) is that network management involves the managing of individual
organizational components in such a way as to make the entire network more
effective. This is a fundamental role shift for administrators who are used to
maximizing the operating performance of the individual facilities under their
jurisdiction. Managers should look beyond their individual organizations, crossing
boundaries to forge alliances and allocate resources for the benefit o f the network
whole, even if this results in an individual organizational performance that is not
maximized or benefited. Effective performance and accountability involves
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achieving a level o f partnership and cooperation among a wide group of persons
and organizations.
Managing complexity related to the integration of multilevel structures and
processes, as well as the methods of communicating knowledge and experience
transorganizationally to enable network learning and positive performance pose
opportunities and obstacles scarcely addressed from a network perspective. In the
current management literature, management is oriented toward market-focused,
results-oriented performance results. As an example, the Government
Performance and Results Act of 1993 (GPRA) requires that federal agencies plan
and report a management approach that involves mission definition, results-
oriented goals, performance measurement systems, program evaluation and
management accountability (Caudle, 2001. 76). However, achieving results in a
health care network that are dependent upon the coordinated efforts of multiple
community, public and private organizations, agencies and relationships, is a
ponderous endeavor.
Finally, the administrative challenge in networks is to manage a diverse and
geographically dispersed political economy. Management must be adept in
navigating the political environment, being responsive to a diverse group of
stakeholders both internally among organizations and externally to the network.
Baker et al. (1999) emphasize the need to reconcile divergent stakeholder interests
with organizational goals and priorities. To do this, IDN managers require
knowledge of managed care and network typologies. Executives ought to have
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138
currency and recent experience in healthcare practice and management to deal with
the considerable institutional and environmental changes which have occurred in
recent decades. Glouberman and Mintzberg (2001a) reinforce the need for a new
mindset in managing the four worlds of health care delivery in the acute care
institution, namely: the worlds o f community (trustees), control (managers), cure
(doctors) and care (nurses).
However one views healthcare delivery, an integrative framework is
critical. Management roles include that of a spanner, a buffer and a leader, inter-
and transorganizationally within the network. Success once entailed effective
management of internal hospital departments and external relations in the local
hospital community. Today, successful management entails effective management
transorganizationally. across levels o f networked components that intertwine
payors, providers, purchasers and consumers o f health care services.
In conclusion, networks in health care service delivery present unique
challenges for both governance and management capacities. Stimulated by the
competitive marketplace of managed care, network structural composition and
processes are often tentative and ambiguous, in part, resulting from the rapid
coupling and decoupling of provider units or healthcare facilities comprising a
network. Network relations may be tenuous, uncertain, and at times confused by
the diluted formal authority and unclear communication channels. Where once
certainty existed, now increased risks and uncertainties in medical practice and
administration dominate.
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No doubt millennium managers will need to be skilled in aligning multiple
organizational domains at multiple levels. Health care delivery is a complex web
of networks that aligns organizations to share responsibility and accountability.
The shared aspects involve a nexus between management and governance
structures and processes. Mindsets and skills must be newly realized and adopted,
tailored to address the dynamism o f networks in the health care sector.
This chapter has provided the necessary historical background and
education concerning the roots, evolution and metamorphoses of the health care
sector, its institutions, and the manner in which health care services are delivered.
It has explored health care change phenomenon through a lens focusing upon
networks as the dominant configuration which has emerged in the sector. The
integrated nature of networks, both the typology of its structures and key
integrative processes have been reviewed.
In the next chapter, health care delivery networks are investigated
empirically through the observations and experiences of network leaders who serve
as informants to the investigation. Each of the preceding chapters has prepared the
way to formulate an analytical framework suitable for research implementation, so
that the nature and dimensionality o f networks can be explored in greater depth
and with anticipation.
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CHAPTER V
INVESTIGATING NETWORKS IN
HEALTH CARE SERVICE DELIVERY
Investigating networks in health care service delivery is a prodigious
challenge given the various typologies of delivery networks, their variability and
geographic expansiveness, as well as the chaos evidenced in methods of service
delivery and financing. This chapter seeks to outline a model for research which
advances the study and exploration of network characteristics and complexities,
and it further raises the level of administrative study and science into the realm of
network action and analyses.
A qualitative design and inductive method utilizing extensive semi
structured interview data to conduct contextual network analysis in a natural
setting is employed. To bound the study and provide rigor and auditability. an
analytical framework or decomposition model is adopted in the study of network
phenomena. The research intent is to coalesce theory, generate principles and
refine propositions toward a theory of networks and network effectiveness. This
chapter details the investigative approach in a two part discussion: (1)
constructing an analytical framework or model for multilevel network study and
analysis and; (2) presentation of the exploratory research methodology employed.
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The research focus is to investigate networks that deliver healthcare
services through multiorganizational linkages and exchange. The level o f analysis
for this research is the network, a macro-organizational level involving
interorganizational relations and capacities. The logic o f networks focuses on
multiple actors (organizations), their interrelatedness, contexts, and other
dimensions of variability. Though the research framework presented here is
applied to the study o f healthcare service delivery networks, the model has utility
for application to other network contexts as well.
ANALYTICAL FRAMEWORK
The proliferation o f network models for contracting and collaboration
between public sector agencies and non-governmental organizations underscores
the relevance o f network research. Service delivery networks raise significant
issues related to democratic principles, governance and accountability and the
administrative capacity o f networks which are established through devolution,
contract or partnership. Based upon interdependencies occurring in pursuit o f joint
interests and activities, the emergent network model is both intersectoral and
intergovernmental, and generally is found in the human services sector (Agranoff
& McGuire. 2001a, 671. 676).
The exploration o f network dimensionality has direct application to
different policy areas, as well as the ongoing debate of public sector devolution in
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which the oversight, management responsibility, and/or service provision functions
are delegated or transferred. This public sector “delegation” is particularly evident
in the delivery o f health care services which are largely public-funded, but are
delivered through networks of non-governmental organizations.
Traditional notions of organization theory must be reevaluated in light of
the new dimensions that multiinstitutional arrangements bring. Questions which
must now be addressed require the undertaking o f thoughtful studies in network
delivery mechanisms and capacity. Some of these questions include: What is the
nature o f networks and network organizational interactions? What dimensions of
networks can be identified as constants or influencing variables? What are the
benefits and pitfalls of network models of service delivery? Does network
structure influence governance and management, or vice versa? What are the
effects o f network structures upon network processes and performance outcomes?
What is a model for network effectiveness? How do we enable democratic
governance and accountability through negotiated networks? Can accountability
be assured in order to overcome the moral hazards of agency and contracting?
How do we determine the boundaries of network interactions? What are the policy
implications for network formation and development? How should networks be
studied?
Notwithstanding the significance of each o f the preceding questions, it is
deemed most prudent to approach the study of networks by first exploring the
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nature and complexities of network configurations, uncovering aspects o f network
dimensionality, exchange and variability in structure and processes for subsequent
research analysis. In this way, a type of “foundational knowledge" may be
gathered in order to provide a structure upon which future research can build.
Considerable effort has been made in the previous chapters to examine
existing and emerging theoretical perspectives and empirical approaches
concerning networks. These perspectives have been applied here to develop a
multilevel analytical framework suitable for network study and analysis. The
analytical framework developed employs a decomposition model of networks that
facilitates a methodology for data acquisition and permits analyses of network
complexity and dimensionality. The framework permits examination o f networks
in terms of their horizontal and vertical configuration and interactive processes
resulting from linkages or integrative structures. The network context, which
consists o f multiple organizations varying in size and complexity, can be viewed as
a distinct structural arrangement for coproduction purposes.
Contextualism as a mode of qualitative analysis is a form of inquiry dealing
with emergent processes and “draws on phenomena at vertical and horizontal
levels o f analysis and the interconnections between those levels ..." (Pettigrew,
1985. 238). “Most relationships in governmental and social systems involve
activities and interactions that span multiple levels of organization or system
structures" (Heinrich & Lynn, 2001,110). Integrative structures and processes,
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144
i.e.. horizontal and vertical linkages, interactions with other organizational entities
and the manifestation o f management, governance and accountability mechanisms
are dimensions within networks that should be explored.
Certain assumptions and theoretically-grounded propositions concerning
the network paradigm have been proposed and woven into the discussion o f the
preceding chapters. The general assumptions (see Exhibit 5.1) and propositions
(see Appendix A) introduced in chapters II and III, provide focus in
conceptualizing the research framework, and were delineated by the researcher
following extensive review of the research literature in the fields o f health care and
public administration.
Specific conceptualizations from scholarly efforts addressing networks or
considering multiorganizationai issues and capacities were also examined and
incorporated into the analytical framework: Multinetwork management concepts
of network depth (extent o f network partners) and the strategic context o f
networking as discussed by Agranoff and McGuire (1998,68, 73-80); network
characteristics o f integration structure, including density', resource munificence and
system stability as modeled by Milward and Provan (1998,209-216); conditions
influencing performance effectiveness in public agencies, including relations with
oversight and stakeholders, mission motivation and leadership, culture and public
service motivation, as studied by Rainey and Steinbauer (1999, 9-26); logic of
governance— reduced form model components, namely environmental factors,
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145
ASSUMPTIONS CONCERNING NETWORK COMPLEXITY
Network Complexity Increases:
Ambiguity
Coalition building
Buffering effects
Leadership skill sets
(negotiation & bargaining)
Monitoring & oversight
requirements
Interorganizational
collaboration
Administrative inefficiencies Political economy
Potential for conflict Operational costs
Muddiness of mission Ethical challenges
Resource dependencies Cultural fragmentation
Confusion as to membership
(organization v. network)
Decentralization of
governance
Confusion as to allegiance
(organization v. network)
Communication lapses
and inefficiencies
Exhibit 5.1 Assumptions Concerning Network Complexity
structures and managerial roles and actions, detailed by Lynn, Heinrich and Hill
(2000. 245); elements o f effective governance, including resources and stability
put forth by Milward and Provan (2000, 368); and the applied typology of
organizational culture, i.e., artifacts, espoused values and assumptions, presented
bySchein (Schein, 1992, 1-48).
Guided by the aforementioned empirical research and proposed network
paradigm assumptions and propositions, an analytical framework was developed
for multilevel network study and analysis. The framework, displayed in Exhibit
5.2, delineates dimensions o f network variability identified for research probing.
The broad dimensionality of networks made it necessary to employ a reductionist
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146
or decomposition model in approaching network study. The framework does not
pretend to posit all o f the dimensions which may exist in network relations;
however it does conceptualize those dimensions believed essential or influential in
the understanding o f network development, models and methods o f operation, and
the achievement of goals and desired performance effectiveness. The derived
framework provides a guide for qualitative network data collection and subsequent
network analysis; it does not preclude nor exclude the discovery o f other
identifiable dimensions or meaningful concepts of network phenomena which may-
become evident during the inductive research process. The conceptual definitions
and elements for each o f the dimensions delineated by the framework follow.
Structural Configuration and Complexity. Networks and their aggregate
organizational membership may be analyzed by their structural configuration and
integration complexity. Structural configuration is determined by organizational
composition (distinctive components) which has a distinctive capacity to exchange
or bring added value to the network. Integration complexity includes the
alignment o f organizational structures and capacities along singular or multiple
strata or levels (vertical, horizontal, or mixed), depth or number o f organizations or
partners, density or intensity of connectedness, and the strength o f coupling, such
as whether there is an ownership versus a contractual linkage.
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ANALYTICAL FRAMEWORK FOR MULTILEVEL NETWORK ANALYSIS:
DIMENSIONS OF NETWORK VARIABILITY
Structural Configuration & Complexity
> Distinctive Components
• Typology oT Integrative Structure
■ Influence
0 Dominance (exercised influence)
0 Power (capacity to exert influence)
> Integration Complexity
■ Stratadevcls o f Structural Integration
0 Vertical
0 llmi/onlal
0 H ybrid or Mixed
• Depth (extent of network partners)
■ Density (intensity o f connectedness)
• Strength of Coupling
0 l ight
0 I oosc
Congruence
> Mission
V Mission Motivation
Context
> Strategy (Proactive)
> Environment (Kcactivc)
V function
V Structure
Stability & Cohesion
> Climate (Degree of Stability)
V Culture (Degree of Cohesion)
• Artifacts
• Espoused Values
■ Assumptions
Management Capacity
V Structure
■ form / Levels
• l eadership Style & Proficiency
* • Processes
• Governance Interface
• Decision-Making
■ Communication
Governance Capacity
* ■ Structure
• Modes of Governance
■ l evels of Governance
• (emrali/ation/Deecntralizalion
V Processes
• Management Oversight
■ Accountability & Compliance Monitoring
■ Communication
V Conditions
• Resource Munificence
• Climulc (Degree of Stability)
Performance
V Indicators
• fiscal
• Administrative
■ Service Delivery
V ( hitcomcs
V - Reporting Requirements
Exhibit 5.2 Analytical Framework for Multilevel Network Analysis: Dimensions of Network Variability
148
Examining the strength of interorganizational linkages and the frequency
and type o f boundary exchanges between organizational components, identifies the
concentrations of network influence, specifically power domains and why they
may occur. Often a particular component holds dominance in effecting network
action. For example, within healthcare delivery networks, hospitals generally
emerge as the dominant network component as they often serve as the epicenter of
a network's administration. The number of linkages or depth o f partnering,
frequency of contact among linkages, and at what levels within the network they
occur, provides valuable information concerning the density or degree of network
connectedness. Additionally, “how" the connectedness occurs, via ownership or
contract, provides indications of the tightness or looseness of the
interorganizational coupling.
Congruence. It is common for organizations to proclaim a mission for
their enterprise. The mission serves to unify the collective toward a common
purpose. It provides organizational participants with a sense of cause and
legitimacy in performing their daily job requirements in the production of network
outcomes. In the health care sector, the mission is generally espoused as enabling
access to services and delivering the highest quality o f care, while being cost-
effective in meeting the medical and health care needs o f a community.
Congruence between the stated missions of organizations linked into a
network and the network mission itself would most likely contribute to overall
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149
network effectiveness. Similarly, any organizational or network actions motivating
the achievement o f the network's mission would also promote a climate fostering
desired network performance. The incentive mechanisms or systems which
reinforce and motivate efforts toward mission accomplishment affect performance
effectiveness, as do the actions demonstrated by leadership in support of the
network mission.
Ideally, networks would possess congruence or agreement among members
concerning the overall sense of mission and the motivation to accomplish the
mission. How well the mission is conveyed by network leadership, received by the
network membership, and assimilated into a motivating framework for each
organization within the network can be examined. The methods and effectiveness
of leadership in instilling a sense of mission and communicating it through goal
setting processes, incentive mechanisms, communication processes and leadership
actions is explored. Each of these provides clues as to whether the mission is
adopted by the organizational mainstream of the network, and whether there is
congruence between the stated mission and the actions in support of achieving it.
Context. The contexts of networks include the context o f formation, as
well as the context in which it operates. Four contexts are examined: strategy,
environment, structure and function. The strategic context or the "why. represents
the intent of network formation, such as a proactive maneuver to position the
network competitively within the marketplace. The environmental context
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150
includes economic and political pressures external to the network which create
strong influences forcing networks to react. An example of reactive network
formation would be the acquisition, consolidation and alignment of resources and
organizational capacities in order to avoid bankruptcy or imminent failure in a
difficult market. The structural context of interorganizational linkages manifests
as a highly-charged sociopolitical context in which issues of disparate missions,
methods of control, governance and accountability, are confronted. Oscillating
degrees of stability and chaos result from organizational mergers, as an example,
and may cause considerable management challenges fueling the dynamic context
of networks. Finally, context involves function or specific areas of cooproduction
and interdependence that are to be performed by the network. For health
organizations, shared functions often revolve around areas of information
technology acquisition and maintenance, and clinical resource utilization
management, as these areas carry significant implementation and monitoring
expenses best addressed by cost sharing among multiple entities.
Stability and Cohesion. The concepts of stability and cohesion here refer
to the climate and culture of the network, respectively. The two are rather
symbiotic as one may be considered to be a product o f the other and vice versa.
Climate reflects the adopted culture which is either cohesive or fragmented in
nature. If the culture is consistent and unchanging, it may be said to result in a
stable climate. Likewise, a continual state of upheaval and unrest contributes
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151
toward a climate of instability and chaos. Culture may be represented as the
patterning or integration of organizational traditions, espoused values, shared
language and meanings (Schein. 1992. 9-11).
The constructs o f organizational culture formulated by Schein (1992).
namely, artifacts, espoused values, and assumptions, are applied here to the study
o f networks. Visible artifacts of network culture are those areas immediately
visible to the observer, such as physical architecture, language, and observed
customs. Espoused values are expressed in the adopted ideology or philosophy
modeled by the leadership. When the ideology or beliefs are validated or proven
successful and reliable in achieving beneficial solutions for the network, a process
of "cognitive transformation" is said to have occurred. The now validated
espoused values become the underlying basic assumptions which are the "taken-
for-granted” shared assumptions that guide behavioral processes and perceptions
(Schein. 1992. 19-21: 26-27). The result is cultural cohesion resulting from an
integration of mind sets achieved through collective learning experiences.
Management Capacity. The sufficiency o f management capacity is
examined through the structures and processes of management, including its
designated leadership and its nexus with governance capacity. A network’s
management capacity considers the adequacy of its intellectual resources, i.e.. the
knowledge and expertise and skills proficiency available to address network
concerns.
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The structure o f management includes the echelons or levels embedded in
the network configuration. These levels come about as organizations become
nested within a network's ownership structure, or formal contractual linkages
establish strong linkages embedding the organizations into the network's
configuration. Multilevel management becomes the norm as a result, since
managers must generally interact vertically at multiple levels above, with network
ownership interests, vertically and horizontally with governing and oversight
bodies o f networked entities, and below, with lower echelons in the network, as is
the case with a subsidiary corporation under the management oversight of regional
and/or divisional offices o f a large corporate network. Horizontally-directed
management occurs among similar entities as found in a multihospital network
where the manager must interface with senior managers o f other hospital facilities
linked through ownership or contract.
At the network level, though leadership is implemented by network actors
representing organizations or corporate levels of management, the leadership or
management capacity o f networks referred to here occurs in the collective sense.
Management capacity may take the form o f an inner circle privy to sensitive
network information, ad-hoc teams, standing operations committees, or any
combination thereof. In addition to form, management may be expressed through
different leadership types or styles. A style o f leadership may be discerned by the
manner in which decision and communication processes occur among
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153
organizations within the network. Styles may vary from authoritative to
delegative. from participative in nature, to democratic in a coalition o f
organizational managers. Management's preferred methods of communication, as
well as the frequency of communications with organizations internal and external
to the network, can suggest patterns of influence and dominance among entities
linked to the network.
Governance Capacity.
Governance generally refers to the means for achieving
direction, control, and coordination of wholly or partially
autonomous individuals or organizations on behalf of interests to
which they jointly contribute. Thus we speak of the governance of
...networks and public service providers. (Lynn. Heinrich. & Hill.
2000. 235.)
Governance capacity is observed through structure, processes and
conditions of influence. Governance structure is reflective of ownership interests
which influences the management capacity of the network. The governance
process interfaces with management through oversight monitoring/control and
accountability methods (Lynn. Heinrich. & Hill. 2000. 245). Integration, the
centralization of control, and contractual arrangements are each related to structure
(Lynn. Heinrich. & Hills, 2000.245). Milward and Provan classify contracts and
agreements as the tools of governance mechanisms by which the network actors
connect (Milward & Provan, 2000. 360).
As networks expand and acquire additional members, the need arises for
expanded control and oversight capacity. The resulting diversity o f organizational
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154
members creates heterogeneity in the modes of governance. This dilutes
governance centrality as more delegation, decentralization and shared governance
modes are likely to result. Similarly, the multilevel processes related to
governance, such as management oversight, accountability and compliance
monitoring, and communications, are often shared and/or overlapping at varying
levels within the network configuration. Shared governance processes help
mediate the asymmetry of information, varying degrees of influence and control
wielded by individual network members and the network itself.
Network performance effectiveness results from effective governance;
effective governance is most likely to happen under the environmental conditions
of resource munificence.1 central control and stability (Milward & Provan. 2000).
Central control or authority is part of the structure of governance. Stability is
defined as the lack o f changes in the key structural components o f the network's
governance systems. Milward and Provan (2000) propose that under conditions of
stability and sufficient direct funding, effectiveness will most likely be produced
(370). Deterrents to stability include the frequent re-negotiation o f contracts which
lends itself to a short term perspective and network destabilization (376).
Performance. The performance dimension of networks includes
indicators (goals and measures for evaluating network achievements), outcomes
1 Resource munificence is generally understood in organization theory to refer to the level
of funding available to operate an organization or network (Milward & Provan, 1998,214). Here,
this funding availability also includes financial strength and revenue producing capacity.
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(the actual achievements or results of network intent and implementation
processes), and reporting requirements (mechanisms which establish
accountability, monitoring and oversight, and the opportunity for feedback and
network learning).
For the current research, performance indicators are divided into three
categories: fiscal, administrative and service delivery. Fiscal indicators include
budget development and capital management, achieving operational efficiencies,
i.e., reducing costs related to service delivery, and the attainment o f the overall
network's fiscal performance goals. Administrative indicators relate to efficient
and effective resource utilization, goal-directed outcomes management,
communications, strategic planning and implementation, and expanded technology
in use to manage vast quantities of information concerning the network’s
operational achievements and quality outcomes. Service delivery indicators may
involve service line management, expanded programs and services, improved
access to care, and streamlining of patient processing.
In regard to performance outcomes, Boscnken (1998) highlights three types
in agencies, of which two are considered “administration-centered:” strategic
organizational effectiveness and operational efficiency (589). Strategic
organizational effectiveness is associated with senior management personnel,
where executives focus upon the growth of revenue, market share and consumer
acceptance (588-589). Operational efficiency encompasses the "transformation of
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resources" and the costs to deliver services and maintain/replace facilities (589).
These performance outcomes are distinguished from a third category of
performance—social program effectiveness which is related to the political
economy (589).
Performance reporting is an essential part o f the performance dimension,
providing the opportunity for objective evaluation and corrective action as may be
necessary. Reporting requirements are both internal and external. Internal
reporting occurs formally and informally between the network's governing bodies
and management conduit. External reporting requirements are generally legally
mandated in accordance with the network and its respective members’ tax status,
licensing, regulatory agency compliance, shareholders and benefactors, and other
stakeholders, including the general public or local healthcare community.
METHODOLOGY
Research Sample
Sample Selection Criteria / Rationale
Purposive sampling was adopted to structure a sample of health care
networks so that the interview data obtained would reflect networked
organizational perspectives gleaned from both the not-for-profit and for-profit
healthcare sectors, as well as include network representation from rural, urban and
suburban healthcare markets. Sample selection was limited to the geographic
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regional areas of central and southern California as geographic proximity for
conducting time-intensive research interviews and associated travel was a
consideration.
To establish an objective standard and conformity for the sampling of IDNs
(integrated delivery networks), the American Hospital Association's (AHA)
definition o f a network was adopted: this states that "a network is defined as a
group o f hospitals, physicians, other providers, insurers, and/or community
agencies that work together to coordinate and deliver a broad spectrum of services
to their community" (AHA as cited in Jantzen & Loubeau, 1999, 85). This
definition permitted the identification of IDNs with multiple levels of provider
integration and geographic expansiveness. i.e. serving multiple communities,
counties or geographic regions.
The broad AHA standard of network definition applied was refined by
establishing specific criteria for network sample selection (see Exhibit 5.3). The
criteria permitted a measure of sample uniformity in spite o f the vast diversity of
network configurations and aided in the identification of healthcare component
organizations/networks and their respective senior management who were to serve
as informants. The first criterion required that a network possess geographic
expansiveness. Expansiveness or extended geographic reach would likely include
the demographics of rural, urban and suburban communities. Additionally,
collaborative partnerships would most likely have been developed in an effort to
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serve the needs o f diverse patient populations in geographically dispersed
communities.
CRITERIA FOR NETWORK SAMPLE SELECTION
Geographic Expansiveness
Multiorganizational Configuration & Interdependence
Multilevel Integration Complexity
Access to Key Senior Network Leadership
Exhibit 5.3 Criteria for Network Sample Selection
Other sample selection criteria were that the network be comprised of
multiorganizational membership or multi institutional linkages. A
multiorganizational configuration permitted examination o f organizational parts to
the network whole and their interdependencies for the achievement of network
purposes. The criterion o f integration complexity assured a sample of
organizations/networks with multiple levels of structural integration: varied
typologies o f integrative structures and forms of coupling, i.e.. ownership, shared
governance and/or contract; and process complexity, i.e., cultural fragmentation,
interorganizational collaboration and shared governance.
Finally, access to key senior leadership for interviews and follow-up was a
most critical element for inclusion in the study sample. The rationale for limiting
the selection o f network actors to senior leadership was that these individuals (a)
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possessed the experience and technical network knowledge required to respond to
probing questions concerning the broad dimensions of the network, and (b) would
be able to offer leadership insights as to the influences upon network exchange
behaviors and performance.
Since senior network leaders are responsible for the mediation of internal
and external influences upon the network, they, by necessity, occupy boundary
spanning roles with interorganizational decision-making capacities influencing
network policy. Leaders mediate matters affecting organizational components and
the network whole itself. In light of this, it was judged that senior management
would be especially qualified to address transnetwork issues, such as those
concerning perceptions of dominance and power possessed by network entities.
Additionally, these executives could inform the researcher as to network climate,
cohesion, and interface with processes of governance, management and
communication.
Sample Recruitment
Possible barriers to the recruitment of executives considered representative
of the sample selection criteria included scheduling difficulties, respondent burden,
and lack o f interest or personal investment in the research. Barriers were lessened
by the application o f successful recruitment strategies for participation outlined by
Levinson, Dull, Roter, Chaumeton, & Frankel (1998). Such strategies included
assurances o f confidentiality; the accommodation o f office schedules and on-site
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interviews: the use of referrals, introductions and endorsements from other
healthcare executives within a candidate's local healthcare community; and the
stimulation o f the interview candidate's interest in the research. To achieve the
latter, a standardized introductory explanation o f the study's focus and intent was
provided along with the opportunity to request receipt of the research findings.
Referral sampling was also utilized as a recruitment method. During
prescreening contacts, network executives would refer the investigator to senior
management personnel either within the network, or who were managers of other
networked healthcare organizations who might be network candidates for
interview. The potential informants were screened in accordance with the sample
selection criteria and if these standards were met. were recruited to serve as chief
informants on behalf of their healthcare network/organization.
Overall. 36 healthcare executives were contacted for possible research
participation. Following initial telephone prescreening, two executives were
screened out of the sample due to a lack of interest to participate. The remaining
34 executives were scheduled for interviews. O f these, four interviews did not
occur due to repeat postponements where scheduling difficulties were cited and
three were last-minute cancellations where urgent unexpected business matters
were cited as the reason for cancellation. It was not possible to reschedule these
interviews due to time and travel considerations.
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The final sample included 27 in-depth interviews conducted with network
executives who were highly experienced and knowledgeable. Experience within
the healthcare field ranged from 8-38 years; the majority (56%) had more than 20
years o f experience in the field, with an average o f 13 years in senior management.
All but three executives held advanced degrees. The length o f duration in their
current senior management positions averaged 2.4 years. Seven (26%) were
physician executives possessing medical degrees; only two of these were also
active in medical practice. Each executive assumed key active roles in network
management and/or governance (e.g., CEO. COO, CMO, CFO and/or governing
board membership) as evidenced by the scope of their administrative
responsibilities and influence among one or more organizations comprising the
network.
The interviewees were representative of a sample of healthcare service
delivery network configurations having multilevel vertical and horizontal
integration; some represented large corporations with healthcare service networks
in multiple states within the U.S. Forty-eight percent o f the interview sample
represented networked organizations in IDNs within the southern California
healthcare market, predominately Los Angeles and Orange Counties; 52% o f the
sample were from the central California healthcare market, predominately Fresno
and Tulare Counties, though the network's service coverage area extended into
other adjacent counties as well. Two thirds of the sample represented investor-
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owned for-profit networks, while the remaining third represented not-for-profit
health care networks.
Specific IDN (integrated delivery network) typologies represented by the
interview sample included: 3 HMO networks. 3 IPA networks. 3 MSOs. 1 PMG. 3
hospital IDNs. 6 networked hospitals, 1 skilled nursing /long term care facilities'
network, and other IDN-owned or affiliated SNFs. subacute facilities, long term
care facilities, rehabilitation hospitals, surgery centers, outpatient/ancillary
specialty clinics. PHO affiliations, joint venture participations, and/or provider
contracts, which collectively numbered in the thousands. Each of the networks
were considered to be the dominant vehicles for the contracting and delivery of
health care services within their local marketplace: marketplace dominance was
determined objectively by size, such as the number of licensed/in use hospital beds
if applicable, managed care market penetration, geographic service coverage area,
and net revenues.
Data Collection
Detailed qualitative data collection incorporated a triangulation of methods
in order to examine network context and the selected network dimensions under
study. First, semi-structured interview data was collected using the IDN
Questionnaire / Discussion Guide (see Appendix B) which generated discussion
concerning the selected network dimensions outlined by the research framework.
Second, secondary data analysis consisting of document reviews pertinent to the
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organization(s) and network was performed: review o f internal documents made
available by the informants, i.e., organizational charts, governance structures and
board composition, mission statements, strategic plans and marketing
communications, quality and performance measures /reports, contract information,
and budgeting and financial management reports; review o f external documents
obtained from published data and media sources, i.e., annual fiscal reports. Third,
observational data were gleaned during scheduled site visits o f networks' /
networked organizations' settings where executives were observed interacting in
their natural surroundings and a tour was made available o f the networks' facilities.
These multiple data sources provided a means of clarification and corroboration.
Instrument
To elicit and organize the vast quantity of interview data, an instrument
was prepared and labeled as the IDN Interview Questionnaire/Discussion Guide.
(A complete detail of the IDN Interview Questionnaire/Discussion Guide may be
found in Appendix B.) The instrument ensured the capture of data as outlined by
the analytical framework previously explained and was designed as a research tool
to focus interview discussions so that at a minimum the network dimensions
deemed essential to network inquiry would be uniformly addressed by the
investigator. The interview format was inclusive o f unstructured dialogue in
which issues o f importance to the informant could be spontaneously introduced. In
this way. the instrument guided the overall discussion with sufficient structure to
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obtain data along the study dimensions while permitting flexibility to capture other
network perspectives as well.
The instrument was developed through many iterative phases,
incorporating phases of field pretesting and formal piloting prior to
commencement of research data collection. This phased approach was done to
secure confidence in the overall content/operational validity of the questions
posed. Pretests of the instrument format were conducted with healthcare
executives not part of the study sample. Feedback from the pretests conducted
proved useful as revisions were made to improve the instrument’ s efficiency,
increase the clarity of certain questions, and reduce any potential bias inherent in
the sequencing of questions.
After the pretest format revisions were made, the instrument was then pilot
tested with several additional executives who also were not part of the research
sample. This resulted in several additional modifications made to further organize
the interview content and reduce the interview time required. While this process
was time intensive due to the considerable efforts required to gain access to
healthcare executives for their input into the instrument design, the systematic
iterative approach to instrument construction provided further assurance that the
questionnaire would be appropriate and effective in eliciting
network/organizational data, imparting integrity to the research process.
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Procedures
Formal data gathering commenced in November 2000. Interviews were
conducted during the time period from November 2000 through March 2001; in
all. 27 interviews were completed. Each interview was semi-structured and guided
by the prepared instrument—the IDN Questionnaire / Discussion Guide. Each of
the identified network dimensions was probed in a structured manner: other
network topics, if introduced by the informant, were freely discussed.
As noted, the preferred method of data collection was an intensive semi-
structured personal interview. This method offered certain advantages in obtaining
the desired information such as the increased likelihood o f responses to the
probing of sensitive issues and the investigator's ability to note the non-verbal and
emotive aspects of communication that accompanied responses, such as facial
expressions and tone of voice. Interview sessions were scheduled to accommodate
durations of approximately two hours each; in some cases longer sessions occurred
or a follow-up session was scheduled as needed to complete the discussion.
The relaxed nature of the interview permitted two to three hour interview
sessions without fatigue. This enabled the investigator to obtain large amounts of
unstructured data offered by the interviewees, including contextual information
concerning the history and strategy of network development, future growth plans
for the healthcare community served, or history and perceptions related to
ownership interests' intentions and expressed missions. Disadvantages to the
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method chosen for data collection included the potential for distraction and
interruptions, increased time and costs to conduct the research, and the risk o f
incomplete responses due to curtailed interview time.
At the start o f each interview a standardized script was used to review the
purpose o f the study, describe the research protocol for the interview, and inform
the interviewee regarding the benefits of participation, i.e.. a written summary of
the research study results if requested. Interview sessions were audiotaped to
ensure a means of verifying data accuracy and completeness. Each interviewee
was asked to respond to a list of questions designed to probe each of the network
dimensions identified by the framework. Questions for each o f the dimensions
probed were read from the IDN questionnaire without alterations in wording. The
investigator was careful not to lead or influence the interviewees' responses.
Interviewees were provided with an interview supplement form in which
they were asked to draw a graphic representation of their network. The graphic
network mapping o f the manager's perception of his/her healthcare network was
completed using pen and paper, and provided important clues as to the network's
structural configuration, linkage types, levels, depth, density and actual and
perceived dominance and influence by and between organizations within the
network. The graphic network representations also served as a reference tool when
discussing component organization versus network issues, and provided a network
map for later individual and comparative network analyses.
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At the conclusion o f the interview, arrangements were made for post
interview follow-up should any clarification or verification of the data be needed,
and the informants were thanked for their assistance and participation in the
research effort.
This chapter has outlined the research framework and methodology utilized
for the exploratory study o f network settings and network action in the health care
service delivery sector. In the chapter that follows, the means o f qualitative data
analysis and the results obtained from the research investigation are presented.
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CHAPTER VI
RESULTS OF NETWORK INVESTIGATION
MEANS OF DATA ANALYSIS
A systematic and verifiable approach to qualitative data analysis was
achieved through a prescribed protocol which organized the exploration and
interpretation of the data. The analysis plan was systematic in that it followed a
prescribed three-step data-handling sequence:
1) Data Verification & Review: Upon completion o f interviews, the data was
verified through a check for accuracy between audiotaping and notes
transcription. An initial data review was then performed which involved
the reading and review of transcripts, field notes and related secondary data
obtained from healthcare organization/network documents provided to the
investigator by the informants. Follow-up inquiry with the informants was
conducted as needed to clarify interview responses/comments and to
address questions related to the supplemental information provided.
2) Data Compilation. Entry & Coding Interview responses and comments,
observations and research notes offered rich textual data for analysis. The
data were compiled and indexed in document form in preparation for data
entry into a qualitative computer software analysis package. QSR N5
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(Richards, 2000). The external source data was then imported into the
computer program so that data tabulation and systematic coding or
indexing of document data (category node identification) could be
performed. Through a process o f coding and tabulation o f semantic text
units derived from the interview documents and the supplemental interview
data, the software facilitated data exploration in context and in relation to
the entire reference database.
3) Textual Data Analysis: Rigorous, systematic data exploration was
expedited by the qualitative software analysis package. QSR N5, designed
for non-numerical unstructured data indexing, searching and theorizing
(Richards, 2000, 2). The software facilitated inductive analysis across
categories or dimensions, allowing for qualitative inquiry to discover
patterns and interpretations o f the data. Computerized data management
permitted the merging, coding and simultaneous management of structured
and unstructured interview data, field notes, and documents which
otherwise would have not have been feasible given the significant volume
of collected textual data. The software coding and retrieval functions
permitted an annotative analysis and the identification o f emerging
analytical themes. Sophisticated software search tools of Boolean,
semantic and proximity-based operators, enabled relational data searches,
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exploration and interpretation o f all documentary data representing the
research nodes (topics and categories).
In addition to the software-facilitated textual data analysis, the dimension
of structural configuration and network complexity was also examined through
network mapping. This included careful review o f informant-provided
organizational charts and free-hand drawn network representations. Networks
were mapped as they were then reported to exist. The maps served as a general
tool for network field analysis.
Network mapping included the graphic depiction of linkages, structural
levels and process flows, and this served as a visual aid to the separate analyses of
network control, organizational positioning and dominance, and complexity. The
total network field was examined in order to discover the relative importance o f
relationships and patterns/purposes of interaction between network components.
In the section that follows, the results of the data analysis are presented.
FINDINGS
The dimensions o f network variability outlined in the Analytical
Framework for Multilevel Network Analysis served as the framing tool for the
findings reported.
Structural Configuration and Integration Complexity. Results from
network mapping and textual data analyses demonstrated that healthcare delivery
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networks were multilevel hybrid structures o f mixed vertical and horizontal
structural configurations. This was a consistent finding regardless of network
typology. With the exception of loosely-coupled HMO networks formed
exclusively by contracts, most networks were generally linked by ownership
interest, and as a result, were considered to be tightly coupled.
Network representations drawn by the informants reflected predominately
hybrid (vertical/horizontal) structural integration patterns with multiple
intersecting strata or levels. The graphic depictions emphasized the organizational
composition and the functional interdependence of the network. The
interdependent or shared functions among network components included human
resources, marketing and business development, medical direction oversight,
contracting, finance and business office support.
In contrast, the individual organizations comprising the network were
drawn as traditional top-down organizational charts showing distinct hierarchical
or vertical structures. Whereas the whole o f the network was illustrated
emphasizing the organizational composition and exchange capacities or functions
of each, its individual members were depicted as hierarchical organizations
emphasizing departments/services and associated supervisory titles/positions.
Network mapping analysis revealed variability in the form or structural
configuration o f networks. Drawn configurations resembled combined flat and
hierarchical forms, and wheel configurations, with the majority of network
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depictions approximating a wheel configuration with multiple spokes. The wheels
illustrated either the network as a whole or its component organizational linkages
intersecting at a given horizontal and/or vertical level o f the network (See Exhibit
6.1). The center of the wheel was usually the most influential component in the
network or at that given level.
NETWORK WHEEL CONFIGURATION
/
Components may be of varying size and
complexity: each may have singular or
multiple vertical and horizontal linkages or
branches (not shown here). Their
couplings may be contractual or through an
ownership interest.
Organization
Component
Organization
Component
Organization
Component
Network Level
of Reference/
Organization
Component of
Influence
Organization
Component
■ ji & r & s m
Organization
Component
Exhibit 6.1 Network Wheel Configuration
(Singular Level of Reference)
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Considerable variability existed in the number o f spokes (horizontal and
v ertical extension branches) and their directional flows o f authority and control.
The vertical branches o f a given network appeared to be the administrative centers
for the concentration of network governance and management. From this
administrative center flowed vertical levels of command which generally included
governing boards, executive committees, corporate facilities, divisional and/or
regional management systems, and local network governance and management.
Horizontal linkages contributed greatly to a network's geographic
expansiveness and were often a result of growth strategies to gain market share or
service coverage areas. Increased network depth was more rapidly achieved with
horizontal coupling involving the linking o f similar entities performing similar
functions. This activity was especially prevalent in HMO virtual networks lacking
ownership linkages of service delivery structures such as hospitals. Instead,
multiple contractual linkages with IDNs. including hospital systems. IP As. PMGs
and MSOs enabled the rapid integration o f these service delivery providers into the
contract HMO network without the burden of ownership and related business
infrastructure. Under this scenario, network depth was seemingly without bounds,
permitting contract partners to number into the hundreds and even thousands. As a
result, the contract networks expanded swiftly in a horizontal as opposed to a
vertical direction. This was in keeping with the network’s goal o f high volume
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contracting with similar provider organizations to enable the HMO health plan to
offer increased access to and choice o f healthcare providers in a given market.
Network field analysis revealed that informants detailed from four to more
than twenty interdependent organizational components in configurations of mixed
integration complexity.1 Components of integrated hospital networks consisted of
horizontally integrated hospitals, with mixed integration of affiliated or owned
IPAs and MSOs. and other levels o f care facilities and ancillary outpatient clinics
and centers. In contract networks, the identified distinctive components consisted
of large employers. IPAs and large physician medical group contracts.
Concerning the benefits and weaknesses of vertical versus horizontal
integration, insights were unveiled during analysis. An expressed benefit of
vertical integration was that it helped to achieve control over the network and
improved accountability. The downside was that centralization could lead to a
tyrannical stifling of network innovation and learning, as well as restrict network
expansiveness. On the other hand, horizontal integration was viewed as increasing
expansiveness and the potential for coalition power of the component
organizations. The potential for and exercise o f coalition power was heightened
'Typically, networks have multiple internal and external linkages which can be considered
network components. For purposes here, distinctive components refer to internal network
components, i.e., those components having critical capacities or contributions affecting network
context or performance. The expression “distinctive component" has been borrowed from
Selznick’s well-known 1957 work. Leadership in Administration.
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with horizontal integration which was perceived as the reason for its greater
network decentralization and dispersion of authority. The negative aspects of
horizontal integration were that it set up an unhealthy competition for budget
dollars and other resource allocations, and that decentralization resulted in what
one executive referred to as "fiefdoms."
Hybrid or mixed integrative structures demonstrated vertical as well as
horizontal elements, having reinforced central controls in a traditional chain of
command, and decentralized self-governing individual business units held
accountable for their individual economic performance. In this way. networks of
mixed integration could expand horizontally, while being connected to a strong
central control. However, the CEO of a mixed-integrated network consisting of
multiple hospitals, an MSO. an IP A. and numerous affiliated medical group
providers, expressed a limitation to the hybrid network configuration. He
indicated that while hierarchical constraints o f operating the network under a
single ownership, single board o f governance and strong centralization o f authority
was effective in coordinating network management efforts, adherence to the
singular and strong centralization configuration naturally restricted any expansion
of operations because of the inherent limitations of infrastructure capacity. In
short, the management and business infrastructure needed for maintaining a strong
centralization of command and control could only be efficient for up to a finite
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number of network components within a manageable geographic radius, which this
executive judged to be 12 to 15 miles for his network.
Examination o f network maps and discussions with network informants
consistently revealed one or two very dominant network components within a
given network configuration. Regardless of how the network was configured,
certain organizational components were perceived as having the power to exert
influence. In fact, these entities emerged as the seat o f influence over network
policies and actions. Organizational power and subsequent dominance appeared to
be related to certain source attributes. Dominant organizations seemed to derive
their influence from one or more of these source attributes, the foremost being
financial strength through resource munificence. In fact, individual organization
power appeared to advance and decline in line with its revenue production
strength. A list of the distilled source attributes o f netw ork influence compiled
from analysis may be found in Exhibit 6.2. All of these source attributes were
generally present in a dominant network component. However, the possession of
any of these attributes singly could also propel an organizational entity to a power
position of influence.
Least influential network components did not possess the identified source
attributes and were perceived as being ancillary rather than central to network
decision-making processes and change implementation. Though they provided
exchange value to the network and contributed to network outcomes, these
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ORGANIZATION SOURCE ATTRIBUTES OF NETW ORK INFLUENCE
> Resource munificence, i.e., financial strength in being the key revenue-producer
or funding source for the network.
> Control over resource allocation and distribution.
> Administrative center of the network, usually housing administrative functions.
> Concentration o f specialized knowledge and expertise.
> Political centrality to a network issue.
> Identified as the flagship organization of the network.
Exhibit 6.2 Organization Source Attributes of Network Influence
components were generally smaller with less revenue producing strength. As a
result, they remained at the fringe with regard to network governance and
management processes. Also, components labeled least influential by the
informants were generally in need of resources, and not in a position to allocate or
distribute them as was the case with their more powerful cohorts.
The intensity o f network interconnectedness or its density was difficult to
ascertain as the informants were initially reluctant to catalogue the nature, intensity
and frequency o f their boundary spanning activities. However, when specifically
asked to characterize the nature, and estimate the frequency (schedule and number
of contacts) and intensity (duration of contacts) o f what they considered to be only
their most primary interorganizational and transnetwork interactions, estimates
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revealed that between one-third to one half of each o f the executives’ time was
spent routinely on the maintenance of network relations and interdependencies
concerning resources and functions of exchange, oversight and management.
Interactions occurred by telephone, email or in-person meetings and were o f a
broad nature, though largely devoted to interfacing with governance and oversight
bodies and management’s inner circle in which corporate and senior level officers
were the network actors involved.
Aside from the structures and processes o f governance and management
which precipitate and influence network interactions, network density also
appeared to be influenced internally, by ownership linkages, organizational power
and dominance, and position in the network. Network density or weave was
greater when the components were linked by ownership. Tight coupling was
reinforced by increased communications. Organizational influence and proximity
also played a role in density, since interactions increased where power
concentrations existed. Thus, greater density may be as much a result of
organizations’ proximity to organizational influence, position and levels within the
network, as it is a function o f ownership coupling. Externally, most networks were
densely connected with their oversight and regulatory bodies which many
contacted daily and weekly; routine communications with non-owned but affiliated
entities occurred on as needed basis or as formally dictated by contractual
arrangement.
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Congruence. The informants were asked to express the missions of their
individual organizations and healthcare networks. Most executives quoted
portions of their published mission statements which varied little from network to
network and organization to organization. The universal mission espoused by
nearly all of the research participants was a variant of “ to improve the health care
status of the community.’ Noted exceptions were the missions for MSOs, which
were to provide administrative infrastructure to organizations receiving
compensation on a risk basis, more specifically, providing support for managed
care contracting and capitation claims management.
Regardless as to whether the network was a non-profit or for-profit
enterprise, all but a single informant claimed that their network had a public
service mission to address and benefit the health care needs o f the community.
The exception was a large multistate for-profit contract HMO network, whose
executive clearly stated that the mission was profit, not public service. Other for-
profit network executives acknowledged the obvious need for profitability, but
they were careful to underscore firmly the overarching network purpose of
providing quality care to benefit the healthcare of individuals.
When asked if there was congruency between the stated network mission
and the missions o f individual organizations within the network, a pattern became
visible. Among tightly coupled community-based hospital networks, there was
congruence between the stated missions of network component organizations and
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the stated network mission. In these IDNs, the mission was clearly and regularly
communicated through various modalities including leadership, employee
orientation, and meetings, and was reinforced through these same modalities
during the course o f daily network operations and events. However, conflicted
missions were evidenced in large for-profit network HMOs. The conflict was
expressed as profits versus costs o f care. Similarly. MSOs have the mission to
manage the contracting functions o f its client hospitals, IPAs, HMOs and other
clients, which conflicts with a network’s patient care mission. Other reported
conflicts o f mission resulted from personality conflicts and differences in agendas
between a governing board member and a network CEO.
Network missions were communicated and reinforced through a number of
modalities which are listed in Exhibit 6.3. Most often acknowledged reinforcers of
mission were employee orientation/education and the wearing o f name tags with a
mission statement, leadership and board actions, meetings, customer service
recognition awards, and newsletters. Less noted methods for communicating
mission were posted mission statements, network websites, community health
fairs, and public service outreach events.
Context. Networks formed or altered their configurations as a result of
reasons related to certain contextual conditions. These conditions could be related
to the overall network strategy, environment, function, or structure o f the network
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MISSION COMMUNICATION
MODALITIES
Employee Orientation/Education
Employee ID Tags____________
Leadership Actions___________
Governing Board Actions______
Meetings____________________
Customer Service Recognition
Newsletters__________________
Postings_____________________
Website Listing______________
Community Health Fairs_______
Public Service Outreach Events
Exhibit 6 J Mission Communication Modalities
itself. A listing o f the common reasons given for advancing network formation
and growth and their related context are provided in Exhibit 6.4.
Results showed that environmental contexts, such as market pressures and
managed care, were the principal reasons for healthcare network formation and
subsequent changes in a network's structural configuration and composition. To
effectively manage the marketplace, networks needed to acquire knowledge and
capacities to deal with managed care pricing strategies, capitation, and the
potential loss of referrals. In some instances, networks defensively maneuvered to
address the environmental context, while in others they strategically planned for
growth and change. For example, acquisitions of other provider facilities/services
were undertaken in the context of strategy to effect growth or expand access to
services. The integration or development of an MSO into the network structure
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was done in the context of structure to create an additional business infrastructure
for contract management to assist provider groups affiliated with the network.
REASONS & RELATED CONTEXTS FOR NETWORK FORMATION & GROWTH
Reasons for Formation &
Growth
Related Contexts
Market Pressures Environment
Managed Care Impetus Environment
Economic Efficiencies Function
Gain Geographic Coverage Strategy
Strategic Growth Strategy
Defensive Maneuver Environment
Create Infrastructure Structure
Create Programs/Services Structure
Gain > Access to Patients Strategy
Community Pressures Environment
Meet Community Need Function
Resource Sharing Function
Acquire Knowledge/ Expertise Strategy
Political Pressures Environment
Exhibit 6.4 Reasons & Related Contexts for Network Formation & Growth
Establishing interdependent partnerships or joint ventures with physicians,
such as outpatient facilities, imaging centers and surgical centers, for joint
purposes or to share financial resources to achieve common purposes was related
to the context of network function. Economic efficiencies could be gained by
merging organizational functions to decrease service redundancy in the market,
w hile increasing network productivity and economies of scale. Thus, networks
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tended to evolve as a result of entities acquired or developed in response to the
presenting network context.
Stability and Cohesion. Adopting the Inquiry Interview Methodology
outlined by Schein (Schein. 177-186). network culture was probed through
historical inquiry o f a network's formation, context, goals, critical events and
problem solving. Cultural data was also obtained by ethnographic observations of
the setting and management interactions, and consideration of the adopted
leadership styles and incentive mechanisms.
With regard to the perception of network stability and cohesion: 70% of
the networks reported a stable climate: only 25% reported cultural cohesion. The
lack of cultural cohesion was due to a reported heterogeneous fragmented culture
within most networks. In some networks, the heterogeneity of organizational
cultures was so strong that executives responded to questioning by stating that
there was no discernible network culture.
Cultural fragmentation also existed with a measure of expressed disloyalty
and disconnection between networked organizations and the network whole. Some
informants perceived a two-tier or dual culture—a homogeneous management
culture among network leadership characterized by collegiality. and a
heterogeneous network culture characterized by organizational competition and
collaboration. This duality of network culture was supported by accountings of
culture clashes between superordinate and subordinate levels of management.
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signified by upper and lower echelons in a vertical configuration, as well as
superior and inferior positions resulting from lateral proximity to concentrations of
organizational power and influence.
Culture clashes also revolved around the long recognized conflict between
the medical professionals, i.e.. the physicians, and administrative or governing
entities. The source of the conflict was the administrative requirement for
physicians to adhere to specific administrative and clinical protocols, standards of
accountability and reporting. Friction concerning these matters was not
uncommon in that the physician culture had established channels for voicing
concern or opposition to administrative and governing board directives. Clashes
were found and generally expected between physicians and their governing boards.
CEOs, and administrations of hospitals. IPAs. MSOs. and HMOs. and any network
philosophies which placed them in a position o f choosing between patient care and
administrative rules and guidelines.
Apart from the disparity between the administrative and medical
professional cultures, other patterns of cultural difference in networks were
observed between corporate cultures valuing end results over process, and
networked organizations valuing process efforts necessary to effect collaboration
to achieve these end results. There appeared to be a lack o f patience or
understanding on the part of network oversight for the inherent process
complexities which confront organizations working together in a network capacity.
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All but four of the informants felt that their network operated in a climate
of distrust. Oddly. CEOs at the highest echelons were the few who felt there was a
climate o f trust. This disparity raised the possibility o f a disconnect between the
highest levels o f network management and other management levels within the
network. For the most part, the network environment seemed to breed distrust and
competition among the entities. The reason for this was unclear: however, this
finding was not unexpected since networks incorporate considerable diversity in
their organizational membership.
Consistently visible cultural artifacts observed in each of the networks
studied were the overall professional demeanor and conduct of personnel, and their
unified recitation of the sense of mission and motivation to provide care to patients
in need. Leadership reinforced the espoused values reflected in statements of
mission, visions and values. This was done in meetings with staff, in public
settings, and as part of human resources orientations and education practices. The
values espoused from network to network varied little: integrity, responsibility,
loyalty, accountability, commitment to community, pride in patient care, and
customer service were those commonly cited.
The underlying assumptions of network culture painted a different
perspective on networks than those of the visible artifacts and espoused values.
Comments made by the informants and presented here in the collective reflect
some of the operating cultural assumptions adopted in these culturally fragmented
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networks: "winning equals profit, loss does not equal growth or profit;” "no
margin, no mission;” "hard work and high energy are expected;” networks grow
"responsibility without authority.” “disloyalty” and a “not my problem” attitude;
"the network need will override the need of the individual organization;” "it’s all
about physician relationships;” "dialogue is needed, especially with physicians;”
"interpersonal relationships—that’s what it’s all about;” "corporatized components
hinder getting the job done;” "organizations need each other to fulfill their own
mission;” and "there’s too much collective, not enough individual
[accountability].”
When asked to consider the relative importance o f traditional public
administration values, i.e.. of equity/faimess, efficiency, accountability and
authority/control, and how they were evidenced in their individual organization as
compared to their network as a whole, patterns slowly emerged from the textual
analysis of the responses. There appeared to be an inverse relationship between
the values of equity and authority. For example, organizations making up a
network placed the most emphasis on the value of equity/faimess in the conduct of
organizational operations. Networks on the other hand, placed the least emphasis
upon equity/faimess in the conduct o f network operations. A similar inverse
relationship was noted concerning the value emphasis placed upon
authority/control, including rules and the chain of command. Where organizations
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rated this value emphasis as least observed or important, networks were found to
reinforce this value as being most important.
The other values of efficiency and accountability appeared to be equally
valued by both organizations and their networks. These findings concerning value
emphasis may suggest that the major focus o f the network and its managers is to
achieve control and coordination o f network operations and outcomes, harnessing
the strengths and mitigating the weaknesses of its organizational components.
Organizations on the other hand, may place greater emphasis and resources into
evolving a culture for sustained loyalty and productivity. Put more abstractly, the
network whole appears to rely upon structure to achieve end results, while its
member organizations seem to rely upon process to achieve the organizational
goals directed toward the network's end results.
Management Capacity. As suggested by the analysis results in
Exhibit 6.5. to achieve coordinated organizational action throughout the network,
management capacity was organized into a various forms at multiple levels,
implemented through different leadership styles, and possessed a unique
complement of skill proficiencies. Each of these will be reviewed.
The vertical hierarchy form of control taught in traditional organization
management was less apparent in networks due to the fact that transactions
occurred through the oversight o f persons representing different organizational
entities. Instead o f operating through one's subordinates or one's superior in a
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specific chain o f command, network management was a function of a collective of
organizations interfacing within an established framework through a multilevel
group process.
NETWORK MANAGEMENT: FORM, LEADERSHIP STYLE & PROFICIENCY
Form Leadership Style Proficiency
Cadre*
Coalition
Committee
Teams
Autocracy
Hierarchy
Councils
Collaborative *
Democratic/Consensus Builder
Open
Positive
Judging
Participative*
Autocratic
Facilitator/Coach
Delegative*
Supportive
Diplomacy
Interpersonal Communication*
Articulation
Relationship Building*
Collaboration
Negotiation
Physician Relations*
Bargaining
“Politicking”
Health Care
Knowledge/Expertise
* Indicates most frequent
responses
Exhibit 6.5 Network Management: Form, Leadership Style & Proficiency
Network management most often took the form of a nucleus of senior
managers representing corporate interests and the interests o f those organizations
which formed and sustained the network. This form o f management capacity was
designated by the investigator as a cadre. The cadre was generally led by an
influential leader or senior executive officer o f a dominant network organization.
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or by a person having legitimate authority delegated by corporate ownership, such
as a corporate CEO.
The committee offered considerable flexibility in managing intra- and
interorganizational issues. There were executive committees, standing committees
and ad hoc committees. These committees assisted in the participative aspects of
network management by filtering ideas and issues from the bottom-up. Ad hoc
committees could be convened and disbanded as needed for the oversight and
management o f specific projects and investigations.
Vertical hierarchy was found in expansive network configurations usually
of large healthcare corporations that were engaged in network growth through
mergers and acquisitions. The hierarchy was often visible at the corporate level
where " ‘corporate” included multilevel controls providing centralization and the
consolidated overhead functions needed to manage the increased depth of network
partners. In descending hierarchical order, the multilevel corporate management
included corporate, divisional, regional, state and ultimately local network
management structures. Each level provided management redundancy, particularly
in regard to overseeing operations and financial management. At the local
community network level, the hierarchy blended into a more decentralized form of
control, utilizing a cadre or other form for engaging organizations into a
participative group process.
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A number of executive informants indicated that their network structure
and management had been modified to include greater vertical hierarchy so that
greater accountability and oversight could be achieved. Apparently, as the network
had expanded horizontally, the lack o f centralized control over acquired
components resulted in poor coordination and oversight. However, by adopting
increased centralization of control through vertical structure, improved
communications and accountability were achieved compared to the failed
horizontal management scheme.
Autocracy as a form of network control was found in two of the networks
sampled. It appeared that autocracy developed as the result o f legitimate authority
in the hands of a strong autocratic CEO in one case, and the dictatorial monopoly
of a governing board by a director in the other. From the difficulties observed and
the outcomes reported, this form o f management was considered to be least
favorable in achieving sustained network performance, stability and cultural
cohesion.
At the organizational level, supervision and coordination was accomplished
through traditionally-organized departmental teams, project coalitions and council
management forms that interfaced with the network management structure. Teams
generally interfaced intraorganizationally, or at horizontal levels within their
immediate sphere. At the network level, the cadre interfaced interorganizationally
and transnetwork at the nodes or levels of management interchange between
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191
netw ork and organization levels. Many of these executives had dual management
roles, having responsibility to inform action both at the organizational level and at
the network level. It is at these nodes that buffering or reverberation o f individual
organization components' successes, failures or externalities occurred.
Examination of Exhibit 6.5 reveals a variety of leadership styles throughout
the network. These were in part a reflection of the individual personalities o f the
leaders themselves. However, the leaders did tend to emulate the adopted style of
the network cadre. All of the informants indicated that collaboration was a
required style to attain network consensus; all claimed management to be
participative; all but two stated management was supportive, and all but three
delegative. HMO networks indicated a strong lack of a supportive nurturing
environment. Informants who were in CFO positions generally stated that there
w as a lack of attentiveness to operation details on the part o f network management.
Regardless of the leadership form and style, the overall atmosphere in the network
was reported to be professional, though a few individual organizations were said to
have lacked a professional atmosphere.
The leadership skill sets required to manage in a network configuration
emphasized interpersonal skills and relationship building. This was necessary in
order to deal with the changing network membership and the diversity o f
organization types and even missions. The need to negotiate, bargain, compromise
and cajole was reflected in the skill sets demonstrated by each o f the informants
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interviewed. Informants were noticeably articulate and knowledgeable, as well as
adept in developing relationships. Many o f these skills were verified by
unsolicited comments offered by executive peers and employees during informal
encounters.
Management in networks occurred at intersecting levels or nodes of
organizational interaction. Internally, interactions or contacts were multilevel in
nature and concentrated at a peer management level (horizontal) or at one to two
levels above or below their network management level (vertical). Externally,
interactions were initiated on an as needed basis in response to the environment, to
manage the external political economy, or deal with regulatory bodies on
compliance issues. Analysis o f the specific nature, frequency and form of these
multilevel interactions was presented earlier in the discussion o f network density in
the subsection of structural configuration and complexity.
Concerning decision-making processes, it was found that authority resided
in corporate levels of hierarchy, such as divisional and regional management,
network CEOs, CEOs or COOs over organizational units, and was influenced by
governance, such as the board o f directors and corporate ownership. Frontline
CEOs of regions, or multistate networks tended to be delegative, and as a result,
authority was broadly disseminated, while accountability was attenuated. In most
cases, network decision-making was viewed as a process o f consensus building
which tended to be slow and frustrating, often delaying needed decisions.
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193
Exhibit 6.6 presents the patterns o f decision-making processes in use at the
network level and organization level of management. The informants' responses
were analyzed for dominant processes which were defined as a response frequency
exceeding two-thirds (> 66% response frequency). The dominant processes of
decision-making observed to occur at the network level were characterized as
being defined (67%). top-down (88%). autocratic (75%) and negotiated (67%); the
most dominant process was top-down. Dominant decision-making processes at the
organizational level o f management were characterized as being collective (67%).
negotiated (75%). and delegated (67%); the most dominant was a process of
negotiation. Comparatively, the greatest differences in response frequency for
decision-making processes in use were for the processes designated autocratic,
individual, chaotic, top-down, closely-held and democratic; the network level of
management dominated over organizations in the use o f all of these, with the
notable exception of the democratic process which was much stronger at the
organization level of management. Organization level decision-making by
management was perceived to be only slightly more collective, negotiated, and
delegated in arriving at decisions than its network management counterpart.
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FREQUENCY & PERCENTAGE DISTRIBUTION FOR DECISION-MAKING PROCESSES
□ Organization Level of Management □ Network Level of Management
Centralized Decentralized Defined Top-Down Bottom-lip Autocratic Democratic
Table 6.6 Frequency & Percentage Distribution for Decision-Making Processes
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FREQUENCY & PERCENTAGE DISlRIBl/l'ION FOR DECISION-MAKING PROCESSES
__________ O Organization Level of Management □ Network Level of Management ____
18
Individual Collective Orderly Chaotic Dictated Negotiated Cloaely-Held Delegated
Table 6.6 Continued: Frequency & Percentage Distribution Tor Decision-Making Processes < _
v ©
U t
196
These decision-making process findings, in combination with the forms of
leadership found, support the notion that networks inherently need to emphasize
methods of control over their expansiveness through decision processes which yield
to the netw ork level of management over the organization level of management. It
also suggests that individuals at the upper echelons of network corporations, or
involved in the select cadre described earlier, may be more prescriptive and
authoritative than expected. If network management authority is viewed as being
derived from vertical hierarchy, and then disseminated downward as well as
horizontally, evidence would also support the conclusion that at the organization
level, a process of decision-making consistent with cultivating democracy and the
earlier reported equity/faimess among peer organizations is assumed. Another
explanation accounting for these results is that a few highly autocratic individuals
could have skewed the findings toward network autocracy. Either of these
contentions is plausible given the up. down and lateral filtering of input between
the network and organization levels of management. In any case, the emerging
theme is a painstakingly slow and frustrating decision-making process for the
network as a whole.
Governance Capacity. Governance structures were stable for each of the
networks with no changes in the structure during the year or more prior to study
participation. A modification o f governance participation was made in one network
to accommodate a new partner with a local county. Governance structures were
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197
found to be centralized in the form of a joint council or corporate oversight board,
or board of directors, as well as decentralized in executive committees established
at the local network level. Typical governance structures encountered were:
■ Governing Board of Directors: inside directors representative of
ownership, inclusive o f CEO and selected officers; outside directors
were inclusive of professionals with specific expertise and community
businesspersons.
■ Joint Governing Boards or Councils (prevalent with joint ownership of
an entity): inclusive of partners having joint ownership interests.
■ Advisory Board: inclusive of local network and organization levels of
management and members of the business and lay communities.
■ Executive Committee: inclusive of CEOs. COOs, CFOs of
facilities/organizations and selected local network management.
Network governing boards were typically comprised o f between twelve and
fifteen members; approximately one quarter to one half of the board representatives
were physicians in practice and/or in executive administration. Board members
were often appointed by the Chairperson and approved by the Board, were voted in
by members and/or elected by shareholders. Surprisingly, a number of the
informants were uncertain of the selection process for their governing mechanisms.
Board member backgrounds and experience included professional expertise in
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198
legal, accounting, real estate, business, banking and finance, and sometimes
included representatives from the lay community.
Governance meetings involving the board of directors were usually
scheduled and held monthly, with one to three additional monthly contacts made by
individual senior managers. Executive committees met more frequently, usually
weekly. Many informants made daily contacts with their governing bodies, that is.
their boards and committees. Advisory boards were organized to engage input and
maintain public relations with the local community base of the network. The CEOs
felt relationships with the local community were critical in garnering support for
special projects affecting health care delivery to the community. Physician board
representation was most important and helpful in such matters.
The preferred communication method for interaction with the governing
bodies was equally divided between email, in-person meetings and telephone
conversation. Less used were voicemail and letters for communication exchanges.
Patterns of communication seemed to indicate that networks with greater
expansiveness also had a greater reliance upon email as a form of communication.
In some cases, executives admitted that emails often piled up unaddressed. As a
result, critical communications were generally held in person or over the telephone.
Key to understanding network governance is to have an understanding of its
facets (see Exhibit 6.7): governance structures and processes, its relationship and
responsiveness to ownership interests, its interface with the levels and systems of
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management, its contextual conditions, and in the case of health care networks, an
understanding o f the needs and motivations o f the physician community.
Maintaining community relations through education, participation and involvement
in governing mechanisms is important to the support and achievement of network
goals, particularly those involving expansion or changes in health service delivery
to a community.
FACETS OF GOVERNANCE
Governance Structures & Processes
Relationship & Responsiveness to Ownership Interests
Interface with the Levels & Systems of Management
Contextual Conditions
Understanding of the Needs & Motivations of the Physician
Community Relations
Exhibit 6.7 Facets of Governance
The challenge of governance appears to be the mediation of each of the
facets of governance. In some networks, episodes of disharmony among relations
between physicians, board member personalities and senior management, caused
significant disruptions to the governance/management interface. One network had
a dysfunctional process of governance with which the collective senior management
indicated a strong dissatisfaction. This dysfunction was a direct result of an
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200
extremely autocratic board chairman who was at odds with the CEO and interfered
at various levels o f network and organization management. This behavior was seen
as intrusive and overbearing and resulted in slowed fulfillment o f the network’s
strategic plan as indicated by a process of “delay and wait.” As evidenced by this
example, the management of the political economy cannot be understated as this
matter took precedence over others until it was relieved to a satisfactory level.
The contextual dimension discussed earlier needs to be taken into
consideration when reviewing governance and management systems and processes.
Stable modes of governance coexisted with the ‘stable oscillations’2 of network
climates. Governance changes usually coincided with changes in the structural
dimensions or integration complexity o f the network. Similarly, the availability of
resources impacted the methods of allocation, distribution, and accountability for
their use. It was clear from the governance actions historically taken within the
networks studied, that in conditions of resource abundance, governing bodies were
more likely to approve new ventures and undertake risks. In times of austerity,
conservatism in governance prevailed.
Performance. Network performance was examined by questioning the
informants on the (1) requirements or indicators of performance, (2) performance
outcomes relative to these indicators, and (3) performance reporting or
: Recall the theoretical discussion presented in Chapter II, p.29, based upon Kiel's (1993) work
concerning the nonlinear behavior of complex administrative systems classified as stable oscillations.
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201
accountability requirements. Performance indicators were divided into three areas:
fiscal, administrative and service delivery. Fiscal indicators were tied to budget
projections and financial planning, and included revenue and income projections,
capital requirements, debt servicing and management, and cash management,
including the maintenance o f adequate cash reserves to meet obligations.
Administrative indicators varied according to network type and included budget
indicators, claim volume processing and turnaround time, access to and availability
of care/services, number of enrollees and contracts, customer service and
satisfaction criteria, and regulatory compliance deadlines. Service delivery
indicators included clinical quality in care and outcomes, customer service call
abandonment due to wait, patient satisfaction surveys, and the multiple criteria of
regulatory agencies, such as the federal Department o f Health and Human Services
and Centers for Medicare and Medicaid Services, the State of California
Department of Health Services and the State of California Department o f Managed
Health Care, accrediting bodies for healthcare organizations such as the Joint
Commission for the Accreditation of Health Care Organizations, and industry
organizations, such as the National Committee for Quality Assurance which
monitors quality outcomes in the managed care industry.
All but four of the networks met their fiscal performance indicators which
were tied to budget projections. O f the four that did not meet their fiscal indicators,
two were MSOs which were designated as “loss leaders” and were expected to
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202
breakeven or were budgeted with losses expected. These entities existed to provide
needed business infrastructure to larger networks with whom they contracted and
by whom they were sustained. A third network that had not met its fiscal
performance goals was a contract HMO network experiencing significant losses
due to unfavorable contracting climates; the environmental context had changed to
such an extent as to cause reactive restructuring of the HMO's business strategy,
provider contracting mechanisms, and health plan product offerings. The fourth
network suffering in fiscal performance was an IPA that was heavily dependent on
relations with two larger networks for its financial viability. The political and
competitive context of this IPA's environment was so volatile that within three
months of the research interview, it had declared insolvency. Each of these
networks stood as examples for the widespread potential for insolvency and the
subsequent changes and disruptions in care that integrated delivery networks can
precipitate. The facets of governance and the complexities of network context were
illuminated by examining these failures of performance.
Performance reporting as a means o f accountability is routine for healthcare
networks and organizations. External reporting is routinely made by each o f the
networks to the following as applicable: governing boards, the DMHC (California
Department o f Managed Health Care), NCQA (National Committee of Quality
Assurance) and JACHO (Joint Commission o f Accreditation o f Health Care
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203
Organizations), to name a few. Internal reporting is done at monthly operations
meetings to the network CEO and to the organizational CEOs/COOs/CFOs/CMOs.
Most informants were not aware of the aggregate performance outcomes,
financial or otherwise, for their networks as a whole. Informants focused their
attention at the network level(s) of their immediate responsibilities: they remained
aware and knowledgeable of the outcomes in those particular areas.
This chapter has presented the approach to analysis and findings o f the
exploratory network research. Results were presented according to the dimensions
outlined in the framework for multilevel network analysis developed specifically
for this research. The final chapter which follows contemplates the findings o f the
research and their significance. Implications for network management in the
postmodern era are discussed, along with a suggested agenda for directed
theoretical and practical research.
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CHAPTER VII
DISCUSSION
The significance of this research is that it addresses a theoretical and
empirical void related to networks, challenging conventional theories of
organizations and "intraorganizational-inspired management perspective[s]"
(Agranoff & McGuire. 2001b. 296). This analysis is expanded beyond
organizations to a macrolevel or network level of analysis. A network level of
analysis examines a collective of organizations and the structural linkages and
influences between them. Consideration is given to the interactions occurring
interorganizationally. as opposed to studying individual actions and influences
intraorganizationally as is typically the case in organization-based research. A
conceptual foundation is laid for a preliminary network paradigm grounded in
converging theoretical perspectives deemed applicable to the observed realities of
networks.
This research effort was undertaken to achieve two essential purposes: to
advance the study and theoretical exploration of network characteristics and their
significance, and to raise the level of administrative study and science into the
realm of network action. Bridging theories, a network paradigm with guiding core
propositions is put forth to coalesce a theory of networks and to organize a set of
network principles to further advance theoretical conceptualization. Next, broad
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205
examination of the network milieu and its dimensionality is accomplished by
applying an analytical framework for multilevel network analysis to the realm of
health care service delivery. The analytical framework identified seven broad
dimensions for network decomposition: structural configuration and complexity,
congruence, context, stability and cohesion, management capacity, governance
capacity, and performance.
Specific contributions of this research may be summarized as follows: (1)
conceptualization of a network paradigm as an initial step toward the advancement
and refinement o f a proposed theory of networks; (2) development o f a
comprehensive analytical framework grounded in theoretical perspectives and
empirical research for the study of multilevel networks; (3) empirical contributions
specific to network integrative structures, processes and influences; (4)
implications for the practice of networked administration; (5) an agenda for "next-
steps" in theoretical development and future research.
Studying integrative structures and processes among a collective of
organizations presented substantial challenges. Determining an appropriate
method o f sampling was a particular challenge given the variability o f networks in
the health care sector, specifically, their geographic expansiveness, and various
typologies and integration complexities. To address these matters, the sampling of
healthcare networks was limited to the central and southern California markets as
these markets were geographically accessible to the investigator for the in depth
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206
study required. A sampling criterion for network selection and study participation
was also devised. Though the sampling design chosen was reasonably inclusive of
a variety of healthcare network structures, it cannot be considered sufficiently cross
sectional in that certain network typologies, e.g., PPOs. were not included, while
others, e.g.. PMGs. were minimally represented in the final interview sample.
Therefore, one cannot exclude the possibility that had other structural types been
included, the results of the data analysis would perhaps reflect differing
perspectives related to the differences in structural network configuration. This
limitation should be a consideration in the application of the findings reported as
well as in the acceptance o f the interpretations made.
Interpretation of the findings, implications for postmodern network
management, and directions for future research and theoretical exploration will be
discussed in the successive sections which follow. These conclusions and
recommendations provide early foundational premises for an emerging theory of
networks and network effectiveness.
INTERPRETATION OF THE FINDINGS
Inductive analysis o f field-based qualitative data yielded key findings
pertaining to networks which were synthesized and presented as broad thematic
conclusions. These are summarized next.
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Context and Focus o f Network Formation and Action
To begin, a number o f contexts drive network formation; however, findings
suggest that the dominant precipitating force driving network formation in health
care service delivery is the environmental context fueled largely by market
pressures. Managed care contracting bom of an economic climate o f increased
medical service demand amid dwindling funding, provided considerable impetus
for network formation, along with political and community pressures in the health
care networks studied. The primary reason for formation appears to be the
underlying assumption that networks will lead to realized economic efficiencies.
Though verification o f this assumption was not the focus o f the current
investigation, it would seem that much of the health care sector’s activities have
rested largely on this presumed benefit.
Once formed, the network’s primary focus is directed outward from each of
its component organizations to interface with external oversight mechanisms, such
as health care regulatory agencies and accreditation bodies, and the community
populations served. The environmental context with its market competitiveness
remains a constant external focus. This interpretation is supported by the density
findings which demonstrated that organizational and network level managers each
focused outwardly in an effort to monitor market developments, maintain
competitiveness, and engage in service delivery compliance monitoring with
external governing authorities.
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Critical Dimension: Structural Configuration and Integration Complexity
A network’s structural configuration and integration complexity is the
critical dimension o f network variability, unlocking the understanding of other
dimensions within networks. Put differently, analysis of a network’s
organizational composition and configuration provides key insights into power
domains, such as the positional power of networked organizations and related
patterns of organizational influence, commonly shared functions o f
interdependence, network levels, depth, density and coupling. The integration
pattern also offers immediate clues into the possible structure o f governance and
management capacities.
The health care delivery networks studied consisted of integrative
structures of mixed or hybrid integration, having vertical and horizontal levels of
organizational integration. Tight couplings were prevalent and achieved through
ownership interests. Virtual HMO networks which were by design, linked
exclusively by contract rather than ownership responsibilities, were loosely
coupled. Tight coupling offered greater centralized control through a vertical
hierarchy, it also appeared to contribute toward increased organizational
commitment and loyalty, possibly as a result of ownership linkages. The loose
contract-based couplings of virtual networks were predominantly horizontally
integrated, with greater potential for expressed disloyalty and organizational
decoupling. These findings potentially signify an association between ownership
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linkages and loyalty to an enterprise, which may also play a role in establishing
network stability.
Vertical Hierarchy and Control
Regardless o f the network delivery type. e.g.. HMO. MSO, IP A. hospital,
etc.. network configurations each included some measure of vertical hierarchy as a
means o f control in addition to evidence of dispersed or decentralized management
structures of authority within the network. Decentralization was especially
characteristic in horizontally integrated organizations found in geographically
expansive networks.
Management structures or forms of leadership capacity evolved in
accordance with the network’s need to establish oversight for aspects of its
existing or expanding structure. In particular, management structure or form
changed to accommodate changes in a network’s structural configuration. This
was frequently evident with growth through mergers and acquisitions. The
existing vertical hierarchy was maintained, modified, or reinforced by the addition
of new vertically integrated structures and modes o f governance, such as corporate
level entities for oversight. Regardless of the type o f coupling or network
typology, it appeared that the administrative centers of control were housed in the
vertical hierarchy, usually positioned within a dominant network component.
Previous research has linked resource rich environments with network
effectiveness concluding that network effectiveness is more likely to occur in
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networks having central control, stability and resource munificence (Milward &
Provan. 1998). This conclusion was supported by the current findings which
examined reportedly stable environments. The stable networks did incorporate a
centralized hierarchical branch in their integration pattern: they were also well-
financed. having met their fiscal goals. The presence o f vertical hierarchies
seemed necessary to establish better control and coordination throughout the
network enterprise. The maintenance or establishment o f vertical hierarchy to at
least some degree was viewed as being more crucial in expansive or large network
enterprises. This was because horizontal expansions became more difficult to
manage with a decentralized approach. The need for centralization o f control was
a finding compatible with that of Milward and Provan (1998) in their study of the
political economies of network structures in cities; the authors similarly identified
a concentration o f influence and coordination of activities, which they termed
centralization.
Domains of Influence
Networks are demonstrably relational interorganizational systems of
exchange comprised of organization sets. These sets develop discernible relational
patterns of power, influence and communication. The perceived or the actual
capacity of one organization to exert influence over another cannot be
underestimated in network configurations. Network configurations were most
often depicted graphically by the informants as a wheel configuration surrounded
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by its primary organization actors represented as the spokes. The center of the
wheel denoted either the most influential component in the overall network or the
dominant component at the particular level of the network symbolized.
The capacity to influence (power) and the exercise of influence
(dominance) were linked to the possession of certain key attributes identified by
the research and designated as source attributes o f influence. Organization
components having these source attributes were generally perceived as being
highly influential, and were in fact, identified as the seat o f power and influence in
the management conduit between the network and organizational levels of
management coordination. The source o f their power and dominance was
primarily tied to their financial strength in revenue production capabilities or
funding capacity (resource munificence). Proximal linkages to a dominant
organization may also contribute to organizational influence although findings
were insufficient to fully support this as a conclusion.
Power domains naturally emerged and may have accounted for the
considerable competitiveness among organization components and the distrustful
climates reported. Agranoff and McGuire (1998, 89) state that power may actually
substitute for trust in achieving network cooperation and collaboration and that the
presence of power versus trust may lead to a “synergistic creativity” important to
network achievement (Agranoff & McGuire, 1998, 89).
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Climate of Distrust
A general climate of distrust was seemingly inherent in the network
settings observed. This gives cause for concern as distrust is generally thought to
contribute toward resistive behaviors likely to discourage an organization’s
assimilation into a network. However, the network executives interviewed
determined that distrustful behaviors were probably a result of competition for
limited budget resources. Other possibilities were a sense o f organization isolation
or the perception o f unimportance. This latter sentiment was expressed by
members o f the least influential organizations; that is, those considered ancillary,
such as skilled nursing facilities and clinics, compared to the more primary
hospital facilities in a health care network. Ancillary organizations and their
representative leadership were not integral or critical in the decision-making
processes o f the network. Often these organizations were not even represented in
the determination of the network’s principal strategies or goals. Though
cooperation and integration had been achieved among network member
organizations, trust was withheld.
Another possibility for the origins of distrust within networked
organization settings is the lack o f loyalty created by the least-vested interests of
temporal contractually-defined linkages. Time and ongoing interactions help to
build trust and the reciprocity involved in interorganizational exchange. This
observation may have normative implications for a network manager’s role in the
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establishment o f cooperative strategies, such as choosing coopting or coalescing
strategies over contracting strategies in building a climate o f trust.
To some extent, the historical context o f health care delivery itself
contributed to the climate of distrust. Historically there have been long-standing
conflicts o f goals and interests between physicians and administrators. Typical
physician and administrator conflicts deal with issues affecting the physician's
professional turf, as in clinical practice matters, as well as in the network’s efforts
to contract with entities on the physicians’ behalf. Those networks relying heavily
upon contract relations, as in the case of virtual contract networks, reported a much
greater sense of distrust as compared to networks having ownership o f hospitals
and other provider facilities. The interpretation o f this is that there are far more
avenues for physician involvement and active participation in governance in tightly
coupled networks, such as integrated hospital systems, than in contractual
networks removed from direct service delivery. This interpretation is consistent
with the conclusions of Morrisey, Alexander, Bums and Johnson (1999), who
found that hospital networks routinely integrated physicians into the processes of
governance and management to achieve physician participation.
Lack o f Cultural Cohesion
The collective sense of distrust, the potential for disloyalty by least vested
interests, the tendency for isolation within networks, and changes affecting
network member composition, each potentially contributes to a noticeable lack of
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cultural cohesion. The lack of an identifiable network culture and persisting
cultural fragmentation was the unifying theme in the networks considered.
Cohesion in visible artifacts, espoused values and the underlying assumptions was
more characteristic o f the individual organizations comprising the network than for
the network as a whole. Many of the executive informants commented that the
network itself had no discernible culture. Others described a dual network culture,
one representing network level management, and the other representing
management at the individual organization level. The dual culture referred to
provided insights into the differences in management cultures and values at the
network versus organization level. Organization level management emphasized
equity and fairness in the conduct of operations; network level managers placed
greater emphasis upon control through the network's vertical hierarchical
component or levels.
Culture "implies some level o f structural stability" (Schein. 1992,9-11).
The networks investigated were reportedly stable in governance and management
structures, as well as in the primary components of the network configuration.
Still, there was an obvious lack of a cohesive “network culture.” Apparently,
performance outcomes did not seem to be significantly impacted by the lack o f this
cohesion among organizations. Similarly, one or more organizational components
for each o f the networks examined, evidenced incongruence between their
accepted missions and the mission o f the overall network; this too did not seem to
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impair network function. The tentative conclusion is that acceptance of the
network context and its coproduction purposes may be sufficient in establishing
the needed degree of stability and cooperation among networked organizations to
achieve the desired levels of performance, in spite o f a fragmented and ill-defined
culture.
Governance/Management Nexus: Shared Leadership and Duality
Insofar as the delivery of health care or the performance o f any policy
sector is dependent upon the effectiveness of network action, the development of
adequate governance oversight and management capacities to establish and direct
interorganizational and transnetwork processes, becomes critical. It has been
theorized that performance effectiveness can be attained through an environment
of responsive autonomy derived ffom a governance process in which oversight
authorities display attentive, delegative, and supportive behaviors. (Rainey &
Steinbauer. 1999. 16). This researcher found that the processes of network
governance were not necessarily supportive, or particularly attentive. However,
network components were fairly autonomous, participating in network governance
and management through the sharing o f leadership.
This research uncovered a shared leadership capacity that has not been
contemplated to any significant extent within the organizational literature, though
its potential to empower others and enlarge the overall leadership capacity to
influence effectiveness has been recognized (Rainey & Steinbauer, 1999,18-20).
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A shared network leadership capacity was revealed in the form of a cadre or
organized nucleus o f the senior leadership of organizations comprising the
network. The cadre's structure provided for representative governance, while its
process permitted a sharing of the leaders' experiences and skill proficiencies.
Members o f the cadre naturally benefited from one another's competencies, which
also permitted them to learn from one another in the management and oversight of
multiple organizations. The collective wisdom gained through the exchange of
complementary knowledge and skills facilitated a much stronger management
capacity than otherwise could have been attained.
Unlike traditional organization managers, network managers were observed
as being far less concerned with the routine and performance of departmental
operations, and far more concerned with a broader scope of performance, such as
the contextual conditions influencing events and outcomes and how these
conditions are managed and buffered. Throughout the network, the senior
leadership acted as the binding force, the buffering agent, the interorganizational
and transnetwork conduit o f idea exchange and action approval, the stability
amidst the chaos. Network management action embodied a collective result, rather
than the end result o f the influence of a single actor.
The multilevel nature of networks was reflected in the multilevel
interactions o f management. “Multilevelism” complicated the investigative
process, as care had to be given to the analysis of management at different levels
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within the network, for example, network versus organization levels. The greater
the depth o f partnering, density o f interactions, and network geographic
expansiveness, the more potential levels of complexity and forms o f management
capacity there were to be examined.
Analysis of a network's structural configuration identified nodes or levels
o f management interchange between the network and its organizations. It is at
these nodes that buffering or reverberation of the network's individual
organizations' successes or failures was likely to occur. Management tended to
focus at their immediate or peer level of organizations within the network, and
generally within one to two levels up or down in a hierarchical position in the
network. This suggests a reasonable sphere o f interface and oversight for network
managers who operate in a network of considerable depth and geographic
expansiveness. Many network managers also occupied dual role positions, both in
the network and as leaders of organizations. This duality in roles raises issues of
power sharing as expressed by Agranoff and McGuire (2001 b) in the “Big
Questions of Public Network Management Research.”
There also emerged a duality in the culture of network management,
characterized by antithetical values and decision-making processes. At the
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network level.1 the value emphasis for the majority of networks was authority and
control; managers were more prescriptive and authoritative than would have been
expected, reflecting a preference for top-down, autocratic decision-making
climates. However, at the organization level of network managers, the value
emphasis was upon equity and fairness, which was congruent with a decision
making process that cultivated democracy and consensus building. It is likely that
this duality of management, both in roles and cultures, provides for flexibility and
adaptability' in the administration of a network’s affairs.
IMPLICATIONS FOR POSTMODERN NETWORK MANAGEMENT
In the face of a changing bureaucracy, new management perspectives and
tools for administrative practice are needed. “Public network management is in
search o f a paradigm equivalent to the hierarchical-organizational authority
paradigm o f bureaucratic management” (Agranoff & McGuire. 2001b. 295).
Currently there have been limited empirical research efforts into network
management and the development of a network management paradigm. However,
this analysis of network dimensionality and examination o f network levels at the
nodes of management intersection, provides clues in the quest for explanatory
theory.
1 The network level is defined as being outside the boundaries of individual organizations,
but within the collective of organizations; it includes the nodes of management intersection between
organizations as well as other network strata, such as regional or corporate management capacities.
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First, managing in the postmodern era of networked administration requires
a change in mindset. Rather than relying on earlier organizational assumptions,
management needs to keep in mind the larger social context beyond individuals
and organizations, that of networks and multinetworks. Networks encompass a
vast political economy which must be responsive to its member organizations' and
stakeholders' interests. As a result of such diversity in membership and influence,
traditional forms and methods for managing single organizations are not readily
applicable.
The postmodern manager functions differently than a manager of an insular
organization. Work efforts must now be viewed in the collective sense and be
directed toward joint outcomes. The network manager has regular multidirectional
interfaces across organizational boundaries, internally, and externally to the
network. Findings demonstrate that the majority of the network managers spent
their time coordinating, negotiating, and collaborating as opposed to supervising
and monitoring. Contacts between managers were made possible within the
network cadre. At the organizational level, management committees and teams
dominated, whereas management at higher levels in the network operated more
closely to traditional hierarchy, particularly if they were part o f a large corporation
with corporate levels o f management.
In single organization management, managers direct their attentions toward
internal processes and supervision of the work output to enhance overall
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performance; they engage in external matters as a matter of strategic concern.
Network managers spent the majority of their time focusing their energies
externally to address integration complexities and matters o f interorganizational
exchange.
Apart from a different function, network management capacity also evolves
a different form, requiring departure from classical organization management
theories. Network management adopts a form that ensures organizational
representation, oversight, and coordination of effort throughout the vastness of a
network. Management is less of an individual process and more o f a collective
group process. This investigation reveals that a common way to organize network
management is in the form of a cadre or nucleus of senior managers, each bringing
their own skill set of proficiencies. In cadre management, the capacities of the
individual managers are enhanced by the skills and expertise available in the
collective management capacity. In this way, the network benefits from more than
a single leader’s abilities.
New forms emphasize different skill proficiencies. This research suggests
that network level managers are especially adept at interpersonal communication
and relationship building. These proficiencies complement the most frequent
network leadership styles displayed: collaboration, participation, and delegation.
Little argument can be made here with Sam Overman’s (1996,491)
conclusion that the nature and meaning of administration will undergo dramatic
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change over the course of the next century. The acceptance of the administrative
world in terms o f the postmodern sciences o f chaos and quantum theories, asserts
the transformation from institutional bureaucracies to those of "public energy
fields" (Overman. 1996.490). where network management is empowered by
information flows (Agranoff & McGuire. 2001b. 302). Though metaphorical, the
application of such theories to the language of administration has an acceptable
utility in understanding management complexities and entanglements pervasive in
networking.
Adopting a postmodern perspective provides an explanatory framework for
the complex dynamics occurring in relation to the network's structural
configuration and integration complexity. Using postmodern vernacular, networks
demonstrate dynamism with multidirectional flows of energy operating in
relatively stable oscillation. Findings here suggest that management practice must
be guided by a mix of the conventional hierarchy assumptions and the assumptions
related to postmodern thinking and the new sciences o f nonlinear dynamics. The
identifying characteristics of networks, namely, organizational distinctiveness,
interconnectedness and interdependence, coexisting in a fluid, dynamic state of
ongoing flux and adaptation (refer to Exhibit 3.1, p.53). are the proposed elements
of a network paradigm conceptualized and advanced by the results of the current
research. Analysis also supports the continuum of network dynamics modeled in
Exhibit 3.3 (p. 63). which projects that as networks move along the continuum
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incorporating elements of vertical hierarchy and centralization, they generally
exhibit tighter coupling and stability. Moving toward multilevel integration
incorporates decentralized structures o f management and governance, as
demonstrated with shared leadership capacities of cadre management. A hybrid of
these two integration patterns, most typical of the networks in this study, would be
placed between these two configurations or integration patterns proposed on the
continuum.
Though it is accepted that leadership within organizations is often
concentrated in an individual with ultimate authority, within networks leadership
becomes a function of the organizational maze of influence. This maze includes
the structures of governance and management, and their related processes. This
empirical investigation concludes that there are identifiable social processes
occurring in the management of networks, congruent with those described by
Agranoff and McGuire (2001b) in their metaquestions referencing the process of
groupware, i.e.. negotiated decision-making and shared learning (302-302) and
collaborative power sharing (316). Managers span their organizational context,
crossing boundaries to engage in interactions with other organizational entities to
achieve network purposes. These managers span their boundaries to develop a
shared base of knowledge and experience to set the tone for and reinforce network
goals and mission, guiding the organizational actors o f a network to the desired
network outcomes. It appears that this is not an easy task since managers must
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adjust their thinking to prioritize network purposes and outcomes over individual
organizational purposes and outcomes, if necessary.
The idea o f sacrifice for the good o f the network as a whole requires a
different mindset than traditional organizational leadership. Much of the
contemporary business and public management literature focuses heavily upon
notions of leadership that are transformational, transactional, multicultural,
mission-driven, learning, to name a few. and on organizational theories reflecting
on culture and learning, adding and creating value, and performance monitoring
and excellence. These ideas on leadership in organizations must be expanded to
include leadership in networks which is a shared capacity. As noted, networks
evolve a shared leadership capacity in which a cadre of leaders is responsible for
setting network policies and determining its collective organizational action.
Though the governance and management capacity of a network utilizes
elements of authority incorporating levels o f vertical hierarchy, they are not solely
vested in formal authority. Within networks, there was a flexible, representative
process o f governance and management in the form of a cadre or group process
which shared the responsibilities and tasks for coordination of network outcomes.
At the organizational level, management took the form o f committees and teams
which displayed an inclination toward democratic impulses and the values of
equity and fairness.
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The logic of networks integrates familiar management infrastructures into
unfamiliar ones. Though the building blocks may be similar, their configuration or
arrangement differs. As a result, management needs to flex and adapt to
accommodate network purposes and organizational needs. Further inquiry into
this unfamiliar territory is required. Directions for future research are
contemplated in the discussion which follows.
DIRECTIONS FOR FUTURE RESEARCH AND THEORETICAL EXPLORATION
The increased advocacy for policy implementation realized through
network arrangements for the delivery o f public goods and services reaffirms the
importance of O 'Toole's (1997b) petition to public administration researchers and
practitioners to treat networks seriously. Health care service delivery as studied
here, is just one o f the many social goods that have evolved institutionally toward a
network delivery emphasis. Today's multinetworked institutions require the
attention o f researchers so that theory and practice may keep pace with the realities
o f a changing bureaucracy.
The effects of organizational coupling and decoupling which occur in
contractual arrangements, joint ventures, mergers, consolidations and divestitures,
may have significantly greater impact in real world settings than initially realized
or anticipated. Examples o f organizational consolidation failures and uncoupling
are abundant within the realm of health care service delivery and also may be
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found in the business sector as well. Whether, and if so, how. local communities
and industry sectors may be adversely affected or changed by the ever-increasing
presence o f networks is as yet a largely unsolved question.
Since integrated delivery' networks involve bureaucratic operations linked
with other institutions and organizational entities, research focused primarily upon
organizations as units of analysis may be less helpful in the postmodern era of
networks. Instead, examining the structures and processes o f network interaction
at intersecting levels or nodes, and across organizational boundaries would be
more informative. Such an approach would provide much needed insights into the
similarities and differences between the workings of networks and those of
familiar singular organizations. Thus, research that emphasizes a macrolevel of
organizational analysis, i.e., networks and their linkages, as the evolved
organizational milieu for designing and executing policy, is both prudent and
necessary.
The analytical framework for multilevel network analysis utilized in this
research provides a tentative map for approaching the study o f network
phenomena. It establishes a conceptual plan which future investigators may utilize
to explore and communicate similar phenomena. Specific dimensions of
variability are identified for broad probing and examination. The intent o f this
approach to network exploration and analysis is to string together and identify
characteristics of the larger social structure along with the mediating variables
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which may influence or contribute to network effectiveness and performance. By
dealing with interorganizational study through a network perspective, analysis may
reveal various heuristics and new strategies for network design, effective network
management, and policymaking that will influence multilevel network integration
and structure.
Currently, public policy is supportive o f network development through
interorganizational collaboration between public health agencies and community
delivery systems for health and social services. In light of this, considerably more
research and theoretical development is needed concerning networked settings.
This research and development requires complex multilevel analysis beyond the
study of singular organizations. In studying networks, research analysis must not
be limited to single components as this would most likely lead to a potentially
skewed or faulty analysis of interorganizational relations and neglect other
dimensions of variability.
Presently, there is considerable variability in the way in which networks are
approached in studies. If the goal is to shape health policy to encourage network
effectiveness in service delivery, it becomes important to develop a consensus
concerning network taxonomies so that particular network structures and
dimensions may be examined for their role in enhancing fiscal, administrative and
serv ice delivery performance indicators. Particularly compelling are the effects of
different network integrative structures, e.g., the impact upon access and quality of
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227
community health services, and the respective roles of public policy makers, public
and private organizations, and individuals in determining health resources
allocation, health policies and planning for a given community.
The identification of a logic for networks and network effectiveness is a
preliminary step toward the framing of theory-based network research. The
present research underscores the value of qualitatively derived knowledge, i.e..
observation, interviews and field research techniques, in empirical studies of
public service delivery mechanisms. These in depth approaches to knowledge
acquisition aid in the interpretation of network action and performance outcomes.
Rather than relying upon traditional public administration assumptions and
paradigms, it is now essential to examine the effects and influences of network
dimensionality, particularly in the service delivery sector where they are more
prevalent.
Valid and reliable tools for assessing network performance effectiveness
and social value must also be developed. The blind acceptance of the assumptions
of economic efficiencies and improved service delivery as truths has led to much
experimentation without substantive facts. Such assumptions include the notion
that networks naturally produce greater efficiencies which result in greater
effectiveness overall. The reality suggested by this research has shown that the
amalgamation o f organizational structures creates a new set o f needs which are not
necessarily efficient. For example, though networks may successfully reduce or
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eliminate redundancies in function as a result o f the interdependencies created,
considerable expansion of administrative responsibilities in the coordination and
management of network components results. There are also increased time
demands and needs for skill proficiencies to navigate the demands of a political
economy that is ever expanding to include greater numbers of stakeholders, each
with their own agenda.
Theory-based research efforts must coincide with exploratory efforts so that
what evolves is something of substance. The exploratory study design
implemented in this investigation is grounded in a strong theoretical
conceptualization effort, and also reflects the findings of recent empirical research.
This design was adopted so that the research findings could be linked to an
emerging set of network principles that could be subject to future research
verification and refinement.
In consideration of future directions for network-focused research,
sustained attention should be placed on the tasks of fundamental description o f
networks and network theory development: (1) Development of explanatory
models which capture the broad dimensionality of network configurations and
structural coupling arrangements, and consensus building concerning definition of
taxonomies; (2) Identification o f origins, influences and concentrations of network
power and organizational dominance; (3) Examination o f network contexts,
specifically, the predisposing and precipitating factors that induce network
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formation, influence network growth and suggest future success or failure; (4)
Advancement o f social network theory through analysis of the organizational
nodes o f network interaction and boundary exchange: (5) Investigation of the
causal links between network structures and cultural processes, and their effects
upon the form and capacities of management and governance, cultural cohesion
and related aspects o f reciprocity, trust, and collaboration; (6) Determination o f a
logic for network effectiveness, considering whether multipurpose networks are
more or less effective than single purpose networks.
In conclusion, a single organization cannot accomplish the service
provision and delivery schema that are made possible through networks of
organizations. Yet. the nature of networks is not understood and their value has
not been empirically verified. Realizing the potential benefits to be gained through
a clearer understanding of network phenomena requires that broad research
undertakings be initiated to explain how networks harness, direct and coordinate
organizational capacities.
The wealth o f literature in the field of organizational studies can be of
enormous assistance in approaching the study of networks. What must occur next,
however, is an expansion of the social action paradigm beyond organizations.
Organizations must be viewed as the structural determinants and subcultural
dynamics o f networks, bringing networks to a macrolevel of organizational study.
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APPENDICES
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APPENDIX A
CORE PROPOSITIONS OF NETWORK CONFIGURATIONS
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Proposition 2.1
Proposition 2.2
Proposition 2.3
Proposition 2.4
Proposition 2.5
Proposition 2.6
Proposition 2.7
Proposition 2.8
Proposition 3.1
Proposition 3.2
CORE PROPOSITIONS OF NETWORK CONFIGURATIONS
Networks blend elem ents o f hierarchy an d chaos, i.e., linear an d non-linear system s respectively.
Buffering and perturbations occur with uncertainty throughout a network as a function o f continual adaptive, self
organizing processes occurring am ong network components.
Networks engage in interorganizational a s well as transorganizational boundary spanning activity.
A network leader is the designated boundary spanner responsible fo r network exchange and exchange relations, an d may
be considered a m ediating variable or buffering element among network components affecting network perform ance
effectiveness.
Indistinct interorganizational boundaries contribute to multiculturalism in networks rather than cultural cohesion or
integration which is dependent upon the degree to which cultural fragm entation persists among network members.
Networks are relational interorganizational system s o f exchange com prised o f organization sets with discernible relational
patterns o f power, influence an d communication.
The dispersion o f p o w er an d relaxation o f controls within network structures perm its transorganizational delegation and
negotiation o f adm inistrative capacity, often resulting in ill-defined, shared, fltzzy governance mechanisms.
Network accountability involves shared governance between networked entities which increases the cost an d complexities
o f oversight an d com pliance monitoring.
A network structure com prises individual organizational members each having distinct capacities to exchange (distinctive
components).
Network components are woven together o r coupled by form s o f control including, ownership interest, sh ared governance,
and/or contract (interconnectedness). u
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Proposition 3.3
Proposition 3.4
Proposition 3.5
Proposition 3.6
Proposition 3.7
Proposition 3.8
Proposition 3.9
Proposition 3.10
Proposition 3.11
CORE PROPOSITIONS OF NETWORK CONFIGURATIONS - CONTINUED
Network circuitry is established by a discernible pattern o f boundary spanning activity resulting from dependencies
(interdependence) between the network's distinctive components.
A network fim ctions in a state o f continual change and adaptation, influenced by energy flows and forces that impinge
upon the network (dynamism).
C ooperative strategies (contracting, coopting, an d coalescing) result fro m network interdependencies and serve to align
organizational capacities necessary fo r network coproduction.
Loosely coupled networks manifest m ultidirectional flows with m ultilevel structures, contributing to dynamic flux with
greater instability an d susceptibility to change; whereas tightly coupled networks exhibit unidirectional flo w s and vertical
hierarchical structure contributing to static resistance with greater stability and reduced susceptibility to change.
Network form ation m ay be proactive or reactive on the part o f the organizations involved an d varies in accordance with
organizational contexts o f strategy, environment, function and structure.
The governance/m anagem ent nexus is the prim ary conduit fo r interorganizational and transnetwork cooperation and
collaboration, an d congregates the expertise responsible fo r managing network capacity and actions tow ard planned
outcomes.
Networks seek stable shared governance, adopting both centralized an d decentralized structures with inform al a d hoc
pow ers assum ed by a n etw ork’ s distinctive components.
The nuxles o f governance selected by networks are influenced by organizational components occupying dom inance-power
positions within the network.
Network governance seeks stabilization through mechanisms o f accountability an d cooperative effort.
K>
ON
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Proposition 3. 12
Proposition 3.13
Proposition 3.14
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as
U J
CORE PROPOSITIONS OF NETWORK CONFIGURATIONS - CONTINUED
Network leadership takes the form o f a coalition exercising a collaborative style to integrate interorganizational capacities
into a network economy.
Network management occurs in an expansive political economy o f multilevel relations sustained through cooperation and
negotiation.
Dynamic equilibrium or stable oscillation in a network is a function o f management's ability to dampen uncertainty and
sm ooth fluctuations.
264
APPENDIX B
IDN INTERVIEW QUESTIONNAIRE / DISCUSSION GUIDE
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265
IDN INTERVIEW QUESTIONNAIRE/
DISCUSSION GUIDE
Organization/IDN: ___________________________
Interviewee / Title: ___________________________
Years in:
Current Position: ___________________________
Healthcare Field:_____ ___________________________
Senior Mgt.: ___________________________
Education/Degrees:___ ___________________________
Date/Time:
Network Structural Configuration & Complexity
1. Please provide an organizational chart for your facility or organization if available.
Please sketch your organization as instructed on the IDN Interview
Questionnaire'Discussion Guide (Supplement Form A) provided for this purpose.
2. Please provide an organizational chart o f your healthcare network, including the names of
the organizations or facilities which comprise your integrated health system or network, if
available. Please sketch the network as instructed on the IDN Interview
Questionnaire/Discussion Guide (Supplement Form B) provided for this purpose.
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266
» Distinctive Components & Integration Complexity
List the organizations considered part o f your healthcare service delivery network, indicating:
organization/facility name, ownership status (for profit, not-for-profit), ownership interest as a
percent (% 01). non-ownership (if NO. please explain nature of affiliation), and organization
type (HMO. IPA. MSO. Hospital. Physician Medical Group, or Other). Indicate the level of
frequency you engage in communications with each organization you have listed in your
network: Never (N). Annually (A). Quarterly (Q). Monthly (M). Weekly (W) or Daily (D)
FP NP %Ol NO
HMO IPA MSO H PMG Other______________ N A Q M W D
____________________________________ FP NP 0 /oOI N O ____________
HMO IPA MSO H PMG Other______________ N A Q M W D
____________________________________ FP NP %0I N O ____________
HMO IPA MSO H PMG Other______________ N A Q M W D
____________________________________ FP NP %0l N O ____________
HMO IPA MSO H PMG Other______________ N A Q M W D
____________________________________ FP NP %0I N O ____________
HMO IPA MSO H PMG Other______________ N A Q M W D
____________________________________ FP NP %0I N O ____________
HMO IPA MSO H PMG_Other______________ N A Q M W D
____________________________________ FP NP %0I N O ____________
HMO IPA MSO H PMG Other______________ N A Q M W D
FP NP %OI N O ____________
HMO IPA MSO H PMG Other______________ N A Q M W D
____________________________________ FP NP % 0I N O ____________
HMO IPA MSO H PMG Other______________ N A Q M W D
____________________________________ FP NP %0I N O ____________
HMO IPA MSO H PMG Other______________ N A Q M W D
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267
I. What degree of formal responsibility for the entire network is held by this organization in
the overall network structure?
2. Is the network itself designed to be responsive to the needs o f organizational members in
the network? Y N How is this evidenced?
3. Does the network assume responsibility to address public concerns? Y N
Are they responsive? Y N How is this evidenced?
4. Within the network, is there an organization perceived to be more dominant or powerful
in the areas of authority, responsibility and influence? If yes. Please identify and explain.
(Please complete Supplement Form A, section (c) provided.)
Select the source o f this dominance:
Legitimate Authority ___ Political influence
Resource munificence (Funding Financial Strength)
Other
Estimate o f network or interorganizational interactions:
a) Identify the primary organizations within and/or outside the boundaries o f the network
that you most often interact with as key senior management? List by name or refer to
organizational and network charts.
b) What would you estimate to be the frequency (schedule and number o f contacts) and
intensity (duration of contacts) you have with each o f these entities within a given
month (this includes any communication or correspondence which you directly initiate
or respond to; each communication is counted as a single contact)?
c) How would you characterize the general nature and purpose of these interactions?
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268
Congruence: » Mission & Mission Motivation
1. In your own words, what is the mission of:
a) Your individual organization?
b) Your healthcare network?
c) Is there congruency o f mission among organizations within the network?
Between the organization and the network as a whole?
2. Is there a public service motivation? Explain.
3. What evidence suggests that the mission is embraced by the organizations in the network?
4. How is the mission communicated throughout the network?
5. Are there incentives for carrying out the mission? If yes, describe below.
6. Could you provide a copy o f your organization's or network’s official mission statement?
Context
1. For what purpose has the network formed? Explain.
2. Describe the processes which occur in determining:
a) Your individual organization's strategy and development:
b) Your overall network's strategy and development:
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269
3. Which reason(s) below most closely accounts for the current structure and composition
o f your network? Explain why.
a) Economic Efficiency:
b) Geographic Expansion:
c) Political Pressures or Expediency:
d) Other:
4. Relate the known precipitating events which occurred at the time of your network’s
formation and also for each additional organizational entry into network membership as it
occurred.
5. What were the strategic purposes or environmental factors which came into play in the
network’s formation? Are these different from the current day? Please elaborate.
6. How would you describe the current context in which your organization/network
operates?
7. Please describe the network context for each of the following:
a) Community
b) Political
c) Industry Sector
d) Other:
8. How does the context in which the network operates influence the network’s structural
composition or configuration? Vice versa?
Stability (Climate) & Cohesion (Culture)
1. How would you characterize the network culture and its assimilation?
Stable / Unstable Homogeneous / Heterogeneous Trust/D istrust
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270
2. What are the values espoused by the leadership of:
a) Your individual organization?
b) The network as a whole?
3. What are the values evidenced by the behaviors or actions taken by the leadership of:
a) Your individual organization?
b) The network as a whole?
4. How important is each of the following traditional values and how are they evidenced:
In your organization: In the network:
Equity/Fairness ____ Equity/Fairness ____
Efficiency ____ Efficiency ____
Accountability' ____ Accountability ____
Authority/Control ____ Authority/Control ____
5. Has the leadership been stable? If no. provide details on term of office and reason for
leadership instability or change:
a) In your individual organization:
b) Within your healthcare network:
6. Relate examples o f symbols, events or processes, that best depict the culture and
climate of:
a) Your individual organization:
b) Your healthcare network:
7. Are there any culture clashes or conflicts between organizations within the network?
Explain.
8. If yes, what do you believe are the probable reasons for the observed conflict or clash?
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271
Management Capacity
1. Identify the key management positions responsible for development, operations,
performance?
a) In the organization:
b) In the network:
2. What leadership style is evidenced by management?
a) In the organization:
b) At network management levels:
3. Describe the management atmosphere. Is professionalism exhibited?
a) At the organizational management level? Y N
b) At the network management level? Y N
4. What form does leadership take (e.g., inner circle, coalition, teams, etc.)?
a) At the organizational level:
b) At the network management level:
5. Is the organization or network professionally managed through a contractual
arrangement? If yes, by whom?
a) Organization: Y N By: __________________________________________
b) Network: Y N By:___________________________________________
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6. Is management considered:
Participative: Y N Supportive: Y N Delegative: Y N Attentive: Y
7. Indicate the preferred method o f communication with management:
a) In the organization:
In-person meeting ____ Telephone Conversation ____ Voice mail_____
Written Communication: Memo _____ Letter Email______ ________
Other: ______________________________________________________________
b) In the network as a whole:
In-person meeting ____ Telephone Conversation ____ Voice mail_____
Written Communication: Memo _____ Letter Email______ ________
Other: ______________________________________________________________
8. Where and/or with whom does decision-making authority reside?
a) For your individual organization:
b) For other organizations/units within the network:
c) For network actions as a whole:
9. Indicate which item in each pair most often describes your overall:
a) Individual organization’s decision-making processes:
Centralized / Decentralized Individual / Collective
Defined / Ad Hoc Orderly / Chaotic
Top-Down / Bottom-Up Dictated / Negotiated
Autocratic / Democratic Closely-held / Delegated
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273
b) Network’s decision-making processes:
Centralized / Decentralized Individual / Collective
Defined / Ad Hoc Orderly / Chaotic
Top-Down Bottom-Up Dictated / Negotiated
Autocratic Democratic Closely-held ' Delegated
Governance Capacity
1. How is your individual organization governed? Indicate the number o f members and
composition for each as may apply.
Board ( )___________________________________________________________________
Joint-Operating Board ( )____________________________________________________
Shared Governance ( ) ______________________________________________________
Oversight Board ( )__________________________________________________________
Committee ( )________________________________________________________________
Other ( ) ___________________________________________________________________
2. How is the network governed? Indicate the number of members and composition for each
as may apply. Is the governance mechanism(s) representative of the network’s member
composition? Y N
3.
Board ( )___________________________________________________________________
Joint-Operating Board ( )_____________________________________________________
Shared Governance (__) _______________________________________________________
Oversight Board ( )__________________________________________________________
Committee ( )________________________________________________________________
Other ( ) ___________________________________________________________________
4. Elaborate on the experience o f Board members or governing body participants?
a) O f your individual organization:
b) O f the healthcare network:
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274
5. What is the criteria used for the selection, appointment and participation o f a member of
the board or governing body?
a) Of your individual organization:
b) O f the healthcare network:
6. Are you currently satisfied with the following:
a) Process of governance? Indicate yes or no and why?
1) For your individual organization:
2) For the network:
b) Performance of governance mechanism? Indicate yes or no and why?
1) For your individual organization:
2) For the network:
7. When was your current governing mechanism established?
a) For your individual organization:
b) For the network:
8. Has your governance mechanism changed in the past year? If yes, why?
If no, when was this governance process last modified and for what reason?
a) For your individual organization: Y N:
b) For the network: Y N
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275
9. If your governance mechanism has been modified, for what reason(s) were changes
made?
a) For your individual organization: Modified Not Modified
b) For the network: Modified Not Modified
10. Indicate the frequency o f governance meetings:
a) For your individual organization:
Scheduled: A Q M W D Other _________________________
Actually Held: A Q M W D Other _________________________
b) For the network:
Scheduled: A Q M W D Other _________________________
Actually Held: A Q M W D Other _________________________
11. Indicate the frequency of communications with governing bodies?
a) For your individual organization:
Scheduled: A Q M W D Other _________________________
Actually Held: A Q M W D Other _________________________
b) For the network:
Scheduled: A Q M W D Other _________________________
Actually Held: A Q M W D Other _________________________
12. Indicate the preferred method o f communication with governing bodies?
a) For your organization:
In-person meeting ____ Telephone Conversation ____ Voice mail ____
Written Communication: Memo ____ Letter Email_____
Other: _______ ___ _________
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276
b) For the network:
In-person meeting ____ Telephone Conversation Voice mail ____
Written Communication: Memo ____ L e tte r Email ____
Other: _____________________________________________________________
13. Do you consider your governance stable (S) or unstable (U)? Explain your answer
addressing the current conditions or context in which your governing mechanism
operates.
a) For your individual organization: S U
b) For the network: S U
14. In your opinion what is the most challenging aspect of network governance?
15. Do you perceive a difference between network governance versus organizational, i.e.,
facility governance? If yes, please explain.
16. Have you integrated physicians into the governance structure o f the organization and
network? Please explain.
17. Do you perceive the integration of physicians as beneficial or a hindrance? Please
explain.
18. Are there accountability mechanisms other than the governance structure previously
discussed?
a) For your individual organization: Y N
b) For the network: Y N
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277
19. If yes to no. 18 above, what are the frequency and processes of these monitoring contacts?
a) For your individual organization:
Frequency: A Q M W D Other Processes:
b) For the network:
Frequency: A Q M W D Other Processes:
20. To whom do your organization and the network have accountability?
a) Economic accountability:
b) Political accountability:
c) Legal accountability:
21. To whom does the network have accountability?
a) Economic accountability:
b) Political accountability:
c) Legal accountability:
22. What are the controls on purchasing and spending? What are the approval processes?
a) Organizational controls and approval processes:
b) Network controls and approval processes:
23. Are there requirements for public disclosure? In what areas?
a) Organizational requirements:
b) Network requirements:
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278
Network Performance
1. What are the established performance indicators for the network?
Is this congruent with what your governing mechanism has established as measures of
performance? Y N
a) Fiscal Performance Indicators:
1) Has the organization met these fiscal goals? Y N If no. why not?
2) Are there sufficient cash reserves for network operations and debt obligations?
Y N If no. why not?
b) Administrative Performance Indicators:
c) Service Delivery Performance Indicators:
2. Are you able to provide any summarized data for the network performance indicators
noted above? Y N Which data specifically? When can this be obtained?
3. What are the performance reporting requirements?
a) Internal to the network:
b) External to the network:
4. Please provide quantitative data for the following as may be applicable:
No. of health plans/type:
No. of contracts and/or contracted entities:
No. enrollees in the network or health plan:
Geographic coverage area/type (e.g., rural, urban, suburban):
No. of health system /network beds:
Annual gross and net revenues; budgeted and net income or loss for the organization and
the network:
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279
Comments & Observations
1. Based upon your experiences and observations, do you feel network structures effectively
improve the capacity o f organizations to meet desired goals and performance
expectations? Please explain.
2. Please relate any experiences or observations that you believe are critical to the
understanding o f networks.
3. Are there any specific areas concerning networks that you feel need further investigation?
For example, these may include perplexing problems or benefits caused by network
structures or inherent processes?
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280
IDN INTERVIEW QUESTIONNAIRE / DISCUSSION GUIDE
(Supplement Form A)
IDN: ________________________________________ Date:_______ _______________
Interviewee: ________________________________
Please sketch a representation of your health care delivery network:
(a) Identify the organizations or facilities which comprise your integrated health system or
network by drawing and labeling boxes representing the organizational components o f the
network. Place arrows to indicate authority and reporting relations. Include governing bodies
such as boards or committees which control or have the responsibility to oversee the network.
(Use the reverse side o f this page for additional space as required.)
(b) Circle the box which identifies your organization within the network.
(c) For each of the organization/network components that you have drawn, indicate the degree of
influence you perceive the component to possess by selecting from the following:
none (does not influence or impact network decisions/processes)
minimal (rarely or occasionally influences or impacts network decisions/processes)
moderate (frequently influences or impacts network decisions/processes)
significant (nearly always influences or impacts network decisions/processes)
extensive (constantly and always influences or impacts network decisions/processes)
(d) Discuss the reasons as to why you perceive certain organizations to be more dominant or
powerful than others.
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281
IDN INTERVIEW QUESTIONNAIRE / DISCUSSION GUIDE
(Supplement Form B)
IDN: ______________________________________ Date:
Interviewee: _______
Please sketch a representation of the network organization/entity which you represent (e.g.. your
hospital or health care facility or other organization, your corporate facility', etc.):
(a) Draw boxes to indicate the primary organizational components or units. Place arrows to
indicate authority and reporting relations. Include governing bodies such as boards or
committees which control or have the responsibility to oversee your organization. (Use the
reverse side of this page for additional space as required.)
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Asset Metadata

Creator Staal, Donna Jean (author)

Core Title Toward a theory of networks and network effectiveness: An analytical framework for the study of multilevel networks in health care service delivery

Degree Doctor of Public Administration

Degree Program Public Administration

Publisher University of Southern California (original), University of Southern California. Libraries (digital)

Tag health sciences, health care management,OAI-PMH Harvest,Political Science, public administration

Language English

Contributor Digitized by ProQuest (provenance)

Permanent Link (DOI) https://doi.org/10.25549/usctheses-c16-232524

Unique identifier UC11338973

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Legacy Identifier 3073849.pdf

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Document Type Dissertation

Rights Staal, Donna Jean

Type texts

Source University of Southern California (contributing entity), University of Southern California Dissertations and Theses (collection)

Access Conditions The author retains rights to his/her dissertation, thesis or other graduate work according to U.S. copyright law. Electronic access is being provided by the USC Libraries in agreement with the au...

Repository Name University of Southern California Digital Library

Repository Location USC Digital Library, University of Southern California, University Park Campus, Los Angeles, California 90089, USA