Health Policy and Health Related Organizations

The existence and accomplishments of many organizations are affected by health policies. Certainly, the missions, objectives, and internal structures and resources, including the quality of their leadership, greatly influence the accomplishments of these organizations. However, the performance levels achieved by these organizations—whether measured in terms of contribution to health outcomes for customers, financial strength, reputation, growth, competitive position, scope of services provided, or some other parameter— are also heavily influenced by the nature of the opportunities and threats imposed on them from their external environments.

The external environments faced by health-related organizations include biological, cultural, demographic, ecological, economic, ethical, legal, policy, psychological, social, and technological dimensions. Policies that affect an organization are only part of its external environment, although they may constitute a critically important part. As Figure 2.1 illustrates, policies, along with the other variables in the external environment of an organization, provide an organization with a set of opportunities and threats to which it can—indeed, must—respond.

The organization responds to these threats and opportunities with strategies and organizational structures created to carry out the strategies. The quality of the strategies and structures, in terms of their ability to make

Figure 2.1

Relationship Between an Organization's External Environment and Its Performance

Organization External Environment

With policies and

• biological

• demographic

• ecological

• psychological

• technological dimensions


Opportunities and Threats

To which the organization responds with

Whose strengths and weaknesses influence future strategic choices


The implementation of which require

Organizational Structures

Which produce

Organizational Performance

Organizational Performance

Which produce appropriate responses to the relevant threats and opportunities, results in organizational performance. But, importantly, the series of events that culminates in organizational performance is triggered by the opportunities and threats the organization faces, which are the direct result of conditions in the organization's external environment, including the public policies that affect it. Thus, it is useful to consider the specific nature of health policy concerns and interests of some of the organizations in the health sector.

A rich variety of organizations populate the health sector; their diversity defies easy categorization, although a common thread among them is that they are all affected by and have interests in health policies. Hospitals, state or county health departments, health maintenance organizations (HMOs), hospices, and nursing homes are examples of health services providers. Although no guarantees can be made for the future, abundant evidence indicates that, for the most part, the organizations that provide health services in the United States have developed under extraordinarily favorable public policies. For example, enactment in 1946 of the Hospital Survey and Construction Act (P.L. 79-725) placed Congress squarely in support of expanded availability of health services and improved facilities. This legislation, known as the Hill-Burton Act after its authors, provided funds for hospital construction and marked the beginning of a decades-long program of extensive federal developmental subsidies aimed at increasing the availability of health services.

Another important aspect ofthe development ofhealth-related organizations, also supported and facilitated by public policy, has been the expansion of health insurance coverage. Beginning during World War II, when wages were frozen for many workers, health insurance and other benefits in lieu of wages became attractive features of the American workplace. Encouraged by policies that excluded these fringe benefits from income taxes and by a U.S. Supreme Court ruling that employee benefits, including health insurance, could be legitimately included in the collective bargaining process, employer-provided health insurance benefits grew rapidly in the middle decades of the twentieth century (America's Health Insurance Plans 2002).

Beyond private-sector growth in health insurance coverage, Medicare and Medicaid legislation was passed in 1965, providing more access to mainstream health services through publicly subsidized health insurance for the aged and many of the poor. With enactment of these programs, fully 85 percent of the American population had some form of health insurance.

Although public policies have been extremely important factors in the development of health-related organizations, the vast majority of them have emerged in the context of a market economy. Thus, much about the healthcare system in the United States has been shaped by the market forces of supply and demand and by the related decisions and actions of the buyers and sellers in this marketplace. The combination of market forces and public policies has shaped a complex and dynamic healthcare system.

In the healthcare system, health services are provided through a large and diverse variety of organizations. One way to envision the diversity of these health services organizations is to consider a continuum of health services that people might use over the course of their lives and to think of the organizational settings that provide them (Longest, Rakich, and Darr 2000). The continuum could begin before birth with organizations (or programs) that minimize negative environmental impact on human fetuses or that provide genetic counseling, family planning services, prenatal counseling, prenatal ambulatory care services, and birthing services. This would be followed early in life by pediatric ambulatory services; pediatric inpatient hospital services, including neonatal and pediatric intensive care units (ICUs); and both ambulatory and inpatient psychiatric services for children.

For adults, the most relevant health services organizations are those providing adult ambulatory services, including ambulatory surgery centers and emergency and trauma services; adult inpatient hospital services, including routine medical, surgical, and obstetrical services, as well as specialized cardiac care units (CCUs), medical ICUs, surgical ICUs, and monitored units; stand-alone cancer units, with radiotherapy capability and short-stay recovery beds; ambulatory and inpatient rehabilitation services, including specific subprograms for orthopedic, neurological, cardiac, arthritis, speech, otologic, and other services; ambulatory and inpatient psychiatric services, including specific subprograms for psychotics, day programs, counseling services, and detoxification; and home health care services.

In their later years, people might add to the list of relevant health services organizations those providing skilled and intermediate nursing services; adult day care services; respite services for caregivers of homebound patients, including services such as providing meals, visiting nurse and home health aides, electronic emergency call capability, cleaning, and simple home maintenance; and hospice care, palliative care, and associated family services, including bereavement, legal, and financial counseling.

The health services produced in the healthcare system have traditionally been provided by autonomous or independent health services organizations, with little attention to coordination of the continuum of services. Reflecting strongly held preferences for independence and autonomy among the leaders of most of these organizations—Ummel (1997, 13) characterizes this phenomenon as a "deeply rooted fixation on autonomy"—the organizations remained essentially independent of each other except for their arm's-length transactions and economic exchanges.

More recently, however, many health services organizations have significantly changed how they relate to each other (Shortell et al. 2000). Mergers, consolidations, acquisitions, and affiliations between and among previously independent organizations are now commonplace. At the extreme end of this activity is vertical integration, in which many organizations join into unified organizational arrangements or systems of organizations. The development of vertically integrated systems capable of providing a largely seamless continuum of health services—including primary, acute, rehabilitation, long-term, and hospice care—increasingly characterizes healthcare.

Health services in the future may in fact be organized and delivered through even more extensively integrated systems and networks in which providers, spanning the full continuum ofhealth services, are integrated with health plans or insurers and perhaps with suppliers to form entities that tie together many categories of organizations involved in the pursuit of health. Although limited in number and scope, some more fully integrated systems have already formed. Whether the integration of insurers and health plans with delivery systems will be successful is unclear, but these more fully integrated systems or networks of organizations can provide an extensive and coordinated continuum of health services to enrolled populations and may be the future of the nation's decreasingly fragmented approach to its pursuit ofhealth.

The policy interests of service provider organizations may vary, but certain generic policy interests are widely shared among their leaders. The attention of those in charge of provider organizations tends to be sharply focused, for example, on policies that might affect access to their services, the costs of those services, or their revenues from them. These leaders also typically tend to be concerned about policies that relate to the structure of the healthcare system, including antitrust issues involved in mergers and consolidations, policies that relate to meeting the needs of special populations that they may serve, policies pertaining to quality assurance, and a number of ethical and legal issues that arise in providing access to affordable health services of an appropriate quality to all who need them. The Real World of Health Policy: The Hospital and Healthsystem Association of Pennsylvania's 2005 State Legislative Agenda outlines the types of policies that the association pursues on behalf of its member hospitals and health systems.

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