With the case outlined below:

Assume the role of Steve Roberts. Makerecommendations. Should the service line management structure be retained and, if so, what actions might Mammoth undertake to strengthen the structure, operations, and overall strategy of Mammoth? Should Mammoth adopt other structures or processes to either complement or replacethe existing service-line arrangement?

Mammoth Healthcare System

The Problem

Steve Roberts fastened his seatbelt as he prepared for takeoff. He then turned to his right and offered a piece of gum to William Strayer, a partner at Briggs, Meyers, and Laventhol, the healthcare policy and management consulting firm that Steve joined after completing his masters degree at Northeastern University almost two years ago. They had just completed three long but fascinating days collecting information (mostly interviews) for a consulting project for their client, Mammoth Healthcare Systems (Mammoth). Mammoth executives had retained Steve's firm to obtain recommendations about Mammoth's innovative service line management structure. Mammoth was at a difficult juncture in its history. Cost containment pressures had caught up with the progressive institution, and the trend of financial losses was threatening its future. Moreover, length of stay at Mammoth's two hospitals had been creeping up, which appeared to be in part the result of poor coordination between clinicians and discharge planners. The system's emphasis on productivity and budget reductions had not been sufficient to stem the losses, nor had utilization management efforts made a major impact. Most importantly, Mammoth was struggling to differentiate itself in an increasingly competitive market.

Shortly after takeoff, Steven began to ponder what he had seen and heard during the two-day site visit.

The Setting

The Mammoth Healthcare System is located in the metropolitan area of one the country's historic cities along the eastern seaboard. The system was formed in 2015 when two community hospitals, Hanna and Thorndike, merged through a holding company arrangement. An impetus for the merger was the health care reform law and the belief that health care delivery in the U.S. was going to undergo major transformation. The two hospitals, which are 24 miles apart, became subsidiaries of the Mammoth Healthcare System. Ralph Nagle, who was often referred to as the "guru" of Mammoth, was then the chief executive officer. Following Mr. Nagle's resignation in 2016, Keith Smith was hired as CEO of Mammoth.Mr. Smith sought to develop Mammoth into a leading hospital system within the local market. By 2020, Mammoth had acquired several physician group practices and a nursing home. However, as of 2021, Mammoth's share for acute care services in its market area was approximately 20 percent, a drop of several percentage points since 2015. Mammoth competes head-to-head with three other community hospitals in its market that each has similar shares of the market for acute care services. Additionally, there are two teaching hospitals in the area, both of which are within approximately 60 miles of Mammoth's two hospitals.

Following the merger of the two community hospitals, the functions of human resources, support services, finance and marketing were centralized at the corporate level within Mammoth. This corporate structure was designed to support Mammoth as it developed into a leading health care-based delivery system.

Implementation and Evolution of the Organization Structure

Within two years after the merger, Mammoth executives set out to integrate the clinical operations of the two community hospitals that formed the foundation of their system.Mammoth executives believed that clinical integration of the two hospitals was critical for maintaining quality patient care and healthy financial performance in the face of increasing competition, reduced rates of payment (global payment arrangements were under consideration by local health plans), and declining utilization of services.Mammoth executives decided to use service line management as a key mechanism for integrating the clinical operations of the two hospitals. In particular, Mammoth executives wanted to use service lines to support their efforts to focus on certain clinical services that they believed could differentiate Mammoth from its competitors. When Mr. Smith (Mammoth's CEO) presented the idea to the system's governing board, he noted the following reasons for restructuring into service lines:

1. Service line management creates an organizational focus designed to make the hospital both more sensitive and more responsive to changing marketplace interests and concerns.
2. Service line management provides strong incentives for maintaining or improving both quality and continuity of patient care in the hospital setting.
3. Service line management provides a format for eliminating unnecessary duplication of services and staff.

4. Service line management increases accountability of hospital managers for patient and physician satisfaction, and for overall bottom-line results.

Mammoth undertook a year-long planning effort to implement service lines.It outlined the following objectives for service line management:

1. Financial
2. Achieve greater accountability for profits and losses
3. Be more responsive to changes in reimbursement
4. Organizational
5. Establish greater decision-making authority at the level closest to patient flow, and for the individuals most knowledgeable about services
6. Provide structure and incentives supportive of creative management
7. Eliminate management layers
8. Encourage greater partnership with physicians

2. Services
3. Be more responsive to competitive forces
4. Be more customer driven and patient oriented
5. Enhance the clinical management of patient care
6. Planning and development
7. Ensure greater control of strategic resource allocation by individuals holding operational responsibilities
8. Build a management structure that will result in synergy between programs
9. Provide a clearer delineation of resources within the organization

Under Mr. Smith's plan, Mammoth executives set out to establish independent service lines as profit centers that were overseen by mini-CEOs who would have total authority over their service lines. After extensive strategic planning efforts to identify where Mammoth could be a market leader, five service lines and various support departments were delineated. The five service lines are the following (see figure at the end of this document):

1. Mental health services
2. Women's and infants' services
3. Rehabilitation/neuroscience/orthopedics services
4. Cardiac/vascular services
5. Oncology (cancer) services

To symbolize the service line managers' power and authority, the title "executive director" was chosen. Most service lines have, in addition to the service line executive director, a medical director and a nursing director. The rehabilitation/neuroscience/orthopedics service line was expanded to incorporate the older adult services unit (i.e., geriatric care).

The service lines unify clinical services at each of the two hospitals. For example, with respect to the cardiac/vascular service line, the decision was made to place cardiac testing and surgery at Hanna Hospital.Patients being treated at Thorndike Hospital who develop cardiac problems are transferred to Hanna.

To incorporate the service line management concept into the Mammoth structure, Ms. Donaldson, who was president of Hanna Hospital, was given the responsibility for service lines and the additional title of executive vice president for service lines. Concurrently, the president of Thorndike Hospital, John Paul, was given additional responsibility as executive vice president for professional and support services. Both Ms. Donaldson and Mr. Paul report directly to Mr. Smith.

Nursing Services

To give the executive directors direct line authority, the nursing departments of the two hospitals were reorganized; nursing directors and clinical nurse specialists now reported to the service line executive directors. A corporate-level nursing service office was maintained for purposes of staffing, nursing education and development, infection control, and nursing quality assurance.

The decision to reorganize the nursing division was a painful one, as there was much resistance from nursing. The administrators responsible for the decision spent much time and effort convincing concerned staff nurses and managers that the new organization structures would meet the needs of their patients, the requirements of regulatory bodies, and the professional development of their specialty areas.

To combat the resistance against decentralization of the nursing function, a nursing leadership council was established. This group is led by the nurse executive and is composed of the nursing directors, clinical nurse specialists, and other nursing administration personnel. The leadership council, which meets once a month, is the governing body for nursing practice issues as well as the place for general policy and procedure development, planned program implementation, and collegial interaction.

The central nursing office that remained after the reorganization is considered a "safe" place for nursing directors to go for advice and support.Many believe that the central nursing office has become the mediator between the executive directors and the nursing directors on some issues, and both were noted to seek counsel there.

Ancillary Services

Wherever possible, ancillary services that primarily support one service line were placed organizationally within that service line. For example, physical therapy, occupational therapy, and speech and audiology were placed within the rehabilitation/neuroscience/orthopedics service line. However, departments that serve many if not all service lines remain centralized.These centralized departments tend to provide support to the service lines in such a way that support staff have become somewhat dedicated. For example, environmental services staff have designated areas of coverage. Decision support staff are divided into teams that concentrate their energies on specific service lines in the areas of budget, cost accounting, planning, marketing, financial analysis, and management engineering.

Selection of Service Line Executive Directors

The five executive directors were recruited in 2017, with three of the five coming from within the Mammoth system. For some of the service lines, the appointment of the executive director was a natural transition. For example, the nurse managers for the general medical/surgical and maternity and infant care areas were promoted to executive directors for those service lines.

Role of the Executive Directors

Ultimately, the service line executive directors are responsible for the overall operations of their service lines. Revenues, expenses, and service line productivity are the major concerns of these executive directors. Their principal accountabilities include the following:

1. Ensuring provision of high quality care
2. Monitoring and maintaining fiscal viability according to agreed upon standards
3. Maintaining long-term viability through program development and marketing
4. Maintaining appropriate contracts and relationships with the medical staff
5. Ensuring quality of care through quality assurance activities
6. Coordinating activities with the other service lines
7. Enhancing long-term viability and competitive advantage of the service line

In addition to fiscal responsibilities for the departments under its domain, each service line is assigned a specific set of DRGs by which success is measured. In some cases, the unit where a patient with a particular DRG eventually receives care is not the responsibility of the service line executive director charged with responsibility for that particular DRG.

For each specialty area, the executive director is viewed as the administrative representative. Executive directors are seen as the advocates for their services and responsible for facilitating the determination of and obtaining required resources to provide a cost effective and quality service. The job description for the executive director position calls for the provision of administrative direction to unit managers in the development of objectives, standards of care, and policies and procedures. Interdepartmental problem solving typically is the responsibility of the executive directors. In terms of program development, the executive director is responsible for strategic planning, market plan development, and monitoring consumer satisfaction and quality of care.

The executive directors have the authority in regard to expenditures and program development, as approved in their business plans. Executive directors are required to consult their superiors about policy decisions that would affect the total organization, and about expenditures and plans not outlined in the approved business plans.

The executive directors are responsible for hiring and developing personnel within their service lines. However, the nursing director of a given service line is delegated the authority of hiring, firing, and evaluating nursing personnel. Additionally, nursing directors are typically delegated the authority to approve expense requests within their budgets, and delegated authority in regard to productivity and quality assurance.

Medical Leadership

Medical leadership varies among service lines. For some, a traditional medical director position exists.The service lines of mental health and rehabilitation services are examples of this. For others, such as and womens' and infants', it has been difficult to appoint one medical leader, and the executive director and nursing directors have had to work with different groups of physicians, depending on the issue at hand. Thus, some service lines have a more formal relationship with the physicians providing service to the patients than do others.

Information System and Support

At present Mammoth's information system does not have the flexibility needed to provide hard data for service line decision making. Accounting in terms of service line profitability is available but on an annual basis only. Budgeting according to anticipated resource use is not yet possible; consequently, the executive directors have had difficulty in monitoring actual versus budgeted resource use.

A major initiative of Mammoth is productivity management. Each clinical department is expected to maintain an average productivity level, over a two-week period, of 102 percent.Engineered standards have been developed for each department, and reports generated by decision support staff assist the executive directors and, specifically, their managers in monitoring the productivity level of their departments.

Even though initially Mr. Smith envisioned having service lines negotiating and contracting for services from support departments and with the ability to go outside the Mammoth system if support services were not satisfactory, it is no longer anticipated that service line management will go to this extreme. The decision support group does not foresee charging back, for example, the services of housekeeping and food services to a service line.

Assessment of Service Line Management

An advantage of the service line structure that is clearly recognized throughout Mammoth is the availability of administrative support and advocacy by specialty including marketing.Many Mammoth staff believe that access to administration has improved, which contributes to greater distribution of information, more focus on the needs of their consumers, better program planning and implementation, and a more effective focus on quality of care.As one physician noted, "We now have an advocate versus an obstacle in administration."

Many staff also believe that no other structure makes much sense for some clinical services given growing competitive pressures in the markets Mammoth services. The structure of the women's and infants' service line is appreciated by both the hospital staff and the medical staff, as it allows staff the flexibility and responsiveness to truly cater to their clientele.

Some of the disadvantages attributed to the service line effort concern fragmentation of the system. Some people believe that individual service lines focus on their own needs without any apparent regard for the organization as a whole. For example, when the cardiac care unit offered double time to its staff nurses in order to cover staffing on off-shifts, the intensive care nurses gained leverage to demand the same compensation. When pharmacy raised the prices of certain drugs to improve its profitability, service lines that used these drugs and could not pass on the increased costs to payers and patients saw their financial performance erode.

Issues that are common throughout the system were difficult to identify, and many find themselves duplicating the efforts of their peers in other service lines. Collaborative relations between service lines have been encouraged, but as the competition for hospital resources increased, the cooperative spirit has waned.

Two of the five executive directors have nursing backgrounds. The other three have backgrounds in business or public health. Some people in the system believe that clinical experience is critical for the success of an executive director. From this vantage point, nursing directors share the frustration and time commitment involved in having to explain technical issues thoroughly to the non-clinical executive directors. Beyond the language barrier, some people indicated that staff nurses and nurse managers no longer feet supported, and that decision making within the structure required more meetings.

Others, however, believe there was a sense of challenge and respect for the nonclinical executive directors. The relationship that evolved between the executive directors and their managers is seen as valuable. Nursing directors who prefer this alternative explained that they had moved away from the emotionalism and protection of nursing, and more creative problem solving was a result. Additionally, the information that nursing directors received is generally viewed as more abundant and relevant under the new system. A by-product is that nursing no longer has to fight its battles alone; there are many people who will advocate for the cause.

Interview Responses from Members of the Mammoth System

Sharon Irwin, director of decision support: We are just now beginning to be able to provide the executive directors with the information that they need on an ongoing basis to understand and act on profitability. The stumbling block in the whole picture is that you cannot hold the service line executive directors accountable for what physicians will or will not do. If we could lick this, we would have it made. It is not even management by consensus. If the physicians do not want to change their practice, they won't.

Jack Ornstein, executive director of support services:The attitude here is that we want collaborative competition-not cutthroat competition. As financial pressures become worse, however, the conflicts are increasing, and there are a lot of personality conflicts among the executive directors. The group expectation is that you'll do what's best for the system. It's a fine line that's hard to achieve. We're lucky the group works well together, but as resources shrink, conflicts increase. In terms of the executive directors of the service lines versus the vice president, it is important to know who is accountable for and who has authority for what. An ongoing conflict is nursing quality assurance. Is this a central nursing function or a service line function?This is yet to be defined. The executive directors are very good at advocating for their areas in terms of articulating their needs. Yet the current limits on authority undermine their ability to be effective.

Debby Hathaway, Marketing: Service line management has great potential to focus an organization but we have five of them and marketing each can be tough when each the executive director of each one wants to be marketed as the "gem" of the system. When we went into the strategic planning effort to identify service lines, I thought we were going to identify two, maybe three. But there was a lot of lobbying by various people with vested interests in a given service line and we ended up with five. I think there are advantages to five from the standpoint of operational and clinical integration across two hospitals, but from a marketing standpoint, are we really outstanding in all five areas? Can we make the case for this?

Anne Cox, nursing director of mental health services:Breaking up the traditional structure has been extremely difficult. The support system and camaraderie of that structure just is not there. Yet, it has helped to move me away from traditional thinking and the emotionalism and protectiveness of "my hospital" as opposed to a system. There is now coordination and planning of services across the two hospitals so, in fact, we behave as a single entity. Really, the hospitals are now just separate campuses of the same organization. Although my superior and I do not always speak the same language, we do work together to come up with more creative resolutions. Service line management seems to be too expensive, as there are more top administrative managers and a need for more meetings than I have ever seen.I would go back to the traditional structure in a minute. One bone of contention is the fact that I am evaluated based on my patients' length of stay, which is something that I have no control over. I am accountable for this, yet I do not have the authority, not to mention the time, to influence length of stay.

Dena Paris, R.N, M.S.N, nursing director, oncology: The biggest problem with service line [management] for me personally is that there is competition with everything not cancer-related. We used to meet as a group of head nurses around a common foesometimes helperthe director of nursing. There are a lot of similar problems on units. Meeting as a group gave us power. What service line management did was isolate meand I had been here six years already when it came in. So you really were on your own. We met, but it was very different. The message was competition. What we got, others didn't, and vice versa. As originally presented, we'd have our own dietary, housekeeping, and marketing.

Ruth Wright, R.N., assistant director, cardiac care unit (CCU) and intermediate care unit (ICU):The structure and purpose of service lines has divided nursing into segments. You lose the feeling of one big happy family. We work under a system of nursing hours per patient day, based on acuity. If you have a patient who takes management nursing hoursone who's combative, loud, or difficultyou need a "sitter." You have no hours for that, so you don't want that patient on your floor. You try to move that person to another floor, whether the patient has the particular disease process for that floor or not.It's most likely that med/surg units try to keep these patients in the CCU or ICU.

Bob Sales, R.N., medical/surgical services: Med/Surg was a potpourri of what didn't fit logically into the selected service lines. I also feel schizophrenic about the service line and nursing units. The service lines are defined by DRGs.Surgery is defined narrowly by a set of surgical DRGs. Similarly, medicine and medical subspecialties are narrowly defined. The schizophrenic part is that at first I didn't have control over the units and labs where care to my patients is delivered.For example, in GI (gastrointestinal), I didn't have responsibility for the endoscopy center, but most of my program is done there. Most of that has been remedied now. In my mind we have developed as a "support service line." Service lines have reduced the potential duplication of services that might have existed if the two hospitals had been able to plan and manage service independently.

I was the one raising questions the loudest when we considered changing to this structure. Really nursing hasn't lost, but has gained. Before, there was one vice president of nursing with four or five other vice presidents. Now there are five service line executive directors who have come to realize the importance of nursing in delivering their service--five voicing the interest of nursing.

The service lines have enhanced program planning and focused people's view of it. We developed the cardiac surgery program when we were in the functional structure, just evolving into service lines. I was the nursing director responsible only for the CCU. We had representatives for the OR, for the cardiologists, for surgery-there was always someone missing when we had our planning meeting. When we transitioned to service lines, Jim (Short) had all the pieces of the cardiac/vascular program except for the OR. There are very clear differences under the two systems.

There's not a good relation between measurable objective performance in the service line and our compensation. We have had poor data systems and don't know how we are doing financially. So we are held accountable on productivity measurement and expenses. We don't control the discharge planner. You take the social worker assigned. If you don't like that, you have to influence the social work department.

Jim Short, executive director, cardiac/vascular services: A year and a half ago, I formed a committee to reduce length of stay. Dr. Parker and I chair this committee. It includes a cardiac surgeon, cardiologists, nurse managers, surgery managers, anesthesiologist, clinical nurse specialist, and one person from Utilization Management. We revised standing orders to reduce the use of ancillary services, substantially reduced blood use for cardiac surgery, and decreased length of stay.In making changes, you have to prove to the doctors that patient care won't suffer. It may take six months, but the momentum of the group will carry.

Henry Parker, cardiologist: The change to service line worked out quite well for us.It unified the Cardiology Department, CCU, and cath lab. It aided program development and utilization management. It let us get angioplasty and cardiac surgery off the ground.

To have a successful cardiac surgery program, you need volume. We heard there were cardiologists at Metro Healthcare System, our primary competitor, who were not happy. They didn't have a voice in administration. Here there is a cardiac/vascular administrator they could identify to hear them out. Jim Short courted them. He had the same goal as we did. The service line concept has let that happen.

Steve Robert's Task

Steve and Mr. Strayer have to make recommendations about whether the innovative service line management structure needs to be changed or eliminated altogether. Mr. Strayer wants a memorandum outlining the recommendations he would make based on what they had seen and heard during the two-day site-visit. He also asked Steve to indicate what other information they may need to obtain before completing the assignment.