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Health Care Management Review:
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"Virtual" Health Care Organizations and the Challenges of Improving Quality

Page, Stephen

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Abstract

This article examines the challenges of improving health care quality continuously within and across "virtual" provider organizations such as independent practice associations and physician-hospital organizations. It draws on recent research and theory about interorganizational networks in other fields to develop recommendations for securing physicians' commitment to quality improvement strategies in today's health care environment.

The rapid spread of managed care in recent years has subjected physicians and other health care providers to a variety of new pressures. Over the past decade, for example, insurers have increasingly sought to control the cost of care by reducing the use of hospital inpatient care, discounting payments to providers, and reviewing providers' utilization of services.

Many providers responded to these initial pressures for cost control by banding together in broadbased networks to increase their bargaining leverage with insurers, in order to protect their incomes and caregiving autonomy. The number of physicians who belong to unions has increased, for example, with current estimates hovering around 40,000, up from 25,000 in 1996.1-3 The 1990s also saw a dramatic increase in the number of medical groups and independent practice associations (IPAs)-umbrella organizations of physicians who work in solo or small group practices and contract jointly with insurers.4

The "easy" phase of cost reductions that generated this organizing backlash among providers is exhausted in many local health care markets now, and premiums are rising again. These circumstances are likely to produce new pressures to control costs through innovations in the efficiency and effectiveness of caregiving. In response, providers and insurers may begin to focus more on preventing illness, improving the caregiving process, increasing consumer satisfaction, and controlling the costs of services such as drugs, procedures, and tests. Many of these more sophisticated strategies require providers to work together to generate continuous improvements in the quality of care.5,6

These market conditions favor provider organizations with a strategic capacity for quality improvement over those that simply bargain to win higher payments and restore their members' caregiving autonomy. Provider organizations seeking a comparative advantage in the future must therefore learn how to innovate and learn as well as to bargain with insurers.

What research is available suggests that the organizational capacity to improve health care quality through continuous learning and innovation may stem from strong leaders and organizational cultures.7-9 These attributes are increasingly rare in today's health care field, however, as the organizational cohesion of hospitals and vertically-integrated health systems has given way to looser contracting networks and partnerships.10,11 In this increasingly "virtual" organizational environment, where are the organizational attributes that support quality improvement to be found? Can the new provider networks develop strong leaders and interorganizational cultures that give them the capacity to improve quality continuously? This article reviews the developments that have generated these challenges, and offers some insights to address them by examining successful interorganizational improvement initiatives in other fields.

The article begins by describing the new understanding of medical quality that relies on the use of evidence-based medicine and continuous improvement strategies. It goes on to outline today's increasingly complex organizational arrangements among health care providers, insurers, and purchasers. It then explores the difficulties of implementing effective quality improvement initiatives in this "virtual" organizational environment. Particular organizational features that are considered crucial to the success of quality improvement initiatives within hospitals and vertically integrated health systems-creative leaders and strong cultures-are hard to come by in today's networks. Offering more direct incentives for physicians to participate in continuous improvement initiatives appears to have the potential to address this problem, but recent empirical and theoretical developments indicate that incentives alone cannot overcome today's organizational complexity. Drawing on research on interorganizational collaboration in the human services and the auto industry, the article suggests nevertheless that collaborative projects may generate their own gradual, self-reinforcing dynamic of growth and development. Over time, continuous improvement practices may help build strong collaborative cultures that reinforce their own success, if participants implement them incrementally and adapt them based on experience. Whether the proponents of continuous improvement in health care can create these same iterative processes of development and achieve similar successes remains to be seen.

© 2003 Lippincott Williams & Wilkins, Inc.

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