Editor’s Note: This content has been excerpted from “How One Organization is Creating a True System,” Frontiers of Health Services Management, vol. 37, no. 4, by Aimee J. Daily, PhD, FACHE. It has been edited down for length. The full article received the 2022 Dean Conley Award and Daily will be recognized during the Congress on Healthcare Leadership.
Growth from a stand-alone hospital to a multifunctional health system has been a common storyline in U.S. healthcare over the past 40 years. But while mergers, acquisitions, affiliations and partnerships have been abundant, the path to systemness has not always been clear. The lack of a standard playbook has left many healthcare leaders looking for solutions for achieving the benefits of a health system.
Founded in 1897 as a 12-bed hospital and training school in Springfield, Ill., Memorial Health System now serves communities throughout central Illinois with five affiliated hospitals, ambulatory care services and behavioral health programs. With a commitment to be a health system able to make decisions that are optimal for the organization as a whole, not just for individual service lines, facilities or stakeholder groups, MHS has made intentional strides from a loose federation of affiliations toward an integrated, optimized health system.
When Edgar J. Curtis, FACHE, began his tenure as president/CEO in 2008, he proceeded to lead MHS on its journey to systemness. First, he addressed functional gaps, which led to the formation of internal business development, legal and organization development functions. This move added structural support to the growing system and improved the capabilities needed to increase organizational sophistication. With the foundation for system functions put in place, significant opportunities still existed to move the system toward greater integration.
Although MHS was officially formed in 1981 and included four hospitals in 2014, it was a system in name only. Most decisions were made at the affiliate level, operations were decentralized, clinical variation was significant and the strategic plan did not address system integration.
During an affiliation due diligence process in 2013, nearly 10 years after the health system’s last affiliation, MHS leadership realized the organization was reaching a tipping point in terms of size and scope and saw opportunities to improve its approach to system integration. With the affiliation of the 75-bed Passavant Area Hospital in 2014, MHS leadership committed to increasing integration while giving local leaders the authority to make operational and clinical decisions as needed to improve care in their communities. The original intentions of the affiliation were to identify and realize economies of scale, share best practices for operational improvements and reduce unwanted variation to improve the quality of care.
In the first few years of the PAH affiliation, MHS was operating at a basic level of systemness and realizing some benefits from initial activities to increase efficiencies. With intentionality, some shared-services integration happened within pockets of the organization, and efforts began on process and structural alignment in the supply chain, human resources and finance functions. While tactics were implemented to improve linkages over the next four years, the progress of systemness was limited because strategic priorities for integration had not been clearly identified across the entire health system. The absence of a burning platform for integration was exacerbated by the varying levels of perceived value of integration, inconsistent commitment to the changes required to achieve that integration and lack of clarity around what it meant to be a system.
Negotiations in the contractual process between MHS and PAH allowed the newly affiliated hospital to retain its name, but as time went on, this decision limited the ability to increase brand identity. The lack of a common brand had both structural and cultural impacts: It impeded progress in unifying the MHS brand, and it perpetuated a “we do things differently here” mindset that was palpable in both the organization and the community.
The lack of brand cohesion limited the health system’s ability to bring the newest affiliate hospital into the fold, further delaying integration opportunities. This cultural division led to decisions that further exacerbated the disunity, not only at the newest affiliate but throughout the organization. Local decisions to maintain or upgrade current systems rather than adopt systemwide solutions were common, as they were seen as the most efficient and sometimes most cost-effective routes. Initially, differences were more apparent than similarities. The affiliate maintained current or developed new policies and procedures rather than adopting the use of systemwide ones, and that was one way autonomy at the affiliate level was expressed. Individual priorities were commonly identified, and resources were allocated at an affiliate level, which sometimes led to the inconsistent application of goals and measures of success. As a result, successes at one affiliate did not cascade to the others, leaving broader opportunities for improvement on the table. Redundant resources across affiliates, such as talent, time and technology, were not shared in a systematic way.
In short, the health system was not structurally designed to support system integration, and in the absence of a clear destination, it ventured down a variety of paths simultaneously. This created a virtual learning lab for the health system, enabling leaders to identify process improvements for future affiliations.
The evolution of MHS from a system—lacking full integration of organizational functions—to its current status as an optimized health system has been marked by challenges, from the initial doubts of employees and the community to the upheaval caused by the COVID-19 pandemic. Systemness requires visionary and sure-handed leadership to identify and realize economies of scale, share best practices for operational improvements and reduce unwanted variation to improve quality of care.
Read more about Memorial Health System’s path toward systemness.
Aimee J. Daily, PhD, FACHE, is senior vice president/chief transformation officer, Memorial Health System, Springfield, Ill.