This paper examines key management challenges and strategic options facing hospital CEOs during a merger between Great Lake Memorial Hospital and Springville General Hospital. Drawing on research in healthcare management, the paper identifies core performance measures — hospital beds, payroll, full-time employees, and patients served — as central concerns for incoming leadership. It outlines three primary management strategies: improving service quality through Organizational Citizenship Behavior (OCB), reducing costs via administrative consolidation, and expanding patient access by combining hospital resources. The paper also addresses the adjustments required of the Springville General CEO and emphasizes the importance of cooperation among CEOs, Boards of Trustees, and Medical Directors for a smooth institutional transition.
Great Lake Memorial Hospital has recently entered into a five-year contract with Springville General Hospital to deliver quality care without duplication of services. A new CEO has assumed leadership at Great Lake and will be working alongside the existing CEO at Springville General. The incoming CEO faces certain management challenges arising inevitably from the merger. The CEO of Springville General Hospital must similarly address issues arising from the consolidation. Both CEOs will also require the cooperation of their hospitals' Boards of Trustees and Medical Directors to ensure a smooth transition and consolidation of resources.
While a change in CEOs does not affect hospital performance per se (Li-Ping Tang & Timmer, 2008, p. 11), the new CEO must address the large issues involved in hospital mergers and acquisitions. Fundamentally, he must establish a good working relationship with the two other components of the hospital's tripartite structure: the Board of Trustees and the Medical Director. Together, with the new CEO as a guiding force for applying hospital policies and managing day-to-day activities, they must be concerned with enhancing the "objective performance measures of customer service," which are: hospital beds, payroll, full-time employees, and patients served (Li-Ping Tang & Timmer, 2008, p. 2).
Hospital beds represent the hospital's patient capacity and, since research shows that number steadily decreasing each year (Li-Ping Tang & Timmer, 2008, p. 16), the new CEO must concentrate on maintaining and, where possible, increasing the number of hospital beds. Payroll, which is "the single largest cost category in hospitals" (Li-Ping Tang & Timmer, 2008, p. 16), presents perhaps the most challenging issue and must be controlled and reduced if possible. The number of full-time employees, which is inescapably linked to payroll, must also be managed as efficiently as possible and reduced where feasible. Finally, patients served — which is intimately linked to both the range of provided services and hospital income (Li-Ping Tang & Timmer, 2008, p. 16) — must be maintained and increased if possible.
The new CEO has several management options available. First, and perhaps foremost among them, is improving service quality by motivating staff toward optimal Organizational Citizenship Behavior (OCB) by "enhancing their sense of belonging to the health care organization and, therefore, to the employees' corresponding self-esteem" (Bellou & Thanopoulos, 2006). By strengthening employees' identification with the hospital and building their self-esteem, the CEO can significantly improve the quality of service delivered to patients. This higher quality of service is a valuable achievement in itself and should also increase the hospital's income, since patient perception of care quality is directly related to hospital utilization and revenue (Bellou & Thanopoulos, 2006).
A second management option is decreasing hospital costs, which can be at least partially accomplished through thoughtful and thorough "consolidation of administrative units and functions" (Choi & Brommels, 2009) between the two merged hospitals. Prior to consolidation, the two hospitals maintain separate administrative and functional structures that can be combined, streamlined, and integrated during and after the merger in order to reduce duplication of services (Groff, Lein, & Su, 2007, p. 12), cut costs, and enhance patient services (Choi & Brommels, 2009).
A third management option is expanding access by efficiently combining the two hospitals' resources — including but not limited to the number of beds and the variety of offered medical services. This expansion should attract a greater number of patients and allow referral of patients to one hospital or the other depending on the needed or desired services (Nakamura, 2010, p. 3). Together, these three strategies give the new CEO a coherent framework for addressing both the short-term disruptions and long-term opportunities created by the hospital merger.
"Partner CEO's role in resource consolidation"
The merger of Great Lake Memorial Hospital with Springville General Hospital will necessitate significant steps by the CEOs of both institutions. As the new CEO of the merged entity, leadership must address key problems such as establishing a good working relationship with the Board of Trustees and the Medical Director. With their cooperation, the new CEO must concentrate on the core performance measures of hospital operations: hospital beds, payroll, full-time employees, and patients served.
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