Management Challenges at the Intersection of Public Policy Environments and Strategic Decision Making in Public Hospitals

Abstract

Hospitals in the United States are heavily impacted by public policies that affect them. for example, Medicare and Medicaid programs account for more than half the revenue in most of the nation's almost 5,000 community hospitals, including the almost 1,100 public hospitals controlled by state and local governments (American Hospital Association, 2012). the public hospitals are especially closely aligned with and controlled by governmental entities compared with hospitals with other kinds of sponsorship. This article addresses the management challenges at the intersection of the strategic management of public hospitals and their public policy environments. Public hospitals are complicated entities designed not only to provide health services but also in many cases to play key roles in health-related research and education and to play important general economic development roles in their communities. the multi-faceted strategic decision making in these organizations is as heavily affected by their public policy environments as by their business, demographic, technological or other external environments. Effectively managing the intersection of their public policy environments and their strategic management is indeed vital for contemporary public hospitals. This article is intended to clarify certain aspects of this intersection through a description and model of the strategic activity in public hospitals and the connection between this activity and their external environments. Specific attention is focused on the concept of public policy environments and their features. Attention is also given to how managers can assess public policy environments and incorporate the results into strategic activities.