Stanford University

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NEWS RELEASE

3/8/00

Kathleen O'Toole, News Service (650) 725-1939;
e-mail: kathleen.otoole@stanford.edu

Sociologists describe how hospitals, doctors fell from grace

At a time when doctors and patients alike are confused by the array of health care plans, a Stanford research team explains how we got into this predicament.

The team's conclusions, reported in a new book on the evolution of the San Francisco Bay Area's health care system over the last half century, suggests that large-scale social changes begin with a breakdown of consensus within society. A similar fate might befall higher education in the future, if enough people begin to believe there are more effective ways of providing it, says the team's leader, W. Richard Scott, Stanford professor emeritus of sociology.

"On the surface, it appears that managers from outside medicine created the changes in health care," says Scott, co-author of the new book released by the University of Chicago Press, Institutional Change and Health Care Organizations: From Professional Dominance to Managed Care. "But there are always barbarians at the gate waiting to step in when a crisis occurs. Before they could enter health care, we needed to have a breakdown in the existing structures of power and control. We have data that indicate the weakening of medical groups sustained reduction in the numbers, for example, of members of the American Medical Association and increases in specialists' associations so that American medicine began to speak not with one but many voices."

Another significant development was the addition of local, state and federal regulators to oversee Medicare and Medicaid funding in the '60s, Scott reports, along with his co-authors, former doctoral students Martin Ruef, Peter Mendel and Carol Caronna. The growth of the consumer health movement in the late '70s also contributed, they say.

The research team spent nearly five years collecting evidence to explain how and why health care organizations, highly respected and controlled by autonomous professionals at the end of World War II, found themselves by the late '80s undergoing a massive shake-up.

Americans shared a general understanding of how health care should be provided in 1945, the first year the researchers studied, until the 1960s. Hospitals and medical practices were controlled by physicians who were allowed to police themselves. The physicians groups were powerful enough to insist that indemnity insurers stay out of their way, only reimbursing them for services rendered. The consensus began to break down as medical specialties arose with sometimes competing interests, Scott says.

In 1965, as part of a broader civil rights movement, a Congress more concerned about equity than in the past established Medicare and Medicaid. "Our data show that it was not that the federal government simply came in and took over, but rather their fiscal prominence led to a proliferation of many different kinds of governance structures, leading to further fragmentation of the rules, norms and belief systems about how this sector was to operate," Scott says.

"In the '70s, concerned about escalation of health care costs now borne by the public sector, Congress and the executive branch encouraged the development of market mechanisms and for-profit forms."

Consumer movement

While consumers today are upset about managed care, the consumer movement may have stimulated its development, Scott says. "The consumer movement is a broad movement that says, 'We're responsible for our own health; it's not the physicians' responsibility.' We have good indicators of when this movement began by tracking the growing circulation figures of national health magazines. That social movement, we think, helped open the door for the managed care folks, because when they began to say, 'I can evaluate my health care,' health care could be viewed as just another kind of service." Similarly, he said, Bay Area consumers helped reduce the centrality of physicians by accepting the services of alternative practitioners acupuncturists and chiropractors, for example as legitimate providers.

Doctors are no longer "cocks of the walk," Scott says, having lost autonomy, power and money. Hospitals, once "cathedrals of the community" at the center of health care, have been pushed to the periphery, often controlled by other types of organizations. General practitioners, once the lowly cousins of specialists, are now gaining salary share as managed care institutions reward professionals who can prevent costly care.

Yet the changing situation is "not just a story of decline but of regeneration, renewal and innovation," Scott says. The research team gathered systematic data on five types of organizations hospitals, health care systems, home health agencies, kidney treatment centers and health maintenance organizations and traced the decline of traditional forms and the rise of new delivery systems, which make today's health care much more organizationally diverse.

Bay Area health care innovations

Scott chose the Bay Area to study because it is close by but also because the region has been a leader in health care innovation. One of the pioneer health maintenance organizations, Kaiser Permenante, was created out of a need to care for industrial workers in remote California sites. Kaiser then came to the Bay Area to construct ships for World War II and at the end of the war opened to the general Bay Area population. "Kaiser has insisted that physicians have a very strong, central decision-making role distinct from the administrative side, and that has affected the kind of HMO providers who came into the area later," Scott says. "Patients here are less likely to choose plans more driven by accountants and managers."

The Bay Area also has strong medical research institutions, which leads to quick adoption of new technologies, and innovative employers, such as Hewlett Packard, who were among the first to organize a coalition to jointly bargain with health care providers, thus reducing costs of health plans. Now this expanded employer group, known as the Pacific Group on Health, is "way out in front" of other regions, Scott says, hiring technical experts to monitor quality and assist medical groups to improve treatment practices. "In this sense, these consumer coalitions are not just negotiating prices but are an important new kind of governance mechanism that operates more on the side of protecting consumers' interests."

The current situation is far from settled, Scott says, noting the existence of "three competing logics" or belief systems about how to organize health care. "Physicians continue to be players but now share power with public officials and managers of health care corporations. Moreover, the public increasingly realizes that the market may not protect valued features of access and quality."

"The process, as we have observed it, appears to be one in which the ideological barriers erected to insulate the health care field [from the marketplace and government regulation] was gradually de-legitimated and discredited," the authors wrote in their concluding chapter. The result is a fragmented sector where "practitioners and patients alike are confused by the array of alternative plans and providers and unclear about the differences among them." Large corporations providing health care under a profit-making business model have triggered a backlash in which consumers have demanded and sometimes won reforms from state legislators and Congress.

Role of institutional beliefs and rules

Well known in organizational research circles for his earlier work on organizations involving skilled professionals, Scott points out two sets of environmental factors affecting all organizations, but health care and other public welfare-oriented organizations in particular.

The first, which is typically studied by organizational ecologists, involves material resources the supply and demand environment. The second involves the "rules, belief systems and governance structures shaping work activities and how they are carried out" what Scott and other scholars refer to as institutions. These rules and customs are often so engrained and taken for granted, he says, that it is almost impossible to see their influence unless you compare them over time or space by examining organizations operating under different institutional conditions. Hence the appeal of studying health care when it is clearly experiencing changes in its institutional beliefs and rules.

Research of this sort has deep roots at Stanford, where, in addition to Scott, John W. Meyer and James G. March have revised traditional theories about organizations by studying the institutional rules embedded in them. Scott and Meyer, for example, looked at schools and found that differing resource environments didn't lead to great differences in the way they operated.

"If you think about the fact that there are a set of institutional understandings about what schools are and how they operate," Scott says, "then you begin to realize every organization exists in a world where there are not only material resources but also certain kinds of rule systems and widely shared beliefs."

That's why higher education may be in for a change too, he says. "We tend to think of higher education as sacrosanct, and there has not been a big funding crisis. But costs are increasing, and a set of people now propose that with new technologies, you can replace or reduce the centrality of professors.

"Institutions considered sacred and unassailable by one generation may rapidly lose their luster, especially where there is [a lack of consensus] among insiders and external governing groups disagree on what standards should be enforced."

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By Kathleen O'Toole


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