Santa Clara University

Changing the Health-Care System

It Will Require a Culture Shift, Not Just Strategy


With health-care reform in the air, issues range from how it’s paid for, to the use of new technologies, to how decisions about care are made. Whatever strategic choices are made, benefits will accrue only if new strategies are implemented successfully.  Unfortunately, health care organizations do not have a terrific record of implementing changes.

David Caldwell, the Stephen and Patricia Schott Professor of Management at the Leavey School of Business, and his colleagues recently completed a study of strategic change in a large health-care organization that may shed a light on what it takes to implement reforms.

“Probably our key finding was that a willingness or readiness to change was a key factor,” he says, “and that, in turn, raised the question of the role of leadership.”

Professor of Management David Caldwell

The non-profit organization Caldwell and his colleagues studied administers nearly two dozen large medical centers employing more than 3,000 physicians. The organization had been successful for more than 40 years in providing a high quality of care for a relatively low price, albeit in a somewhat “bureaucratic” way.

During the past decade, the competitive landscape changed. For-profit HMOs and more restrictive insurance plans eroded the price advantage the organization had held.  This put the organization at real risk of failure unless it could maintain its customer base.

To counter this threat, executives believed their organization needed to change its strategy in order to dramatically improve patients’ experiences in dealing with staff. In particular, executives believed the key to the new strategy was improving the quality of the relations between physicians and patients. This meant fundamentally changing the culture of the organization. The executives, themselves physicians, knew that getting physicians to change the way they did their work would not be easy.

Caldwell was given considerable access throughout the organization to study the success of the change and why some groups of physicians were able to implement the new strategy more quickly than others. Caldwell drew three important conclusions from his research.

“First, physicians were unlikely to change what they did unless they believed the new strategy was in the best interest of the organization. While this is obvious, what was important to understand was the amount of effort that needed to go into discussing the nature of the problems facing the organization and the importance of the change.”

He went on to say that the CEO, himself a surgeon, said he didn’t believe people could embrace an idea until they had heard it 17 times. The CEO met extensively with physicians for nearly a year to discuss the data demonstrating the necessity for change and the elements involved in the new strategy.

“Second, even if groups of physicians agreed with the new strategy, they were not likely to implement it unless the group had a culture that supported change. Physician groups that had norms that supported experimentation, viewed failures as learning opportunities, encouraged teamwork, and had a restlessness or sense of urgency, were the ones that could translate support for the strategy into successful action.

“Third, we found that implementation took place when the actions of leaders at different levels in the organization were aligned with one another. If team leaders or directors of medical centers sent different messages about what was important, real change was unlikely even if people agreed with the strategy.” 

Caldwell and his colleagues surveyed physicians and monitored patient surveys over time and found that in those groups where these three characteristics were present, physicians changed in ways that increased patient satisfaction. “Overall,” he says implementing changes in health care systems won’t come about simply by announcing a new strategy and coming up with a different reward system; rather, it may require changing the culture of the organization. Our research demonstrates that doing this is hard, but that it can be done.”

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