Seeing the forest for the trees: Institutional environment impacts on reimbursement processes and healthcare operations

• Date: 01 November 2016
• Published date: 01 November 2016
• DOI: http://doi.org/10.1016/j.jom.2016.09.001

Seeing the forest for the trees: Institutional environment impacts on

reimbursement processes and healthcare operations

Seung Jun Lee

a

, James D. Abbey

b

,

*

, Gregory R. Heim

b

, Duane C. Abbey

c

a

School of Global Innovation &Leadership, Lucas College and Graduate School of Business, San Jos

e State University, One Washington Square, San Jose, CA

95192-0164, United States

b

Department of Information &Operations Management, Mays Business School at Texas A&M University, 320 Wehner Building j4217 TAMU, College

Station, TX 77843-4217, United States

c

Abbey &Abbey Consultants, Inc., P.O. Box 2330, Ames, IA 50010-2330, United States

article info

Article history:

Received 24 February 2015

Received in revised form

6 August 2016

Accepted 5 September 2016

Available online 18 September2016

Accepted by: Mikko Ketokivi

Keywords:

Healthcare

Coding

Billing

Payment

Reimbursement

Institutional environment

abstract

Healthcare reimbursement processes perform an annual multi-trillion dollar task to remunerate

healthcare organizations, physicians, and patients. Healthcare reimbursement entails coding, billing, and

payment processes based on care provided to patients. As this research note highlig hts, though often

implicitly assumed to be independent of care delivery processes, reimbursement processes are distinctly

connected to the efficacy of care delivery. Prior research tends to examine neither antecedents nor

consequences of healthcare reimbursement processes and their operational implications, even though

these issues can lead to unproductive externalities affecting healthcare systems and patients. Most extant

literature tends to focus on medical task environments, with far less attention given to how institutional

environment structures reimbursement and thus drives stakeholder incentives and behaviors. Because of

a wide diversity of institutional environments, reimbursement processes differ on a nation-by-nation

basis, and within nations on a state, province, city, or even within-city basis. The varied and complex

reimbursement processes drive divergent stakeholder incentives, varying use of healthcare protocols and

processes, and differing patient outcomes. Even within a single reimbursement regime, a multitude of

reimbursement policies, required processes, and payer institutions creates operational complexity for

physicians and their professional staff, which ultimately affects patient care delivery processes and

outcomes. The task environment focus of extant healthcare OM research suggests a need to und erstand

institutional environment antecedents, natures, and impacts of reimbursement processes. This research

note illustrates the seemingly simple structural nature of reimbursement processes, yet also reminds

researchers how diverse institutional environments, built to accomplish different healthcare aims, can

lead to similar levels of enormous process complexity. The research note further motivates how such

phenomena may affect research findings and the quest for operational solution s to healthcare dilemmas.

By focusing on healthcare reimbursement and its operational implications, the note provides useful

insights for continued studies of healthcare operations.

©2016 Elsevier B.V. All rights reserved.

“We really do believe much harder times are coming from a

reimbursement standpoint.”-Daniel Morissette, Stanford

Health Care CFO (Ellison, 2015)

1. Introduction

Healthcare reimbursement processes include coding, billing,

and payment processes related to care provided to patients. Though

these processes are known to have massive economic impacts on

national economies and businesses (Baker and Rosnick, 2005; Brill,

2015), the processes also generate many operations management

challenges. Healthcare providers, involved in $3 trillion of annual

financial flows in the U.S. alone, face salient operating challenges

arising from regulatory and market pressures (World Bank, 2014;

Brill, 2015). As the scope and costs of regulated healthcare tasks

*Corresponding author.

E-mail addresses: seungjun.lee@sjsu.edu (S.J. Lee), jabbey@mays.tamu.edu

(J.D. Abbey), gheim@mays.tamu.edu (G.R. Heim), duane@aaciweb.com (D.C. Abbey).

Contents lists available at ScienceDirect

Journal of Operations Management

journal homepage: www.elsevier.com/locate/jom

http://dx.doi.org/10.1016/j.jom.2016.09.001

0272-6963/©2016 Elsevier B.V. All rights reserved.

Journal of Operations Management 47-48 (2016) 71e79