The impact of physician‐hospital integration on hospital supply management

• Author: Arnold Maltz,Eugene Schneller,Mohan Gopalakrishnan,Yousef Abdulsalam
• Date: 01 January 2018
• DOI: http://doi.org/10.1016/j.jom.2018.01.001
• Published date: 01 January 2018

Contents lists available at ScienceDirect

Journal of Operations Management

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

The impact of physician-hospital integration on hospital supply

management

Yousef Abdulsalam

a,∗

, Mohan Gopalakrishnan

b

, Arnold Maltz

b

, Eugene Schneller

b

a

Kuwait University, Kuwait

b

Arizona State University, United States

ARTICLE INFO

Keywords:

Healthcare supply chain

Professional services

Supply management

Physicians

ABSTRACT

This study examines how organizational alignment between professionals—who act as surrogate buyers–and the

organizations in which they work, influence the supply management efficiency of the organization. Based on a

cross-sectional sample of hospital data, we estimate random effects regression models to investigate the asso-

ciation between physician-hospital integration mechanisms and hospital supply efficiency. The results suggest

that either professional hierarchy or bureaucratic pressures can improve supply management efficiency. In a

sector of the economy characterized by escalating costs and uncertainty, the findings provide potential guidance

for professional relationship strategy design to improve sector performance.

1. Introduction

As modern economies become increasingly knowledge-based, pro-

fessionalization of the workforce is a dominant trend. Based on data

from the U.S. Bureau of Labor Statistics (2016), employment in pro-

fessional and business services has seen a compound annual growth rate

of over 10% in the past decade. Thus it is not surprising that a recent

special issue in the Journal of Operations Management examined

“Professional Service Operations Management”, emphasizing the in-

tersection between operations and supply chain research and the pro-

fessional services context (Harvey et al., 2016).

Modern professionals perform their tasks in two different organi-

zational settings, professional and nonprofessional (i.e. bureaucratic)

organizations (Wallace, 1995). A physician practice is an example of an

organization that is closely aligned to the “professional service firm”

classification (Von Nordenflycht, 2010). A hospital, on the other hand,

is generally viewed as a bureaucratic organization that depends on a

professionalized workforce to carry out its core operations with bu-

reaucratic control mechanisms at its disposal (Dobrzykowski et al.,

2016; Heineke, 1995; Sorensen and Sorensen, 1974). Using the physi-

cian-hospital relationship as a context, this study examines the linkage

between professional service providers, their integration in an organi-

zation, and their effect on that organization's supply chain efficiency.

As noted by Harvey et al. (2016), characteristics of professional

work pose a potentially difficult management dilemma. “These char-

acteristics, autonomous judgment and external regulation/

accreditation, also create a significant practical challenge for any no-

tion of management or coordination in a professional service setting.”

Their concern is the potential elimination of the professional service

employer from influencing the provider-client relationship. From a

supply chain perspective, Harvey et al. (2016) are concerned with

managing the service provider's downstream relationship with the client.

They point out that similar management and control issues seem to be

present whether the professional provider works for a specialized pro-

fessional service organization-law firm, physicians' group, etc. –or

within a nonprofessional enterprise such as a hospital or government

agency.

We contend that similar concerns and challenges exist in the up-

stream direction, where the professional service provider interacts with

others in the supply chain (Harvey, 2016). In common with sociologists

(Abbott, 1988; Freidson, 1988) Harvey emphasizes the importance of

the power of the various supply chain actors, including the providers

themselves, the clients, and managers of the providers. In the supply

management context, the conflicts typically manifest as disagreements

about supply selection. Professionals assume the role of “surrogate

buyers”who make decisions based on their expertise on behalf of the

buyer or consumer, which gives rise to inter-organizational agency

problems (Solomon, 1986; Tate et al., 2010). Divergent incentives be-

tween the actual purchaser (e.g. hospital's materials manager) and

surrogate buyer (e.g. the physician) lead to sourcing issues which can

expose both parties to opportunism by the supplier.

Our research question probes the extent to which integration

https://doi.org/10.1016/j.jom.2018.01.001

Received 15 July 2016; Received in revised form 26 October 2017; Accepted 4 January 2018

∗

Corresponding author.

E-mail addresses: y.abdulsalam@ku.edu.kw (Y. Abdulsalam), Mohan.gopalakrishnan@asu.edu (M. Gopalakrishnan), Arnie.maltz@asu.edu (A. Maltz),

Gene.schneller@asu.edu (E. Schneller).

Journal of Operations Management 57 (2018) 11–22

0272-6963/ © 2018 Elsevier B.V. All rights reserved.

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