evolving organizational forms &...

Rural Health Networks:

Evolving OrganizationalForms & Functions

June 2003

Prepared by:

RU R A L HE A LT H RE S E A RC H CE N T E R

DI V I S I O N O F HE A LT H SE RV I C E S RE S E A RC H A N D PO L I C Y

SC H O O L O F PU B L I C HE A LT H

UN I V E R S I T Y O F MI N N E S OTA

MI N N E A P O L I S , MI N N E S OTA

Supported by:

GR A N T NO. F RO M

T H E RO B E RT WO O D JO H N S O N FO U N D AT I O N

PR I N C E TO N, NEW JE R S EY

Rural Hospital Physicians

Urban

Hospital

Mental Health

Public Health

Nursing Home

rural health 2003 7/1 7/1/03 9:20 PM Page x1

Rural Health Networks: Evolving

Organizational Forms and Functions

Rural Health Research Center

Division of Health Services Research and Policy

School of Public Health

University of Minnesota

Minneapolis, MN -

Single copies are available from:

Jane Raasch

Phone: 1..

Fax: 1..1

or at:

http://www.hsr.umn.edu/rhrc

Principal Investigator:

Ira Moscovice, PhD

Research Staff:

Walt Gregg, MA, MPH

Eric Lewerenz

Design:

Aldrich Design


43

Table of Contents

3

7

15

25

39

Chapter 1 Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 2 Location, Membership and Relationships: Network Demographics . . . . . . .

Chapter 3 Governance and Management: Network Organization and Operation . . . . .

Chapter 4 Functions and Services: The Process and Products of Networking . . . . . . . .

Chapter 5 Conclusions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Appendix . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .


U N I V E R S I T Y O F M I N N E S O T A

R U R A L H E A L T H R E S E A R C H C E N T E R 3

Efforts to address rural health care issues(e.g. lost opportunities for economies ofaction, increased barriers to access quali-ty health care services) have grown dra-matically over the past decade. Ruralhealth networks have emerged as a pop-ular policy construct for mobilizing thenecessary resources and focusing effortsto address these and other issues. Ruralhospitals, largely because of the centralrole they have played in rural health caresince the time of Hill-Burton funding,have figured prominently in the emer-gence of these networks both as mem-bers and anchor institutions.1

The Current Environment forRural Health Networks

The findings of the first comprehensivestudy of rural health networks werereleased in 1997 under the title RuralHealth Networks: Forms & Functions.That report, based on a telephone sur-vey of rural health network administra-tors conducted in the fall and winter of1996, provided information on keyorganizational, governance and activitiesof 180 formally organized rural healthnetworks.

The present report, Rural HealthNetworks: Evolving Organizational Formsand Functions, provides a fresh look atthe existing population of formally orga-nized rural health networks. Networkswere identified using a variety of sourcesincluding the 1996 survey contact list,the 1997 Annual Survey of the

American Hospital Association, networksincluded in Federal Office of RuralHealth Policy initiatives, and those iden-tified by the State Offices of RuralHealth. Following an initial screeningprocess, 223 rural health networks wereincluded in a survey conducted by theSurvey Research Center of the Divisionof Health Services Research and Policy atthe University of Minnesota, duringApril to June, 2000 with a response rateof 85 percent. Approximately two thirdsof these respondents represented ruralhospitals that had been included in the1996 survey with the remainder repre-senting networks formed since our previ-ous survey, providing an opportunity toassess network development over time.

The program and policy context sur-rounding rural health network develop-ment has undergone notable changessince the release of Forms and Functions.A variety of private and public effortshave taken shape to provide capital forstart-up costs and technical assistance fordevelopment and on-going operations(e.g., programs sponsored by the FederalOffice of Rural Health Policy, StateOffices of Rural Health, The RobertWood Johnson Foundation, W. K.Kellogg Foundation, the ClaudeWorthington Benedum Foundationamong others).

1 We define a hospital as rural when it meets the Medicarecriteria for reimbursement as a rural hospital under the provi-sions of Section 1886 of the Social Security Act (i.e. locatedoutside of a Metropolitan Statistical Area).

Introduction

Chapter One

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R U R A L H E A L T H R E S E A R C H C E N T E R4

bership will generate benefits for theorganization that might not otherwiseaccrue by individual effort.

Network structure and actions takeshape as stakeholders balance organiza-tional self-interest with collective (net-work and community) interests, marketallocation with public allocation, andstrong leadership with collaborativemodels of decision-making. Achieving abalance is largely determined by mem-ber abilities to envision and accept a setof rules and expectations that can becounter to what members have beenfamiliar with in the past as autonomousinstitutions. Collaborate, cooperate,negotiate and compromise becomereplacements for out maneuver, marketleverage, compete, force and threaten.

Written agreements provide an effectivemeans for achieving and maintainingthis balance. They can also be useful indeveloping and executing necessaryaction plans. They create a safe mediumfor reconciling community andprovider needs/self-interests (i.e., clearlyarticulating the purpose and intent ofthe network and the responsibilities ofits members to fulfill them). In addi-tion, they can be particularly valuableaddressing organizational autonomyissues by creating a means for dis-cussing which aspects of organizationalboundaries are negotiable and whichare not.

Some of the initiatives targeted spe-cific delivery system reform issuessuch as the expansion of rural man-aged care in Florida, Maine andNew York, or targeted the needs ofspecial populations in NorthCarolina, Kansas and Wisconsin.Some states have created a legisla-tive and regulatory infrastructure toencourage network development(e.g., protection from state anti-trust law, regulatory relief from statereporting and licensure require-ments).

Rural Health Networks—Concepts and Definitions

The rural health networks includedin our surveys have also beenknown by other names includingaffiliations, alliances, consortia,cooperatives and physician-hospitalorganizations. However, eachrespondent shares a common set oforganizational characteristics. Eachnetwork includes at least one ruralhospital as a member and links twoor more autonomous organizationsby a formal written agreement topursue mutually agreed upon goalsand objectives (see page six for theformal definition of the rural healthnetworks included in this study).Participation in these networks is avoluntary decision and is oftenmotivated by the belief that mem-

Chapter One : Introduction

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Chapter OneNetworks can differ by their:

• Degree of autonomy (interorganiza-tional interdependence)

• Type and level of network activityand service integration

• Level of complexity (number anddiversity of network members)

• Level of commitment to financialinvestment and the acceptance of risk

• Range and scope of shared networkactivities

The results of the survey related tothese attributes as well as their implica-tions for the future of rural health net-work development are discussed in thefollowing chapters.

Chapter 2—Location, Membershipand Relationships: NetworkDemographics – describes the number,size, age and membership of ruralhealth networks.

Chapter 3—Governance andManagement: Network Organizationand Operation—describes how ruralhealth networks are organized to carryout their goals and objectives.

Chapter 4—Functions and Services:The Process and Products of

Networking—reviews key trends in theinvolvement of network members inactivities as well as their experiences inproviding clinical and insurance servicesand establishing managed care linkages.

Chapter 5—presents Conclusions on theevolving development of rural health networks.

The Appendix contains tables and figuresthat provide additional detailed informa-tion on the rural health networks includ-ed in this study.

This chartbook is provided as a statusreport on rural health network develop-ment and has been crafted to be of use toa variety of audiences:

• Providers who do not currently belongto a rural health network may learnmore about the structure and functionsof networks, which may help themdecide if network membership willwork for them.

• Providers who participate in ruralhealth networks may gain insights intotheir own experiences compared toothers and better plan for their future.

• Policymakers may better understandhow to provide incentives and reducebarriers to achieving various ruraldelivery system goals and reforms vianetworking initiatives.




Chapter One : Introduction

Definitions and Data Notes

Rural Health Network: a formal organizationalarrangement among rural health care providers(and possibly insurers and social serviceproviders) that use the resources of more thanone existing organization and specifies the objec-tives and methods by which various collabora-tive functions are achieved.

Formal Rural Health Network Attributes

Written Agreement: an agreement that specifiesthe purpose of the network, identifies who is amember of the network, and outlines the dutiesand responsibilities of membership.

Individual Autonomy: members of the net-work retain their individual autonomy, but maychoose to delegate an explicitly limited portionof their autonomy to the network to fostergreater coordination and/or integration.

Joint Action: members of a network performcollaborative activities according to an explicitplan of action. Activities include the provisionor coordination of management functions andclinical services.


Key Trends

The Midwest region continues tohave the largest number of networksin the country and the Northeastregion has the most new networks.Network formation is heavily influ-enced by issues of proximity with thememberships of nine out of every tenrural health networks located in thesame state as the administrativeoffices of the network.

• The largest number of rural healthnetworks are located in the Midwestregion accounting for almost fortypercent of all networks (Figures 2-1and 2-2).

• The Northeast region continues tohave the largest proportion of newnetworks (27% of all networks in theregion) (Figure 2-2).

The number and average size of ruralhealth networks has increased signifi-cantly.

• Forty-one percent of all rural healthnetworks have more than 20 mem-bers compared to 14 percent in 1996(Figure 2-3).

• The number of rural health networkswith only hospitals as membersremained relatively stable; however,the size of these networks was not aslarge as in 1996 (Figures 2-4 and 2-5).

The diversity of rural health networkmembership has increased consider-ably since 1996.

• Rural health networks with a diversemembership have increased fromalmost one-third of all networks toover one-half of all networks since1996 (Figure 2-4 and Table 2-1).

• Participation of local public healthagencies, mental health providers,nursing homes and social serviceagencies in rural health networks hastripled since 1996 (Table 2-1).

• Rural health networks are more likelyto have a diverse membership if theyare less than two years of age andhave a large number of members(Figures 2-5 and 2-6).

• The decrease in the proportion of

Chapter Two



Location, Membership andRelationships: NetworkDemographicsRural health networks are developing all across the country and are distributedthroughout forty-five states representing every region of the United States. Thischapter reviews changes in the size, distribution and membership of rural healthnetworks since 1996.




Chapter Two : Location, Membership and Relationships: Network Demographics

Rural health networks have become anincreasingly popular strategy foraddressing community health careissues. They grew in number, size anddiversity over the four-year period,1996 to 2000. Although the ruralhealth networks identified in 1996experienced an attrition rate (22%)common to small and medium businesssector ventures that are usually undercapitalized, almost one quarter of thecurrent population have been in opera-tion for at least ten years. They contin-ue to be widely distributed across theUnited States operating in 45 states.The impact of state-based rural healthnetwork development efforts is particu-larly evident in the six states thataccount for 40 percent of all existingnetworks (i.e. Iowa, Kansas, Michigan,Minnesota, Nebraska and New York).

Why do rural health networks form?The availability of grant funding, pay-ment incentives and favorable state andfederal policies can be strong induce-ments; but, policy and funding incen-tives aside, what else has made the dif-ference between isolation and coopera-tion? Life in rural America has longbeen associated with a strong collectiveawareness of community values, needsand roles. In many ways rural healthnetworks are a natural outgrowth of thistradition. Much of their successdepends upon balancing a number ofpotentially conflicting needs and inter-ests (e.g., organizational self-interestwith network interests and visionaryleadership with collaborative models ofdecision-making and organizationaladvocacy). The recent growth in net-work size and member diversity will

Overview and PotentialImplications

rural health networks with only hospi-tals as members has occurred primari-ly through the loss of rural hospitalonly networks; however, they remainthe dominant network type amongthe smallest and oldest networks(Figures 2-4, 2-5 and 2-6).

Rural health network membershipincreased for over half of all networksand decreased for almost a third of allnetworks during the two years prior

to the survey with interests and pri-orities accounting for the largestamount of change in either direction.

• One half of the rural health networksadded new members to expand theirservice area and/or to broaden theprovider types that were members ofthe network (Table A-1).




Chapter Two

mean an increase in the challenge formany administrators to maintain theneeded balance for success.

Who decides to participate in ruralhealth networks? The initial formationof a rural health network is heavilyinfluenced by how much providersknow, or think they know, about theleadership, mission and market historyof their potential partners. According tothe survey findings, knowledge aboutpotential partners, in the initial devel-opmental phase, draws heavily uponproximity-based information (e.g., pastcollaborative/ competitive relationships,image and character of the organiza-tion’s leadership, understanding themission, vision and goals that focus anorganization’s efforts).

Growth within the member ranksappears to take a different path once anetwork has been formed. Instead ofexpectations and assumptions based onproximity and past history, new mem-bers are more likely to be added whenthey provide a defined market advan-tage for the network or through thenetwork (e.g., half of new memberswere added to expand the existing ser-vice area or the scope of services provid-ed by the network membership, andanother quarter of new members joinedthrough their own initiative suggestingthat the potential benefits of member-ship are definable).

Looking at the reasons for member lossprovides us with a glimpse of the poten-tial volatility of rural markets. In anenvironment of scarce resources andtightened regulatory and reimbursementpolicies, rural health providers are find-ing that it is tougher to survive alone.Whether it is an initial desire on thepart of network conveners to be as openand welcoming as possible and/or aneed on the part of potential membersto seek a degree of safety in numbers isnot clear. The result is the same, net-work members later finding themselvesin an arrangement that has either alwaysbeen or has become incompatible withtheir organizational purpose and mis-sion (i.e., the most common reason formember loss was disagreement over net-work goals and purposes).

Communication is one approach toavoid either circumstance. This meanskeeping current members up to date onpressing network business and opera-tional performance issues. For potentialmembers, it means clearly communicat-ing the goals and purposes of the net-work and having a process in placewhen developing member agreements.Failing to do so can create problems farmore damaging for the network thanmember loss (e.g., the subtle undermin-ing of network efforts resulting indelayed implementation, wastedresources and making counterproduc-tive compromises).

It can be easy for network administra-tors and other key participants to investfar more importance in the network



Table 2-1

Rural Health Network Membership1, 1996-2000



Rural Hospitals 100% 100% 7.5 8.2

Urban Hospitals 39% 42% 2.6 3.1

Local Public Health Agencies 10% 30% 1.7 2.6

Mental Health Providers 10% 29% 2.8 3.0

Nursing Homes 9% 25% 2.3 4.0

Home Health Agencies 10% 23% 2.8 3.4

Social Service Agencies 6% 22% 3.2 4.9

Ambulance Services 6% 16% 2.2 3.9

HMO/Insurers 5% 6% 1.2 1.2

Percent of Average Number of Member

Networks with Type in Networks with

This Member Type This Type of Member

Member Type 1996 2000 1996 2000

1 While we are not aware of the number of physicians in networks, 42% of rural health networks had at least onephysician as a member in 1996 and 40% in 2000.

rather than the strategy behind it. Dealsare important but not sufficient toaccomplish the broader goals and pur-poses that usually bring providerstogether. The key to success is the strat-egy behind the deal and not the dealitself. Adding any willing member tothe network does not constitute asound strategy or business plan and onthe contrary can risk sapping importantstrength and momentum from the larg-er enterprise. Providers are important asnetwork members to the degree thatthey contribute to achieving existingnetwork goals and objectives. Thesegoals and objectives may change overtime as environmental circumstances

change and therefore can be expected togenerate changes in membership tomeet the current needs and demands ofthe strategy behind the network. In thissense, bigger is not always better.

As networks continue to form it will beimportant for state and federal stake-holders to identify ways to assist thesenew businesses in making appropriatedecisions. This means providing sup-port for the development and mainte-nance of effective planning, decision-making and communication amongnetwork members and the networkleadership.


Chapter Two



Figure 2-1

Distribution of Rural Health Networks by State, 2000

Number of Networkszeroone to threefour to sixseven to nineten or more

Northeastern

Region

Southern Region

Western Region

Midwestern Region





Northeast Midwest South West Total

(n=49) (n=83) (n=52) (n=33) (n=217*)

60%

50%

40%

30%

20%

10%

0

Rural Health Networks by Region and Age, 2000

Figure 2-2

Percent of networks two years old or lessPercent of networks between two and five years oldPercent of networks greater than five years old

*Some networks are excluded because of missing values.


Growth in Network Size, 1996-2000

Figure 2-3



Chapter Two

Fewer than 5 5 to 10 11 to 20 21 to 30 Over 30

35%

30%

25%

20%

15%

10%

5%

0

Percent of Networks19962000

Growth in Network Type, 1996-2000

Figure 2-4

Rural Hospitals Rural and Hospitals and Hospitals, HospitalsOnly Urban Physicians Physicians & Others

Hospitals & Others (No Physicians)

30%

25%

20%

15%

10%

5%

0

Number of Members

Percent of Networks19962000


Types of Rural Health Networks By Size, 2000(n=223)

Figure 2-5

Types of Rural Health Networks By Age, 2000

Figure 2-6




Rural Hospitals OnlyRural and Urban Hospitals OnlyHospitals and PhysiciansHospitals, Physicians and OthersHospitals and Others (No Physicians)

Fewer than 5 members

(n=34)

Five to ten members

(n=49)

11 to 20 members

(n=50)

21 to 30 Members

(n=39)

Over 30 Members

(n=51)

Greater than five

years old (n=106)

Between two and five

years old (n=77)

Less than two

years old (n=34)

50%

12%

22%17%

15%

9%

9%

29%

14%

10%

25%

16%

8%

24% 40%

32%

21%

10%15% 3%

40%

2%

6%

14%

57%

29%

19% 25%

18%

9%37%

23%

9%

17%

14%

52%

12%

12%6%

18%




Governance and Management:Network Organization and Operation

Corporate law remains the dominantform of rural health network organi-zation.

• Although seventy percent of all ruralhealth networks are organized as legalcorporations, the proportion of unin-corporated networks has doubledsince 1996 (Table 3-1).

• The substantial use of governingboards, steering committees andbylaws for network governance hasremained unchanged since 1996(Table 3-2).

A large majority of rural health net-works have an operating budget butfew have a capital expenditure plan.

• There has been an increase in thenumber of networks with an operat-ing budget as well as budget levelssince 1996; while ninety-four percentof networks have an operating bud-get only seventy-five percent use abudget reporting system (Figures 3-1and 3-2).

• Network operating budgets varyaccording to the nature and mix ofproviders participating in the net-work. Rural hospital only networkshave the lowest average budget andhospitals and other member networkshave the highest and most variablebudgets (Table 3-3).

Rural health networks differ widely inthe resources they use to supportoperations; however, a high propor-tion rely on only a single source ofsupport.

• Although reliance on single sourcefunding decreased from 1996, morethan one in every three rural healthnetworks continue to depend on onlyone funding source to meet theirfinancial needs (Figure 3-3).

• Reliance on state or federal grantfunds to support network develop-ment and operations increased signifi-cantly since 1996 with 13 percent ofnetworks relying only on state or fed-eral support (Figure 3-3).

This chapter describes how rural health networks are organized to carry out their goalsand objectives. It highlights trends in the governance and management of networks.

Key Trends

Chapter Three


• Almost half of all rural health net-works cover part of their operationalcosts with the sale of network servicesand more than ten percent complete-ly support operations through sales ofservices (Figure 3-3).

• Half of all rural health networksoperate within a state that providessome support for network develop-ment; however, the availability ofstate-backed loans dropped three foldsince 1996.

Networks have increased their use ofpaid staff and management informa-tion strategies to facilitate networkoperations since 1996.

• The use of paid network directors hasdoubled since 1996 but almost one-third are part-time directors. Ruralhospital only networks are the leastlikely to employ a paid director(Table 3-4).

• Most rural health networks share per-formance related information withtheir members; two-thirds do so on atleast a quarterly basis (Figures 3-4, 3-5and 3-6).

The majority of rural health networksgive all participating members a voicein network decision-making; for someof these networks, member votesbecome channeled by the efforts of adominant member or member clique.

• Less than two-thirds of all rural healthnetworks involve their entire member-ship in network decision-making(Table 3-5).

• While the proportion of rural healthnetworks dominated by one or moremembers has remained relativelyunchanged since 1996 (approximatelyone third of all networks), the sourceof that dominant influence has shiftedfrom individual members to cliques ofmembers (Figure 3-7).



Chapter Three : Governance and Management: Network Organization and Operation




Chapter Three

For many networks, the compellingneeds and clarity of purpose thatbrought the member organizationstogether generates considerable enthusi-asm and promise. Until a thoroughanalysis of the issues and options iscompleted, it is difficult to grasp thecost and magnitude of the tasks neededto achieve their vision. In some ways,the ready availability of external fund-ing can delay the process by providinga safe zone between the investmentsneeded to make a plan work and theamount of required organizationalcommitment for ongoing success.

When organizations become a networkmember they may bring competingagenda and priorities, strong leadersaccustomed to exercising autonomywhen making decisions about theirorganization and a history of past com-petition. The ability to turn thisaround and generate a level of commit-ment and investment where membersprovide a portion of the neededresources to achieve network goals is atthe very core of networking. Withoutjoint action and investment, economiesof scale are not possible and memberparticipation will wane. Rural healthnetworks require strong leaders withsignificant competencies in groupprocess, conflict resolution, problemsolving, strategic planning and a variety

of other skills necessary to coalesceinterested parties into a collaborativeand effective unit.

A network’s organizational structurecan play a significant role in facilitatingand guiding network operations anddecision-making by rationalizing andlegitimizing the collective mission,vision and purpose for the network.The most formal structure involvesincorporation with its attendant bylawsand specification of the purposes andgoals of the entity being incorporated.The continued popularity of corporatestructure for the organization of ruralhealth networks may be due to a strongneed for a more structured frameworkto guide member interaction and net-work operation. It also could be theexpression of a general belief on thepart of the members in the permanenceof the venture. Incorporation may helpprovide legitimacy for the organizationnot only in the legal sense but also inhow the organization is viewed by otherregional providers, state officials (e.g.related to tax issues, eligibility for pub-lic funding and regulatory relief ) andofficials responsible for federal agenciesand programs (e.g. related to anti-trustissues, funding opportunities).



It is likely that concerns over autono-my and control can, at times, over-shadow some of the legal advantages ofincorporation. With the proportion ofunincorporated rural health networksdoubling since 1996, the importanceof some of the legal advantages ofincorporation may have lost relevancefor some networks. However, this doesnot mean that the need for a guidingframework for network decision-mak-ing and operations has diminished.The proportion of networks using gov-erning boards, steering committees andbylaws remained virtually unchangedbetween 1996 and 2000.

The dramatic growth in network bud-gets and the growing dependence uponpublic funding sources suggest amarked overall influence of state andfederal network programs. The avail-ability of public dollars for networkdevelopment could be partially respon-sible for the decrease in the proportionof networks that rely on a single sourceof operational support. However, atleast one-third of all networks dependupon public support to sustain at leasthalf of their operation costs. With therecent economic downturn, this depen-dence may place many networks at fis-cal risk.

Coupled with the fact that one third ofall networks are relying on just onesource of operational support, this fiscalvulnerability becomes even more pro-nounced. Networks need to remainactive at all times to diversify their fund-ing sources. A number of networks aredoing this through the sale of networkproducts and services to support a por-tion of network operations.

The greater availability of funding fornetwork development and operationslikely is responsible for the increase inthe use of paid network directors since1996. A majority of paid directors arepart-time administrators mostlyemployed by networks with highly vari-able budgets (e.g., rural and urban hos-pital only networks). The tripling of theuse of part-time directors over this peri-od may suggest a satisficing strategy toaccommodate variable budgets and theneed to provide network oversight.







Chapter Three

Size of Rural Health Network Budgets, 1996–2000

Figure 3-1

Median Budget

1996 $198,000

2000 $260,000

40%

35%

30%

25%

20%

15%

10%

5%

0%Zero $1 - $100,000 $100,001 - $300,001 - More Than

$300,000 $600,000 $600,000

Percent of RuralHealth Networkswith Budget Size

19962000

Not-for-Profit Corporation 70% 62%

Unincorporated Entity 11% 21%

For-Profit Corporation 9% 9%

Cooperative 6% 6%

Government Entity 2% 1%

Other 2% 1%

Legal Structure (n=180) (n=223)

1996 2000

Legal Status of Rural Heath Networks,1996–2000

Table 3-1





Rural Health Network Management Tools, 1996–2000

Figure 3-2

80%

68%

24%

34%

94%

75%

39%

29%

Operating

BudgetBudget

Reporting

System

Management

Information

System

Capital

Budget

Percent of Networks With a Governing Board 91% 93%

Average Size of Governing Board 12% 13%

Percent of Networks With Community Board Members 36% 33%

Average Number of Community Board Members 6% 4%

Percent of Networks With Written Bylaws 81% 80%

1996 2000

Rural Heath Network GoverningBoard Attributes, 1996–2000

Table 3-2

1996

2000


Sources of Network Funding and Reliance onThose Sources, 2000

Figure 3-3

Chapter Three



Government Grants

Private Foundation

Member Dues

Sale of Network Services

Health Insurance Premiums

Member Loans

Member Contributions

Non-Member Contributions

0% 10% 20% 30% 40% 50%

Rural Hospitals Only $200,000 $201,911

Rural and Urban Hospitals Only $205,448 $420,562

Hospitals and Physicians $250,000 $487,187

Hospitals, Physicians and Others $250,000 $322,126

Hospitals and Others (No Physicians) $272,000 $745,841

Network Type Median Mean

Rural Heath Network Operating Budgetsby Network Type, 2000 (n=223)

Table 3-3

Percent of RuralHealth NetworksThat Use

This Source of Funding ONLYThis Source of Funding





Network Communication Strategieswith Members, 2000 (n=223)

Figure 3-4

Business Final Budget Automated Web Site

Plan Report Reporting Information

System System

43%

51%

39%36%

75%

Rural Hospitals Only 22% 43% 8% 15% 1.1 3.8

Rural and Urban Hospitals Only 59% 49% 0% 19% 7.9 6.8

Hospitals and Physicians 40% 71% 12% 21% 1.8 20.9

Hospitals, Physicians and Others 50% 62% 9% 13% 6.9 4.5

Hospitals and Others (No Physicians) 40% 44% 10% 47% 2.3 5.9

TOTAL 40% 54% 9% 22% 2.8 6.7

With Full-Time With Part-Time Average Number Director Director FTE Employees

Network Type 1996 2000 1996 2000 1996 2000

Rural Heath Network Staffing by Network Type, 1996–2000Table 3-4


Frequency of Network Reports to Members, 2000 (n=182)

Figure 3-5

Chapter Three



Annually

27%Monthly

30%

Bi-Monthly

9%Quarterly

29%

Semi-Annually

5%

All Members 64%

More than Half of Members 14%

Less than Half of Members 22%

Involvement in Decision-Making

Network Member Involvement inDecision-Making, 2000 (n=212)

Table 3-5





Content of Network Reports to Members, 2000 (n=151)

Figure 3-6

Member Participation in Network Decision-Making,1996–2000

Figure 3-7

Income & Expense

by Member by

Program

32%

Aggregated

Income

26%

Income &

Expense by

Program

33%

Income & Expense

by Member

9%

70%

60%

50%

40%

30%

20%

10%

0%Equal Member Dominant Group Dominant Member

Participation of Members

19962000


Functions and Services: The Process and Productsof Networking

Rural health networks form whenproviders of health care services recog-nize the advantages collaboration andcooperation can create for their indi-vidual organizations. The shared activi-ties that become the focal point of net-work member participation can varydepending upon several factors. Thenumber and type of providers involvedin a network and the nature of theirorganizational needs and concernsinfluence the strategy used by membersof a network to collaborate. The levelof success achieved through shared net-work activities depends upon howaccurately a network’s leadership hasdetermined the right activity mix forthe membership (i.e. tackle too manyactivities and risk overwhelming themembership, tackle too few and risklosing critical momentum and themotivation to collaborate).

Some networks form to address manyshared areas of activity while othershave formed to address only a mini-mum of issues only to graduallyexpand their efforts over time toencompass greater degrees of function-al and service integration. An integra-tion scale based on 21 potential sharedactivities was developed to assess thescope and intensity of network mem-

ber efforts to realize goals and objectivesthat are important for their organiza-tion’s mission. These 21 areas of poten-tial shared activity are sorted into threekey domains of integration—clinicalintegration, functional integration andfinancial integration. In this chapter wereview key trends in the involvement ofnetwork members in these domains ofactivity as well as their experiences inproviding clinical and insurance servicesand establishing managed care linkages.



Chapter Four

Definitions and Data Notes

Integration means the bringing togetherof previously separate and independentfunctions, resources, and organizationsinto a new unified structure.

Clinical Integration denotes the coordi-nation or combination of patient careservices across members of the network.

Functional Integration describes thecoordination or combination of key sup-port or administrative functions andactivities across members of the network.

Finacial Integration indicates the shar-ing of capital, risks, and profits acrossmembers of the network.




Chapter Four : Functions and Services: The Process and Products of Networking

Components of Integration

Clinical Integration• Use the same, or substantially the same,

physician credentialing system• Use the same, or substantially the same,

quality measurement and improvementprogram

• Use the same, or substantially the same,clinical protocols developed or approvedby the network

• Use a system for sharing medical recordsamong network members

Functional IntegrationHuman Resources:• Use the same, or substantially the same,

personnel policy manual• Use the same, or substantially the same,

salary and wage system• Use the same, or substantially the same,

health professional recruitment program• Use the same, or substantially the same,

continuing education programs• Use shared staff (e.g., nurses, physical

therapists)

Accounting:• Use the same, or substantially the same,

chart of accounts• Use a consolidated network office for pay-

roll and/or accounts payable

• Use a consolidated network office forpatient billing and collections

• Use the same network-wide material man-agement program

Planning & Marketing:• Use a consolidated network office for mar-

keting and community relations• Use a consolidated network office for plan-

ning• Use a consolidated network office or ser-

vice for grant writing• Participate in common legislative and reg-

ulatory advocacy efforts

Management Information Systems:• Use the same, or substantially the same,

network management information system

Financial Integration• Accept a portion of the risk of operating

loss on network ventures• Accept a portion of the risk of business

failure on network ventures (i.e., respon-sible for paying creditors after businessfails)

• Contribute capital to network ventures

Network Integration Scale

Calculation of Scale

For all networks with 20 or fewer members, we collected data on the number of memberswho participated in each of the 21 functions listed below. For each function, we calculatedthe percentage of network members who participate in the function. For each subgroupidentified below, we calculated the average of the percentage participation scores. The func-tional integration scale is the average of the overall scores for human resources, accounting,planning and marketing, and management information systems. Integration scores rangefrom 0 to 100. A score represents the percent of members who use, participate in, or con-tribute to a network function.


Rural health networks are pursuing awide range of objectives that theyconsider of major importance.

• Major objective areas includedresponding to member needs, devel-oping local service capacity, expand-ing health improvement and riskreduction services, strengtheningmember communication and coordi-nation, and developing marketableproducts to generate additional rev-enue (Table A-2).

• Almost two thirds of all rural healthnetworks engaged in activities tomeet the organizational and opera-tional needs of their members whileover a third launched programs toimprove, expand and develop localhealth care capacity (Table 4-1).

Hospital only networks are morelikely to pursue objectives involvingimprovements in member operationalefficiencies than developing addition-al community services.

• Rural health networks with diversememberships are more than threetimes as likely to pursue objectivestargeting health improvement andrisk reduction services than hospitalonly networks (Table A-3).

• Networks that include physicians aremore likely to develop market orient-ed products and services (Table A-3).

Self-assessment of the networkachievement considered most signifi-cant to date suggests that most ruralhealth networks are still in the earlystages of organizational develop-ment.

• Almost 60 percent of all networks(similar to 1996) considered thedevelopment of network infrastruc-ture (organizational and administra-tive development) as their most sig-nificant achievement (Figure 4-1).

• There has been a substantial increasein emphasis on activities to improvecommunity health (Figure 4-1).

Three of the four most popularfunctions shared by network mem-bers in 1996 remained the mostpopular in 2000 including con-tributing capital to support networkventures, participating in commonlegislative and regulatory advocacyactivities, and using the same con-tinuing education programs.

• More than half of all networks arereceiving capital contributions fromall of their members to support net-work ventures. Over two-thirds haveat least two or more members con-tributing capital. Similar propor-tions of rural health network mem-bers are engaged in common legisla-tive and regulatory advocacy efforts(Table 4-2).



Chapter Four

Key Trends


• Thirty percent of all rural networkshave complete involvement of theirmembers in continuing educationprograms for health professionals(Table 4-2).

Network member involvement inshared functions and activitiesincreased between 1996 and 2000.

• Although network member involve-ment increased across the broadrange of network functions, the mostpopular area remained financial func-tions (Figure 4-2).

• The use of shared clinical protocolsdeveloped or approved by networkpractitioners increased substantiallysince 1996 (Table 4-2).

Network member participation inshared functions is strongly influ-enced by network age and member-ship size.

• Older networks are more likely tohave members that are participatingin the full range of network func-tions, reversing the relationshipobserved in 1996 (Table A-4).

• The members of smaller rural healthnetworks exhibit a greater degree ofintegration than larger networks andare more likely to engage in sharedclinical functions as well as share inthe financial risks of network ven-tures (Table A-5).

Few rural health networks provide orarrange for the provision of clinicalor insurance services.

• Only 22 percent of all networks pro-vide or arrange for clinical or insur-ance services (Figure 4-3).

• Smaller rural health networks aremore likely to provide or arrange forclinical services while larger networksare more likely to offer insuranceproducts (Figure 4-4).

Most rural health networks are notlikely to contract with health mainte-nance organizations (HMOs) ordirectly with self-insured employers.

• The proportion of networks thatcontract with HMOs increasedslightly since 1996 (from 20% to26%) while the proportion contract-ing with self-insured employersremained stable (20% versus 19%)(Table 4-3).

• Networks with physician memberswere more likely to contract withHMOs and employers (Table 4-3).

• Rural health networks located in theSouth were most likely to contractwith HMOs (Figure 4-5).







Chapter Four

Rural health networks are voluntaryorganizations. Analyses of major net-work objectives, significant achieve-ments to date and the manner in whichnetwork members integrate their sup-port and core functions provide aframework for understanding howmember interests may shape networkdevelopment and operations.

Virtually all of the major objectivesidentified by the networks provide adirect or indirect benefit for theirmembers. Two thirds of the objectivesfocused on activities that could result indirect and timely support for meetingmember operational needs (e.g., educa-tion and training, improvement of uti-lization review programs, developingdistance learning and consulting capac-ities, expanding staffing pools, andjoint recruiting efforts). As with theprevious survey, the most commontheme of the objectives is improvingmember operational performance.

The capacity to provide direct or indi-rect support for member operations islinked to the capacity of a network’sinfrastructure for coordinating efforts,focusing resources and allocatingresponsibilities to meet such needs. Thedevelopment of this infrastructure is anincremental and time limited process(i.e. the more time that has elapsedsince network formation, the fewerstructure conflicts and issues thatshould remain). Network maturationcan be characterized as a process inwhich efforts to establish and maintainthis infrastructure gradually gives wayto focused efforts that address externalhealth system related issues.

Surprisingly, almost six of every ten sig-nificant network achievements identi-fied by respondents involved efforts toestablish or maintain network infra-structure. These networks, like theirpredecessors in 1996, have continued


Almost half of the rural health net-works contracting with HMOsreceive a capitated payment andmost pay their primary care physi-cians, specialists and hospital mem-bers on a fee-for-service basis.

• Forty-eight percent of rural healthnetworks contracting with HMOsreceive a per person, per month pay-ment from the HMO for eachHMO member served (Table 4-4).





to function in the early stages of net-work development. In our earlierreport, we speculated that if networkswere concentrating on these activities inan effort to build for the future, a latersurvey should be able to identifyaccomplishments more consonant withthe overall purposes of the networksuch as improving member effectivenessand community health. It appears thatnetworks have not moved as rapidly inthis direction as expected.

Even if these milestones of networkdevelopment have not emerged, it isimportant to underscore the fact thatthe number of network members shar-ing in core functions (e.g. use of clinicalprotocols or management informationsystems) has increased since 1996. Theparticipation of rural health networkmembers in shared functions increasedin 16 of the 21 functional areas result-ing in an increase in overall integration.However, consistent with the conclu-sion that many networks remain in theearlier stages of organizational develop-ment, the majority of members have yetto significantly integrate core networkfunctions, mirroring the 1996 findings.

Contributing capital toward networkjoint ventures and engaging in legisla-tive and regulatory advocacy remain themost popular areas of integration forrural health networks. Two thirds of the

rural health networks had at least twoor more members engaged in theseefforts and half of all networks reportedall members involved in them.

Rural health networks continue to par-ticipate in joint ventures as indicated bythe degree of capital investment bymembers in such efforts. This suggeststhat many network members continueto take a significant stand in positioningtheir organization for future opportuni-ties (especially given the often scarceand fragile nature of rural resources).However, investment in network jointventures does not involve the same typeof commitment required in integratingother network functions. Joint venturesoften create a new entity rather thanreconfigure existing member relation-ships and obligations. This entity usual-ly provides services and products thatare not currently available through thecollaboration of network members. Thismay be an important strategic step onthe part of network members but ourfindings suggest that network membersshare limited risks related to operatinglosses or business failures.

The level of overall network integrationhas been modest at best. This is likelydue to similar issues identified in ourearlier chartbook: a low level of trust inthe intentions and efforts of other net-work members, ambiguity in terms of


Chapter Four



the balance of short-term costs withlong-term benefits from core functionintegration, and the inability to controlthe decisions and activities of partnerorganizations. Engaging in non-core,supportive functions (e.g. joint purchas-ing, materials management) is far saferthan core functional areas. Engaging innon-core efforts can benefit the largermembership without producing signifi-cant risks for participating members.Sharing core network functions increas-es the financial and operational vulnera-bility of participating members for sev-eral reasons including less control overoperational and strategic information,decision-making and mid-course correc-tions (i.e., group priorities and benefitsmay run counter to individual organiza-tional interests).

The only area of core network functionsthat substantially increased since 1996was the adoption of the same or similarclinical protocols. The integration ofnetwork clinical protocols increasedmore than any other single networkfunction. There are a number of factorsthat could have contributed to thisincrease including increasing concernsabout malpractice litigation and theneed to adhere to commonly acceptedstandards of practice, as well as thereplacement of retired practitioners byclinicians trained to understand thebenefits of using clinical protocols.

Few rural health networks provide orarrange clinical or insurance services.While the number of rural health net-works contracting with HealthMaintenance Organizations (HMOs)increased slightly since 1996, the pro-portion of networks contracting withself-insured employers remained stable.Networks comprised of hospitals andphysicians only are most likely to con-tract with either employers or HMOs.The reduction of HMO activity inmany rural areas and the shifting ofemployer responsibilities for the costsof health care to employees suggest thatfew networks are likely to expand con-tracting activities with HMOs oremployers in the near future.





Self-Assessment of Most Significant NetworkAchievement to Date, 1996–2000

Figure 4-1

61%

Improve. expand and develop local health care capacity 35%

Develop network products/services and joint market strategies 25%

Improve communication, coordination and collaboration 22%

Expand access to health improvement and risk reduction services 17%

Objective Targeting this Area of Activity*

Proportion of Networks with Objectives

Major Network Objectives, 2000Table 4-1

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%Organizational Administrative Improve Access Improve Improve Member Clinical Survival/Stability

Development Development to Care Community Health Effectiveness Development

19962000

*Respondents were allowed to identify more than one objective


Help meet the needs of member organizations

19962000

19962000

Rural Health Network Integration 1996–2000(Networks with 20 or Fewer Members Only)

Figure 4-2



Chapter Four

40

35

30

25

20

15

10

5

0

Clinical Functional Financial Overall

Human R

esources

Finance

/Acc

ounting

Mark

eting/P

lannin

g

Managem

ent Info

rmatio

n

Network Integration

Scale (Range 0-100)





Member Participation in Network Functions, 1996–2000

Table 4-2

Use the same, or substantially the same, personnel policy manual

Use the same, or substantially the same, salary and wage system

Use the same, or substantially the same, chart of accounts

Use a consolidated network office for payrolland/or accounts payable

Use a consolidated network office for patientbilling and collections

Use the same, or substantially the same, health professional recruitment program

Use the same, or substantially the same, network-wide managementinformation system

Use the same, or substantially the same, network-wide materials management system

Use the same, or substantially the same, physician credentialing system

Use the same, or substantially the same, qualitymeasurement and improvement program

Use the same, or substantially the same, clinical protocols developed or approved bynetwork practitioners

Use a system for sharing medical recordsamong network members

Accept a portion of the risk of operating losson network ventures

Accept a portion of the risk of business failureon network ventures (i.e., pay creditors)

Contribute capital to network ventures

Use the same, or substantially the same, continuing education programs(e.g., for physicians and nurses)

Use shared staff (e.g., nurses, physicaltherapists)

Participate in common legislative and regulatory advocacy efforts

Use a consolidated network office for marketing and community relations

Use a consolidated network office for planning

Use a consolidated network office or service for grant writing

7% 2% 17% 3%

7% 2% 12% 1%

9% 3% 14% 4%

7% 3% 8% 4%

9% 5% 10% 2%

25% 13% 36% 19%

21% 8% 19% 5%

18% 6% 29% 16%

28% 16% 30% 17%

16% 8% 19% 10%

11% 4% 36% 26%

12% 7% 17% 9%

30% 22% 33% 23%

26% 18% 29% 19%

46% 30% 68% 51%

37% 25% 44% 30%

33% 14% 29% 15%

43% 32% 64% 54%

17% 10% 26% 17%

20% 17% 33% 24%

25% 18% 36% 27%

Shared FunctionTwo or More All Members Two or More All Members

Members Participate Members Participate

Participate Participate

1996 2000(n=119) (n=129)


Percent of Rural Health Networks That Provide orArrange for Clinical or Insurance Services, 2000

Figure 4-3

Chapter Four



78%

Don’t Provide

22%

Do Provide80%Five or MoreMembers

20%Less than FiveMembers

Rural Hospitals Only 8% 15% 10% 21%

Rural and Urban Hospitals Only 12% 16% 12% 14%

Hospitals and Physicians 35% 42% 22% 67%

Hospitals, Physicians and Others 33% 22% 46% 31%

Hospitals and Others (No Physicians) 13% 9% 10% 17%

Total 20% 19% 20% 26%

Contract with Contract withEmployers HMO’s

Network Type 1996 2000 1996 2000

Rural Heath Network Contracting with HMO’sor Employers by Network Type, 1996–2000

Table 4-3


Less than Five MembersFive or More Members




Networks with capitated contracts 48%

Primary care physicians capitated 26%

Specialists capitated 16%

Hospitals capitated 17%

Rural Health NetworkPayment Under ManagedCare, 2000 (n=55)

Table 4-4

100%

80%

60%

40%

20%

0%

Clinical Services Insurance Products

Provision of Clinical Services andInsurance Products by Network Size, 2000

Figure 4-4




Rural Health Networks that Contract with HMO’sor Directly with Employers by Region, 2000

Figure 4-5

Chapter Four

35%

30%

25%

20%

15%

10%

5%

0%Northeast Midwest South West All

Networks

Contract with HMOsContract with Employers




Chapter 5

ConclusionsRural health networks organizedaccording to formal written agreementshave increased in number, size andmember diversity over the last half ofthe 1990s. Operating budgets are largerand more diverse involving multiplesources of funding and a larger propor-tion of state and federal grant supportthan in 1996. The types of services thenetworks are providing or arranging tobe provided are much more likely toinclude community-focused andhealth-related efforts than ever before(e.g., public health, community mentalhealth, health education and promo-tion, and social services). With greaterresources available and broader con-stituencies and agenda to represent it isnot surprising that networks also exhib-it somewhat greater degrees of func-tional integration (i.e., greater propor-tions of network members are joiningin shared network activities).

Given the above, it is puzzling to findthat most networks continue to vieworganizational and administrativedevelopments as their most significantaccomplishment to date. However, thisbelief is consistent with the findingthat many networks have still not sig-nificantly integrated core networkfunctions. Without significant integra-tion of core network functions it is dif-ficult to accomplish more than broadstructural and administrative goals.

Core operational efforts have remainedbounded by the planning and actions ofindividual network members and accruebenefits mostly to those members.

We conclude this chartbook with a dis-cussion of how these and other find-ings of our study of rural health net-work development offer suggestions onfuture directions for networks.

Increased Number of RuralHealth Networks

A variety of factors converged to fuel agrowing popularity in the use of net-working strategies for meeting ruralhealth needs. The favorable marketconditions of the 1990s along withincreasing health care payments creat-ed the availability of resources for stateand federal networking programs andhelped provide a framework for orga-nizing those activities. Rising healthcare costs coupled with the response ofhealth care plans in lowering premi-ums and offering expanded coveragefueled efforts to embrace managedcare. Many rural providers began tosearch for ways to prepare for the com-ing managed care environment. Stateand federal programs emphasized thecreation of provider relationships thatreflected greater degrees of verticalintegration and organization.

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Chapter Five : Conclusions

It is difficult to predict whether existingfunding incentives for rural health net-work development will continue intothe near future given the weakening ofstate and federal economies. However,the rationale for network creation andoperation will remain, as scarce ruralresources become even more the subjectof competition and community debate.

As providers continue to struggle withmeeting new regulatory requirements,maintaining physical plant resources,keeping pace with technologicalimprovements, and investing in therecruitment and retention of neededhealth care professionals it will becomemore difficult to succeed as an indepen-dent entity. Collaboration will not beenough. For many, their future survivalwill depend upon the degree to whichthey are able to adapt to a new model oforganizing and operating.

Increased Size and Diversity ofRural Health NetworkMembership

The growth in the availability of publicand private foundation funds for sup-porting network development has madea marked contribution to the dramaticgrowth in network size and diversity.Both federal and state network develop-ment programs have increasinglyemphasized the importance of includingcertain types of providers (e.g., commu-nity health clinics, county healthdepartments, mental health providers

among others). As efforts have grownto maintain the health care safety netmore diverse collaborations haveemerged.

Larger sized memberships carry agreater administrative burden for bal-ancing member agenda. Balancingmember agenda also becomes morechallenging when the membership isdiverse. The increase in the use ofcommunication strategies to dissemi-nate network-related information like-ly is a direct result of the increase inmember size and diversity as well asthe availability of funds to establishand maintain those strategies. Futurenetwork administrators will need todevelop strategies for addressingincreasingly complex decision-makingissues that networks will face.

Increased Network FinancialSupport

A significant factor in the increase inthe size and diversity of rural healthnetwork budgets has been the growthin state, federal and private initiativesemphasizing networking as a strategy.The reliance upon single source fund-ing to support network operationsdecreased considerably and almost halfof the networks obtained some opera-tional support from the direct sale ofnetwork products and services. One inten rural health networks completelysupported their operations in thismanner. Even though funding oppor-

rural health 2003 7/1 7/2/03 12:31 AM

tunities for networks improved in thelatter 1990s, networks have becomemore sophisticated in generating supportfor operations. This suggests, at least forsome networks, a maturation of adminis-trative and leadership capacity.

Integration of Network Functions

Finding that the majority of rural healthnetworks still considered achievements oflegitimacy and structure as a significantaccomplishment more often than thedelivery of services to their communitieswas surprising. With the exception of theshared use of clinical protocols, the inte-gration of core network functional areaswas modest at best.

The emergence of more clearly definedand stronger quality improvement initia-tives, documentation of the need for areduction in patient errors, a generalshift in focus from process to outcomemeasures, and increased concerns overmalpractice have all contributed to anincreased interest in standardized clinicalprotocols. These are strong environmen-tal incentives that have been largely lack-ing for the other areas of core networkfunctions.

Does the discovery of only minorincreases in levels of core function inte-gration signal a fundamental flaw in net-work strategy and policy? What is it thatmakes a rural health network any differ-ent than a health care alliance or pur-chasing cooperative if the only benefits

that accrue are to the individual partici-pating organizations? These are criticalquestions that must be addressed by pol-icymakers and stakeholders. Thereappears to be a fundamental conflictbetween the vision that networks conveyin policy and strategy and the reality ofwhat providers and communities are ableto achieve.

The period of 1996 through 2000 was atransition period where strong beliefs inthe benefits of managed care approachesand bullish economic markets began togive way to disenchantment with verti-cally integrated delivery systems and abearish economic future. The challengesfacing rural health care providers in thecoming years will remain much the sameas they are now (e.g., limited resources,aging populations, large geographic areasto cover and growing regulatory require-ments). Survival will continue to dependupon how well a provider or group ofproviders is able to achieve and maintaingreater efficiencies, cost-savings, capitalinvestments and organizational flexibili-ty. While some providers will benefitfrom diversification, the majority likelywill fall back on their core product-relat-ed line that most defines the organiza-tion. Unless innovative organizationalmodels are developed, hospitals will findthemselves under greater pressure toredefine core products and to capturemarket share currently held by non-hos-pital providers.



Chapter 5

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For many networks, the limited evolu-tion beyond the initial stage of develop-ment may be less a measure of theinability of current network policy thana reflection of the larger environmentalcontext of scarcity. In many ways, thedevelopment of rural health networks asformal integrated models of health carewill remain a solution awaiting a prob-lem. They will continue to offer aneffective strategy for managing localmarket pressures involving small num-bers of trusting providers with a clearunderstanding of their goals and inter-ests. As a national phenomenon, inte-grated rural health networks likely willneed to wait for another window ofopportunity similar to that provided bymanaged care a decade ago. The increas-ing popularity of using care managementstrategies to achieve quality improve-ment goals while enhancing financialefficiencies will require greater degrees ofprovider cooperation and collaboration.Networks may be able to provide theorganizational framework for achievingthese goals in rural areas of the country.

Chapter Five : Conclusions

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Appendix

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Appendix

How were members of the network initially selected?All hospitals were invited to join 29% 30%A small group of providers began to meet informally and 22% 23%

invited others to join as they thought appropriate.All health providers in the area were invited to join 13% 14%All hospitals and their medical staff were invited to join 10% 2%Network membership is the same as another organization 3% 8%Other1 23% 23%

Percent of networks that added new members 52% 52%during the previous two years

What was the major reason for adding new members?To include members who asked to join the network 31% 27%To increase the service area of the network 29% 28%To broaden the types of members who participate 21% 27%To complete specific activities 5% 7%To include members who were originally overlooked 3% 1%Other 11% 10%

Percent of networks that lost members during 24% 29%the previous two years

What was the major reason given for losing members?Members relocated or retired 32% 22%Monetary costs of participation were too great 14% 19%Network did not produce expected benefits 11% 3%Did not want to collaborate with competitors 7% 14%Did not agree with the goals of the network 5% 11%Non-monetary costs of participation were too great 2% 10%Other 29% 21%

Formation

Growth

Attrition

Network Development: Formation,

Growth, and Attrition, 1996–2000

Table A-1

1996 2000

1Analysis of open-ended responses included in the “Other” category for the 2000 survey revealed two additional reasons forselecting initial network members: (1) similarity of mission and goals, 11%; and (2) proximity and past experience, 11%

rural health 2003 7/1 7/2/03 12:31 AM

Examples of Major Rural Health

Network Objectives

Table A-2

Improve, Expand and Develop Local Health Care Capacity.• Provide a mobile dental clinic• Develop case management and home health services• Provide mobile diagnostic technologies• Expand scope of services and access to EMS• Train mental health workers on the needs of frail elderly adults

Improve Communication, Coordination and Collaboration.• Develop network-wide teleconferencing and telemedicine capacity• Assess member ongoing needs for new product and program initiatives• Improve electronic connectivity of members• Collaborate on staffing problems and shortages• Expand and strengthen affiliations and relationships among members

Help Meet the Needs of Member Organizations.• Create opportunities for education and re-training• Extend campus initiative for LPN training with two regional colleges• Expand temp staffing pool• Develop initiatives in the areas of purchasing, contracting, credentialing

and information systems

Develop Network Products/Services and Joint Market Strategies.• Centralize managed care contracting• Develop managed care consulting and contract evaluation capacity• Develop third party administration capacity• Diversify into a profit oriented business model• Develop and provide a service network to self-insured empolyers

Expand Access to Health Improvement and Risk Reduction Services.• Provide community health education on tobacco use issues• Prepare consumers and providers to respond to changes in health care• Develop senior nutrition education and exercise classes• Foster wellness, prevention and personal responsibility

Appendix



rural health 2003 7/1 7/1/03 9:20 PM



Appendix

21% 22% 33% 38% 53%

26% 14% 17% 28% 19%

51% 86% 75% 46% 60%

18% 30% 54% 26% 16%

8% 8% 8% 28% 21%

Objective

Rural Rural and Hospitals Hospitals, Hospitals and

Hospitals Urban and Physicians Others (No

Only Hospitals Physicians and Others Physicians)

(n=43) (n=4o) (n=24) (n=72) (n=68)

Improve, expand and develop

local health care capacity

Improve member communication,

coordination and collaboration

Help meet the needs of member

organizations

Develop network products/ser-

vices and joint market strategies

Expand access to health improve-

ment and risk reduction services

Rural Health Network Objectives by

Network Type, 2000*

Table A-3

Clinical 16.6 13.1 14.6 16.5 7.2 20.2

Functional 15.1 12.8 14.1 11.1 10.4 18.0

Human Resources 18.9 18.1 17.5 11.9 13.9 21.6

Finance/Accounting 2.3 2.9 7.0 3.9 6.2 15.4

Marketing/Planning 25.3 24.2 20.6 20.6 20.0 23.1

Management Information 6.7 5.9 21.8 7.9 10.4 11.9

Financial 39.7 22.3 29.4 35.6 24.2 40.1

Overall Integration 19.3 17.4 16.7 17.6 11.9 24.8

Less than Two Two to Five More than FiveYears Old Years Old Years Old

Type of Integration 1996 2000 1996 2000 1996 2000

Network Integration Scale Scores by Network Age(Networks with 20 or Fewer Members; n=119, 1996; n=129, 2000)

Table A-4

Network Integration Scale Scores

*Cell percentages reflect the proportion of networks of a particular type that listed at least onemajor objective for a particular category of objectives.

rural health 2003 7/1 7/2/03 12:31 AM

Clinical 17.2 42.8 7.5 14.0 12.9 4.4

Functional 14.3 20.9 11.6 20.4 13.4 7.4

Human Resources 16.7 19.8 15.6 36.1 17.3 7.7

Finance/Accounting 8.4 17.3 2.9 8.4 9.0 4.4

Marketing/Planning 19.1 29.4 18.6 26.2 11.9 13.4

Management Information 15.7 16.9 11.7 10.9 14.0 4.2

Financial 29.2 52.4 29.1 38.4 33.1 20.6

Overall Integration 17.2 34.6 13.5 21.8 16.4 10.9

Less than Five Five to Ten Eleven to TwentyMembers Members Members

Type of Integration 1996 2000 1996 2000 1996 2000

Network Integration Scale Scores by Network Size

Table A-5

Network Integration Scale Scores

Appendix



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(Networks with 20 or Fewer Members; n=119, 1996; n=129, 2000)

Rural Health Research CenterDivision of Health Services Research and Policy

School of Public HealthMinneapolis, Minnesota

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