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HEALTH CARE REFORM: IMPLICATIONS FOR HUMAN RESOURCES MANAGEMENT


Author(s): BRUCE J. FRIED
Source: Journal of Health and Human Services Administration, Vol. 21, No. 2 (FALL, 1998),
pp. 218-235
Published by: SPAEF
Stable URL: http://www.jstor.org/stable/41426767
Accessed: 13-03-2018 04:43 UTC

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HEALTH CARE REFORM: IMPLICATIONS

FOR HUMAN RESOURCES MANAGEMENT

BRUCE J. FRIED
University of North Carolina at Chapel Hill

INTRODUCTION

Current health care reform efforts are bringing about a rap


acceleration in the rate at which the health care delivery is evolving
This evolution includes a transformation to a more cost-conscious
system emphasizing capitated and managed care arrangements,
integration among levels of care, intensive quality and productivity
improvement initiatives, and a renewed emphasis on primary care.
These changes have profound implications for health services deliv-
ery organizations and the people working in those organizations.
While there is an emerging literature on the structure and financing
of the health services delivery system under health care reform (see,
for example, Health Affairs 13(1)), relatively little has been reported
on how health care organizations are adapting and will continue to
adapt to these specific changes.
The focus in this article in on the health care organization as the
provider of services under health care reform. The objective of this
article is to examine the human resources (HR) management impli-
cations of health care reform with respect to the health system as a
whole, as well as for individual health care organizations and health
care networks.
Human resources executives can expect to be heavily involved in
developing strategies to control labor expenses so that hospitals (and
other health care organizations) can remain viable, considering the
fact that hospital expenses for salaries and benefits typically exceed
fifty percent of total expenses (Burda, 1993). In adapting to health
care reform as employers, health care organizations will need to
consider how reform will affect their administration of health bene-
fits and the cost of providing those benefits to employees. This may
involve increased costs to the organization if the minimum benefit
package exceeds what it currently provides and will likely involve
changes in how health insurance plans are marketed to employees.

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JHHSA FALL 1998 (219)

It will be important, for example, for


that their managed care strategies are c
culture and to provide employees wit
make health care decisions (Darling, 1
are choosing to self-insure as a respo
health benefits. While these changes wi
health care organizations (particular
may not currently provide state-of-
employers, the focus in this article in o
as provider of services within the health

TENETS OF HEALTH CARE REFORM

Human resources management refers to the strategic and opera-


tional management of activities related to the performance of the
human resources in an organization. The human resources man-
agement function is a shared set of activities carried out by the
formal human resources department as well as by managers and
supervisors throughout the organization (Shimko, 199). The formal
HR management function, centered in the human resources de-
partment, has undergone a steady evolution from a "personnel" role
focused on operational, day-to-day concerns, to one which increas-
ingly performs a strategic role in the organization (Fottler et al .,
1990).
While the operational role (e.g., ensuring that vacant positions
are filled, administering employee benefits programs) certainly is a
mainstay of human resources management, HR departments are
increasingly concerned with strategic planning, identifying emergent
legal issues and workforce trends, organizational downsizing, advis-
ing on mergers and acquisitions, quality improvement, and develop-
ing compensation programs that are aligned with the strategic goals
of the organization (Freedman, 1990).
The several health care reform proposals currently being dis-
cussed include in various combinations several themes: improved
access to health services; an emphasis on managed care and con-
sumer choice; global budgetary targets; competition among provid-
ers; cost control; significant attention to primary care and preven-
tion; and the development of organized, clinical integrated with the
Clinton administration health care plan; forces shaping these trends
have been developing for at least fifteen years.
Concurrent with these changes are important trends in the health

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(220) JHHSA FALL 1998

care labor force, all of which relate dir


complement health care reform objec
increased use of multiskilled health c
important concerns facing health care
for increased productivity. Individuals
be able to move more freely about t
system to perform a variety of functi
work force and increasing overall pr
because of the uncertainties facing m
regarding their future roles, priorities
sification.
There is tremendous pressure on h
make the transition from viewing labo
that views labor costs as sensitive to
standing current state licensure and
inhibit flexibility in staffing, organiza
priority on designing work around s
technologists who also perform basic n
challenges facing the health care field
the challenge to establish training an
developing new markets of competency
continuing competency for those work
A second labor force trend concerns the increased role of health
information specialists to provide health education, health promo-
tion, and wellness services. They will also increasingly serve as a link
(and in some cases, a buffer) between the medical community and
consumers and may in fact assume increasing responsibility for
integrating illness and wellness in vertically integrated health sys-
tems. Certainly, as the locus of health services continues to shift
from the hospital to facilities and programs providing preventive and
primary care services, health information specialists will take on key
roles in the health care system.
A third trend concerns the greater acceptance of advance prac-
tice nurses, physician assistants, and other nonphysicians to provide
primary care services as well as alternative therapies. Greater use is
being made of alternative therapies and the use of nontraditional
providers, particularly in the areas of drug and food additives, stress
management, and hospice care. Fourth, the aging population is
already creating increased demand for geriatric health professionals
such as geriatric nurse practitioners and physicians, adult day care
personnel, home health aides, and social workers. These workers in

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JHHSA FALL 1998 (221)

turn will deal with increasingly diff


right to die and euthanasia (Sherer, 199
The restructuring of health services r
the traditional foundations of human r
past, human resources management
Personnel specialists were primarily co
tion of specific employee-related funct
compensation administration, and disci
HR function focused mainly on the
carry out these functions in an efficie
tives on human resources manageme
ships among these functions and bet
organizational effectiveness and compe
Of critical importance under the h
reform environment is the ability of t
activities with the strategic goals of
sources departments will need to play
ous quality improvement programs
"functions" (e.g., compensation syst
training) reinforce the quality improv
As health care organizations conti
costs, a key role for the human resour
care organizations will involve deve
implementing downsizing plans. Thi
the HR department in outplacemen
decisions regarding the use of continge
management of the impacts of downsi
and job satisfaction.
The domain of the human resource
into new areas of responsibility. The
all types of health care delivery organ
is a transformation in the relationship
organization. As physicians continue
tions, the human resources function
ously designated for physicians and ho
recruitment and appraisal. These cha
Pew Health Professions Commission
that the changing nature of health care
organizations, planning, and educat
health professionals, their training,
work together.

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(222) JHHSA FALL 1998

To participate fully as a partner in


reform efforts, the human resources
that its practices are aligned with the ob
ment, access, "customerization," and
delivery systems continue to erode th
organizations (such that, for example, p
be system-wide or "health-wide" and
cerns), human resources departments
wide as well as intraorganizational rol
These human resources challenges a
newly merged organizations where ther
disparate compensation policies, deve
services, and redeploy staff given a n
structure.

Further, as organizations continue to coalesce into health care


alliances, human resources departments will assume responsibility
for bridging differences in organizational cultures and resolving
historical conflicts among organizations and between organizations
and professional groups. This will perhaps be most pronounced as
public health departments, managed care organizations, hospitals,
and other organizations forge alliances. While these alliances may be
strategically mutually beneficial, differences in culture will need to
be managed.
Consistent with these trends is a redefinition of the role of the
health services manager, in particular, senior hospital managers.
Senior hospital managers have grown accustomed to and are quite
comfortable with established hierarchies in which they hold consid-
erable formal power within a relatively closed system. The new
management culture, however, will require managers skilled in
negotiation and conflict management skills, systems thinking, team
building, and consensus building (Shortell et al ., 1993).
With the blurring of boundaries and the shift of resources (and
power) from the hospital to others, the senior manager will also
need to identify alternative sources of influence within the organiza-
tion and system.

In the following sections, attention focuses on four traditional


human resources functions: job design, compensation systems, and
recruitment and retention. Performance appraisal is addressed as a
component of a compensation system. Attention is then focused on a
relatively new area of HR management: the physician.

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JHHSA FALL 1998 (223)

JOB DESIGN

Health care reform is bringing about new ways of thinking


about the design of health care jobs. Workforce restructuring is an
area key to current efforts at improved quality and efficiency.
Among the members of the workforce most likely affected by re-
structuring are non-exempt employees such as support staff and
middle managers as well as nurses. Specifically, job design will need
to consider: (1) training aspects of jobs or how jobs fit together to
promote patient-focused care; (2) flexibility and breadth of duties in
job design; (2) a reconfiguration of traditional career tracks and
progress through the organization; and (4) the impact of new tech-
nology on work and job design.
Traditional job descriptions focus on a relatively narrow set of
tasks, duties, and responsibilities for a given job. A key element of
job design is the job analysis process, which typically focuses on the
behaviors and skills required for a particular job. While still con-
cerned with these factors, health care organizations are increasingly
concerned with the relationships among jobs and how they fit to-
gether to form patient-focused care teams. Health care organiza-
tions are placing increasing emphasis on delivery of "seamless care"
and moving from a highly compartmentalized vertical organization
to a horizontal, integrated one aligned with the manner in which
patients move through the organization.
Future health care organizations will also find themselves need-
ing to be increasingly flexible in the manner in which human re-
sources are deployed. Organizations will move more towards flexible
job descriptions, providing individuals with greater breadth of re-
sponsibilities. This will need to be accomplished while maintaining
professional standards.
However, as noted earlier, professional standards for a multi-
skilled worker may be quite different from those established by a
traditional licensing body. Cross-training of personnel to assume a
diverse set of roles in health care organizations is already quite
common. An example is the use of fewer classifications for RN
specialties and greater attention to cross-training of RNs. Many
hospitals have developed cross-training initiatives for RNs to work in
mother-baby units, enabling staff to rotate among labor and delivery,
nursery, and post-partum as demand shifts. Moving towards these
types of arrangements requires substantial training, development of
an environment fostering strong professional relationships, and new

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(224) JHHSA FALL 1998

performance management systems.


Traditional career tracks in health
begin with entry-level direct servic
progress to positions of increasing r
management, and ultimately, for som
agement positions. In fact, promises
traditionally played an important role
employee commitment and motivat
industries, this career scenario has
increased productivity. For a number o
zations can no longer present to p
developed career track within their org
First, the future structure of health
tain as they move into alliances, mer
tional configurations. Second, the nat
changing because of the changing nat
is the "natural" career track, for examp
with competencies in drawing blood,
designing and delivering health pro
patients' vital signs? Finally, a key step
the middle manager role is undergoin
perceived duplication and inefficiency.
Nursing has taken a number of step
issues by instituting an alternative t
Clinical nurse specialist roles provide
advancement within the organization
maintain a clinical focus and increase
tional structures will need to address career tracks in even more
innovative ways.

COMPENSATION SYSTEMS

Compensation systems set out to meet a variety of objectives: to


recruit and retain high-quality employees; to compensate employee
at prevailing market wages and salaries while adhering to legal con
straints; to maintain internal equity while being externally competi-
tive; and to induce and reward improved performance.
Compensation is perhaps the most volatile of human resources
issues. On the one hand, health care organizations are seeking to
contain costs and, with labor costs accounting for the highest propor-
tion of health care budgets, the most obvious method of reducin

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JHHSA FALL 1998 (225)

costs is staff reduction or greater flexib


ing the use of part-time and contrac
with the relatively insecure employme
are seeking to enlist loyalty, comm
productivity from their employees
seemingly opposing objectives is in the
reward system.
The major challenges facing compensa
organization is in ensuring that the sy
namely, activities associated with achie
the organization (Milkovich and Newma
has been a weak link between the rew
priorities. Compensation systems ar
cations (based mainly on experience a
the organization. The need for incr
organizations to become more pre
employees with respect to their per
number of modification to existing com
tested, including skills-based pay, pe
added executive compensation, and flex
Under a highly competitive system, h
be increasingly held accountable for
services. System performance will be e
with these two elements. Congruent w
compensation systems to be designed
formance and less around formal job
based pay structure, employees are p
types of skills that they are capable of
fore paid at a rate based on their know
of service or job title.
Pay increases are achieved when
expansion in their skill base. The advan
clear: employees have incentives t
achieves increased flexibility; employee
there is often a higher level of emp
1991; Tosi and Tosi, 1986).
There are, however, several obstacles
ing skills-based pay. Wage rates and tr
employees may be dissatisfied with the
this implies. In addition, attention
equity concerns and developing the m

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(226) JHHSA FALL 1998

developing skill blocks, defining progr


requirements in a particular skill block
tests.

Performance-based pay systems and discretionary bonuses have


received considerable attention in various sectors of the economy.
Essentially, performance-based pay is a method of variably paying
individuals so that at least part of their pay is linked to their per-
formance. In developing a performance-based pay system, health
care organizations need to ensure that: (1) the outcomes valued (and
thus compensation for) are those that will continue to have value in
the long term; (2) by rewarding one outcome, the organization is not
compromising other equally or more important outcomes (e.g.,
compromising quality for productivity); (3) outcomes worth reward-
ing are measurable in a valid and meaningful way; and (4) outcomes
are under the control of the job incumbent (or team). Among the
most dramatic changes in compensation will be a transformation
from an individual orientation to one which also rewards group
productivity and quality. It is likely that such variable pay systems
will be implemented alongside traditional pay structures.
Flexibility will be the most critical part of compensation systems.
Compensation systems, particularly in large organizations, however,
tend to be rigid and difficult to change. Job evaluation systems are
typically built around the concept of "compensable factors" and
assigning points for such job factors as experience, training require-
ments, work environment, and responsibility. Factoring in perform-
ance outcomes is typically a messy and controversial endeavor and is
particularly difficult when group rewards are included as a compo-
nent of the compensation scheme.
While health care organizations typically adhere to a philosophy
of teamwork, compensation systems are rarely aligned with this
concept. The problems associated with team-based reward systems
are well-documented (e.g., social loafing, dysfunctional competition
among teams) and many organizations are reluctant to deviate from
generally well-accepted individual initiative programs. Given intense
competitive pressures, variable group compensation plans will
become increasingly common. The plans will likely target improve-
ments in quality, profits, service, and cost reduction.

RECRUITMENT AND RETENTION

With its emphasis on providing a range of health services from

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JHHSA FALL 1998 ( 227)

prevention to hospice care, an overrid


system managers will be the recruitment
individuals. Like other areas of human
recruitment and retention functions are
human resources department and line d
er, health care organizations can no lon
ment and retention incentives (e.g., pr
continued employment) that were availab
A major segment of the labor force cu
registered nurses. The nursing shortage o
develop compensation systems that wo
for RNs. These compensation plans includ
on bonuses and the Baylor Plan which res
and one-half times the regular pay to wo
1990s have witnessed a period of increa
ates due to an increase in academic pro
and increased class size in existing pro
decline in inpatient volumes, many hos
need for RNs and have phased out spe
retention incentives.
In this environment, organizations ne
recruitment strategies. First, it is import
tions to establish recruitment plans tha
accommodate cycles of shortage and su
example, hospitals have responded to
through extraordinarily recruitment effo
financial and scheduling incentives). Wh
the hospital recruiter and the short-staff
efforts often result in internal inequi
longer term nurses and new employee
these incentives are removed.
A second recruitment or staffing stra
and cross-training. If organizations an
bodies are willing to part with past assum
of skill sets (i.e., who may do what under
may find that we are recruiting for skills
particular professional credentials. This
training current employees to carry ou
restrictive assumptions about who mig
were viewed as scarce.
A third recruitment and retention strate

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(228) JHHSA FALL 1998

quality and flexibility of working


been gained with quality enhancing
sharing, work sharing, compressed w
These strategies, if well designed,
orientation towards productivity o
these innovations have been initiated
accommodate family responsibiliti
however, have initiated flexibility in
and retention tool (Goddard, 1987).

TRAINING AND DEVELOPMENT

Training and development represent a human resources function


that will vary tangibly and be affected by health care reform efforts.
Training issues emerge on two levels: professional training programs
and intraorganizational training and development activities. [The
issue of physician retraining is discussed in the following section.]
There are currently approximately 21,000 nurse practitioners, 21,000
physician assistants, and 4,300 certified nurse midwives in practice in
the United States (DHHS, 1992). While there has been a profusion
of analyses dealing with medical and allied health workforce policy,
there is little consensus or wide acceptance of a role for nonphysi-
cian primary care providers.
Extant workforce policy research has focused mainly on educa-
tion policies and employment incentives that will promote the geo-
graphic distribution of physicians and strategies to promote the entry
of minorities into medicine (Mullan, Rivo, and Politzer, 1993). There
is little correspondence, for example, between the number of nurse
practitioners and the "demand" for nurse practitioners. We simply
have not yet established benchmarks for nonphysician primary care
providers.
The Pew Commission on Education for the Health Professions
stressed the need for teamwork as an important element in health
professions training. In addition, practitioners will need to be com-
fortable in a variety of practice settings. A flexible workforce re-
quires that individuals have the ability to move among levels and loci
of care. Those training programs that have been oriented mainly to
the hospital setting will need to consider additional sites for practi-
cum placement.
Perhaps most important, training programs will need to accultu-
rate individuals to the managed care environment. Ideally, future

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JHHSA FALL 1998 (229)

members of the workforce will need


into the workforce, to the issues of p
ment, teamwork, and flexibility. It sho
transformation will occur at a rapid pa
Training and development activities w
focus to a great extent on better fittin
needs, It will no longer be the case t
registered nurses will necessarily ma
tion. Efficient training initiatives will
uals with requisite skills within a par
cases, this will involve a broadening of

ing ^ross-training, while in other ins


training in a particular programmatic
formal training and development funct
management at the most senior levels o
that training programs are supportive o
tional strategies.

SPECIAL CASE OF PHYSICIANS

Physicians as a human resource present a series of challenges in


a health care reform environment. On a national level, the Clinton
health reform plan proposes the creation of a National Council on
Graduate Medical Education, representing the most dramatic
imposition by the federal government in the supply of physicians.
The Council would determine the number of medical residency slots
by specialty; allocate the slots among residency programs; ensure
that, by academic year 2002-03, no less than 55 percent of the enter-
ing class of medical residents will complete primary care residency
training; and determine by academic year 2003-04 the appropriate
number of medical residency slots nationwide. The proposal also
specifies that payment for graduate academic education would go
only to entities complying with the residency allocation decisions of
the National Council and that compliance would be required for an
entity to be assured participation as a provider in regional and
corporate alliances.
As planners determine the appropriate supply of physician spe-
cialists, the relationship between the physician and the individual
health care organization is continuing to evolve towards greater
organizational inclusiveness in the organization and reduced clinical
autonomy. As part of this transition, the notion of a formal "medical

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(230) JHHSA FALL 1998

staff," implying an organizationally


reporting relationships, is being repl
are more integrated into organization
cian clinical autonomy-third-party
agencies controlling payments to
practice guidelines, and legislative
traditional control over licensing an
Care Quality Improvement Act of 1
development of the "postprofessio
banning, 1992). More physicians ar
ships with organizations whether
group practice with strong links to a
other affiliations.
Obtaining the commitment of the
facing all health care organizations
faced with the task of creating mutu
ic interplay and interdependence of t
and the physician staff. Effective
where their economic and professio
complementary (Shortell, Morriso
there is perceived to be a conflict,
ingly difficult. Among the many evo
forms of coping, swapping, the objec
cian financially invested in the organ
Under a health care reform and
physicians will be recruited and selec
compatibility of their practice habits
ization's strategic orientation. Thu
recruited is changing. Previously, a
cruiting "all star" specialists who c
centers, generating charges, and bu
puses. Under a managed care enviro
patients out of the hospital and recru
a 1993 survey of 392 hospitals, it w
specialists were the most highly recr
1993b).
Recruitment strategies are increasingly aggressive; paid moving
expenses, compensation guarantees, and provision of malpractice
insurance are among the most common recruitment strategies.
Hospitals are also seeking affiliation with, and in many cases, pur-
chasing primary care physician groups. The hospital itself is coming

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JHHSA FALL 1998 (231)

to be viewed increasingly as a cost cent


developing integrated/aligned relatio
building a strong primary care base, an
Among the most important issues
training and retraining of physicians.
of Americans achieve greater access to
services will be most in demand. Fur
ment will likely result in a decrease in
specialist services. Alternatively, if one
cian-induced demand, there remains
care environments somehow reduce
With increasing numbers of specialists
arrangements, their ability to ultim
sharply curtailed.
Currently, of the 650,000 physicians
40,000 are primary care physicians.
increased demand for primary care
pediatrics, obstetrics, gynecology, and
in traditionally underserved areas. Calc
cult, particularly when one takes int
contributions of other primary care
mating demand is made even more diff
cal lack of coordination among state an
education and lack of coordination amo
Among other recommendations,
(1993) suggest that a majority of ph
receive continuing education in the g
practice, general internal medicine, a
the workforce should reflect the popul
Further, analysis of demand must take
other primary care providers.
Implementation of health care refo
will require the development in the U.S
ture. Starfield and Simpson (1993) su
encouraging the use of primary care ph
ists through modified reimbursement
rational referral systems, and restru
increasing the pool of primary care ph
training primary care providers and
forgiveness for primary care physician
ness of primary care practice through

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(232) JHHSA FALL 1998

reward primary care practice, reduc


providing bonuses for achieving preven
bonus payments for team practice,
primary care practice; and (4) enhanc
and knowledge base in primary care
research involving residents in quality
While policy initiatives may yield a m
specialists and generalists, market fo
impact on physicians' choices. A num
and medical schools are providing refre
to retrain subspecialists to deliver ge
tague, 1992). There are a number of c
cians. Family practice specialty board
nize these retraining programs; thus
possible. Another issue is exactly what
ing program. In sum, health care refor
economic base of many specialists an
expect physicians' choice of specializatio
In the HMO environment of the pa
choosing to work in the HMO enviro
scheme based on capitation and cost s
physicians for providing individual p
scheme rewards efficiency and provisio
services. The post health reform enviro
compensation schemes. Not only will
tated formula but, increasingly, at le
compensation will be based on outco
measurable factors as patient satisfac
cost and utilization as well as selected
The National Health Service in Gre
recently developed general practition
cian practice for reaching targeted p
with comprehensive preventive servi
It is certainly not unreasonable to expe
to have similar targets and for physi
basis of their success in achieving t
outcomes to be used for compensati
matter and accentuates the change from
er to employee.
Among the most important changes i
the use of the resource based relativ

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JHHSA FALL 1998 (233)

fee schedule now being phased in over


expected outcomes of this system is
ance between primary care and pro
There are indications that this is occur
by Medicare for family physicians and
from 16% to 18% while those to all oth
internists and otolaryngologists declin
It is expected that by 1996, assumi
family physicians and general pract
increase and internists will have 7%
many other specialties will have de
1993); U.S. House of Representatives
1992). Coupled with efforts to structur
(GME) payments to encourage an enh
residents, this bodes well for efforts t
mary care physicians.
There is of course considerable con
the long-run expansion of the RBR
uninsured and, eventually, the entire p
versal access plan. There is also the e
cians that physician reimbursement
budgetary targets whereby physicians'
be set on a national or state-by-stat
physician income decreases by fiat o
clear. What is clear is that the dispar
specialist incomes will narrow and th
income will decrease.

CONCLUSION

The trajectory of health care reform clearly points to a pro


nounced emphasis on prevention, primary care, and integration
among levels of care. Service delivery will be characterized by atten-
tion to efficiency, quality, and consumer preferences. Assuming tha
larger numbers of Americans will gain access to health care services
as a result of reform, the new era also suggests that services wi
need to be available in larger numbers, particularly in currentl
underserved areas. Implementation of this agenda is thus highl
dependent upon managing human resources within this context.
On a national basis, concern needs to focus on the supply of
health care providers, reform of requirements for accreditation and

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(234) JHHSA FALL 1998

licensing, and a combination of market


ensure adequate numbers of individuals
supply. From an organizational perspect
innovative job designs permitting flex
tems that reinforce organizational strat
Managers need to be comfortable with
functioning within a health care netwo
will also need to develop innovative a
retention. Given the state of flux in th
cannot rely on the past incentives to
organization. Finally, managers will nee
new relationships with physicians, inclu
as employees, and numerous other cont

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