Loosely coupled organizations hold the potential to be more agile and resilient because their various components don’t have to wait for a centralized bureaucracy to respond. In this they resemble a network more than a hierarchy. They embody the durability often evidenced by other loosely coupled structures like the Internet.
Because so much of their decision-making is contained within departments and because authority is often emergent rather than delegated, academic medical centers, by their nature, tend to be decentralized. As a result, weakness or failure in one department or division doesn’t necessarily threaten the others. In addition, because they combine distributed decision-making and authority with higher levels of autonomy, loosely coupled academic medical centers also provide a potentially more fertile environment for entrepreneurialism and innovation.
According to University of Michigan organizational theorist Karl Weick, loose coupling allows organizations like academic medical centers to “temporarily persist through rapid environmental fluctuations, improves the organization’s sensitivity to the environment, allows local adaptation and creative solutions to develop, permits subsystems and subunits to underperform and break down without pulling down the entire organization, and allows more individual self-determination.”
Shared commitment to delivering complex care, collegiality and proximity give academic medical centers coherence sufficient to overcome the fragmentation that might otherwise accompany loose coupling. Organizations can benefit from being loosely coupled, but they can’t afford to be so loose they lack purpose and direction. On the other hand, they can be paralyzed by being too tightly coupled. Academic medical centers that become too integrated and centralized risk squandering the advantages embodied in loose coupling.
The good news for leaders is that the four core differentiators previously described continue to support considerable competitive advantage for academic medical centers and will be difficult for competitors to emulate. The bad news is that they are largely a fortuitous inheritance. Because each differentiator arises naturally from the tripartite mission that distinguishes academic medical centers rather than from intentional strategy-making, they are subject to neglect.
Success for academic medical centers will require more than good fortune. It will require embracing the characteristics that make academic medical centers unique and the advantages those characteristics can yield. Focused investment of attention, time and resources will be necessary to fully leverage core differentiators into sustainable advantage.
Growing Need to Leverage Core Differentiators
Despite the strength of their inherent differentiation, academic medical centers already are burdened with significant challenges that could endanger their long-term sustainability. Nationally, their costs are higher on a case mix-adjusted basis compared with community hospitals, as are their operating expenses. The National Institutes of Health budget for research grants fell by 22 percent from 2003 to 2013 while private research funding declined by 15 percent from 2007 to 2012. And academic medical centers are significantly more reliant on federal funding. Median Medicaid levels are 18.5 percent for academic medical centers versus 13.5 percent for nonprofit hospitals in general.