'Why They Merged and Why the Merger Was Unsuccessful\r'

'In 1997 University of California, San Francisco (UCSF) merged its deuce public hospitals with Stanford’s twain private hospitals. The devil separate entities merged together to create a non-for- realize organization titled UCSF Stanford Health wield. The merger betwixt the health systems at UCSF and Stanford essaymed like a equit subject idea collectable to the similar missions, proximity of institutions, cast up financial pressure with cutbacks in Medicare reimbursements followed by a dramatic increase in managed care organizations.The commencement ceremony year UCSF Stanford Health Care produced a profit of $22 million, however three years afterwards the health system had lost a append of $176 million (â€Å"UCSF-Stanford nuclear fusion,” n. d. ). The first part of this writing forget address reasons why the two institutions decided to occupy the merger by looking through the nonional lens of jump rationality, prospect surmise and choice dependen ce theory (RDT). The second half of the paper will purpose reasons why the merger was unfulfilled by considering key concepts in organizational panache such as military force and goal.The threatening and timid m mavintary times led the leaders to take on the option that they believed maximized their chances for survival. The theory of bounded rationality, proposed by Herbert A. Simon, suggests that quite a little are macroly limited by time, schooling and cognitive limitations(Simon, 1997). The merger amid the two aesculapian schools seemed to make sense, both institutions overlapd a familiar mission of treating the uninsured, training the next generation of forward-looking doctors, and remain at the forefront of breaking question and technology.Since both were going to be competing for change magnitudely curious resources, joining forces made sense. Together they would be able to skip spending on administrative costs, and discover prepared to negotiate contacts with large insurance companies(â€Å"UCSF-Stanford Merger,” n. d. ). Simon suggests that people, bounded by time, cognitive ability and education, are to a greater extent seeming to make satisfactory decisions rather than best virtuosos(Simon, 1997).Instead of focusing time and energy outlining potential drop slipway to remain separate amongst the shifting payment grammatical construction UCSF and Stanford, both limited by time and majestic of the potential losses, agreed to merge. The merger was UCSF and Stanford’s way to mitigate risk and manage uncertainty. look theory is a behavioral economic theory developed by Daniel Kahneman that holds that people are more(prenominal) likely to take higher risks when decisions are framed in negative terms(Kahneman & Tversky, 1979). Although mergers are complex and risky the looming worry of decreased reimbursements made the leaders focus on the benefits of merging.Kahneman argues that people do not base their dec isions on final outcomes, instead they base their decisions on the potential value of losses and gains(Kahneman & Tversky, 1979). Instead of analyzing the risk of the merger, leading focused on the more pressing burden, the target line. To stay alive in the era of managed care, university hospitals crosswise the country were seeking mergers with private hospitals. Calculations baseed that hospitals lost $4 million annually for each 1 percentage drop in policy patient population(Etten, 1999).Since the 1990’s, indemnity insurance was on a drastic pass up in San Francisco paying the market for managed care organizations(Etten, 1999). RDT looks at how the behavior of organizations is affected by their external resources. The theory, brought about in the 1970s, addresses organizations demand for resources, resources and forefinger are now linked(Pfeffer & Salancik, 2003). RDT holds that organizations depend on resources thus the idea of merging, due to increasi ng resource scarcity, appealed to both institutions(Pfeffer & Salancik, 2003).On paper, the merger amidst these two institutions made sense †both institutions were bordering to sensation another and competing for diminishing resources. Together they could reduce administrative costs and join forces to negotiate with large insurance companies. The need to create a unused culture and dis make historically existent power struggles were two large tasks that needed to be communicate in order to ensure a thriving merger. However, the way in which the merger was organized did not lead to a palmy merger.UCSF Health Care did not spend adequate time creating a share culture in which the two organizations would see one joint organization with dual-lane power (resources). On paper both organizations agreed to share power, however both parties behavior showed otherwise. Dr. Rizk Norman, co-chair of the combined physician group of UCSF and Stanford faculty, attests that neithe r institution was ever golden enough to share financial information(â€Å"UCSF, Stanford hospitals save likewise different,” n. d. ). UCSF did not fully disclose their fiscal concerns regarding one of their sinking hospitals, while Stanford was also guilty of ithholding information (â€Å"UCSF, Stanford hospitals just too different,” n. d. ). Merging into one should stub out the sense of two separate entities, however not enough was through with(p) to shape the merger in such a way that facility and ply felt like equal partners. Loyalties existed within the organization, ascendant at the top with the Board of Directors. Structurally the control panel was split between vii Stanford board members and seven USCF board members and three non partisan members, however loyalties to ones picky institution never dissolved(â€Å"UCSF-Stanford Merger,” n. d. ).As outlined, RDT, holds that organizations depend on resources, which modernize from their environment. imaginativenesss are an organizations power used to compete in their environment. The two health systems shared an environment, thus competed with one another for power (resources) (â€Å"UCSF-Stanford Merger,” n. d. ). Because Stanford was a for-profit organization, they held more fiscal power over UCSF. Pfeffer and Salancik argue that the way to solve problems of uncertainty and interdependence is to increase coordination, more specifically, to increase shared control of each other’s activities(Pfeffer & Salancik, 2003).Had the two institutions worked from the beginning to increase coordination and communication between both institutions the merger whitethorn contribute more changes in succeeding. Increased coordination between the two institutions could have lead to the creation of a strong culture. burnish is the shared belief, expectations and values shared by members of an organization. (â€Å" hint by Leveraging Culture †Harvard job Review,” n. d. ). Employing a new culture starts from the top, management must deterrent example in accordance with the new culture.This was not done at UCSF Stanford Health Care due to existent loyalties. Adding to the culture struggle, the institutions were far enough away from one another to merit concern. For an organization to flow smoothly, tidy up communication channels need to be established. Without disperse communication and collaboration a shared culture cannot emerge. Weak cultures harm the workplace by increasing inefficiencies that lead to increased costs. UCSF Health Care theoretical account from the top down to create a shared culture.Had leadership spent adequate time addressing ways to dissolve existing power struggles, and creating a shared culture that would set the foundation to achieve a new-shared vision, the merger could have been successful. Engaging leaders in creating a strategic plan to merge two separate existing cultures would have encouraged them to show support and dissolve power struggles. Shared resources, open communication and a culture of oneness may have set the foundation for a successful merger between the two organizations. References Etten, P. V. (1999). Camelot or vernacular sense? The logic behind the UCSF/Stanford merger.Health Affairs, 18(2), 143â€148. inside:10. 1377/hlthaff. 18. 2. 143 Kahneman, D. , & Tversky, A. (1979). Prospect Theory: An Analysis of Decision under Risk. Econometrica, 47(2), 263. doi:10. 2307/1914185 Leading by Leveraging Culture †Harvard Business Review. (n. d. ). Retrieved October 16, 2012, from http://hbr. org/product/leading-by-leveraging-culture/an/CMR260-PDF-ENG Pfeffer, J. , & Salancik, G. (2003). The External Control of Organizations: A Resource Dependence Perspective. Stanford University Press. Simon, H. A. (1997). Models of Bounded Rationality, Vol. 3: Emperically Grounded Economic Reason.The MIT Press. UCSF-Stanford Merger: A Promising Venture. (n. d. ). SFGate. Retr ieved October 16, 2012, from http://www. sfgate. com/opinion/article/UCSF-Stanford-Merger-A-Promising-Venture-2975174. php#src=fb UCSF, Stanford hospitals just too different. (n. d. ). Retrieved October 16, 2012, from http://www. paloaltoonline. com/weekly/morgue/news/1999_Nov_3. HOSP03. hypertext markup language ———————†Fall 16 PM 827 A1 Strategic focus Of Healthcare Organizations UCSF Stanford Healthcare †wherefore They Merged and Why The Merger Was Unsuccessful Sofia Gabriela Walton Mini Exam #1 08\r\n'