Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 32

Centralization versus Decentralization; Health Care Doctors Health Care System has integrated health networks in three different regions: northern California, southern Florida, and Oklahoma. These three markets have vast regional differences. Because of the increasing penetration of the U.S. health-care market by managed care companies, Doctors Health Care System must create a system that offers continuity of care across the continuum for a set price in order to remain competitive. Its board of directors set the system’s goal as being a leader in developing and maintaining integrated health networks that improve the health status of their communities.

Required To meet this goal in the three regions, should the health system’s management structure be decentralized or centralized? What are the advantages and disadvantages of each option?

Step 1 of 2

Decentralization is a strategy where the specific amount of authority is delegated to lower level managers or SBU. In centralized system, the decision-making authority lies with the top-level management only.