Demand and Supply–Based Operating Modes—A Framework for Analyzing Health Care Service Production

December 2010 | Paul Lillrank, P. Johan Groop, Tomi J. Malmstrom

Context: The structure of organizations that provide services should reflect the possibilities of and constraints on production that arise from the market segments they serve. Organizational segmentation in health care is based on urgency and severity as well as disease type, bodily function, principal method, or population subgroup. The result is conflicting priorities, goals, and performance metrics. A managerial perspective is needed to identify activities with similar requirements for integration, coordination, and control.
Methods: The arguments in this article apply new reasoning to the previous literature.
Findings: The method used in this article to classify health care provision distinguishes different types of health problems that share generic constraints of production.
Conclusions: The analysis leads to seven different demand-supply combinations, each with its own operational logic. These are labeled demand and supply based operating modes (DSO modes), and constitute the managerial building blocks of health care organizations. The modes are Prevention, Emergency, One visit, Project, Elective, Cure, and Care. As analytical categories the DSO modes can be used to understand current problems. Several operating modes in one unit create managerial problems of conflicting priorities, goals, and performance metrics. The DSO modes are constructed as managerially homogeneous categories or care platforms responding to general types of demand, and supply constraints. The DSO modes bring methods of industrial management to bear on efforts to improve health care.

Author(s): Paul Lillrank; P. Johan Groop; Tomi J. Malmstrom

Keywords: demand and supply–based operating modes (DSO modes); health care operations management; segmentation; organizational architecture; health care demand; health service production

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Volume 88, Issue 4 (pages 595–615)
DOI: 10.1111/j.1468-0009.2010.00613.x
Published in 2010