Caught in organized ambivalence: institutional complexity and its implications in the German hospital sector

ABSTRACT

Worldwide, public service-providing organizations confront regulatory hybridization. While their societal mission persists, they are expected to become more business-like. Drawing on theory concerned with institutional complexity and ambivalence in organizations, this article illuminates the case of German acute care hospitals. We depict the emergence of market orientation in this industry, its structural impact and major sensemaking patterns at the site level. In our multiple case study, we find ‘organized ambivalence’ shaping the institutional context and affecting the undertakings’ internal life. Thus, regulatory hybridization tends to create certain traps – which challenges ideas according to which it helps improve public management.

KEYWORDS:

• New public management
• hospitals
• ambivalence
• Germany

View correction statement:

Correction to: Bode, Lange and Märker, Caught in organized ambivalence: institutional complexity and its implications in the German hospital sector

Throughout the Western world, public service agencies have long been understood as non-market organizations following a distinctive societal mission. Over the last decades, however, they have been subjected to considerable regulatory change entailing new ‘institutional complexity’, with ‘incompatible prescriptions’ from critical environments (Greenwood et al. 2011, 317). The key to this has been the proliferation of New Public Management (NPM) as a normative template for reorganizing public service provision (Pollitt and Bouckaert 2011; Ackroyd 2013; Klenk and Pavolini 2015). NPM was aimed at ‘rationalizing’ the public sector by introducing market discipline and business-like management tools; a lean or even ‘marketized state’ (Pierre 1995) should enhance manageability in ‘tenacious’ organizational settings. This also applies to hospitals (Dent 2003; Reich 2014). Along with this rationalization, however, they continue to be expected to deliver services according to the needs they encounter, as healthcare is deemed a social right (Beckfield, Olafsdottir and Sosnaud 2013, 131). The result is what Reay and Hinings (2009) have referred to as competing institutional logics.

The question this article tackles is how such institutional complexity is processed by those who organize inpatient care, and with which implications for public management.¹ We look at manifestations of, and reactions to, competing institutional logics within German acute care hospitals. From an international perspective, this case is intriguing because developments that took shape much earlier in nations such as the US have occurred here in a context in which the aforementioned societal mission had long been outstanding; moreover, NPM affects the German hospital industry in a way different from what is known about countries with a National Health Service, as healthcare providers have an independent status instead of being part of a statutory umbrella. Therefore, dynamics of change related to growing institutional complexity may be particularly vibrant in the German context.

Since ‘our understanding is selective’ concerning organizational responses to institutional complexity (Greenwood et al. 2011, 319), there is a case for ‘concept development’ (Gioia, Corley and Hamilton 2013, 16) and systematic exploration. We have embarked on this endeavour by research addressing structural change throughout the German hospital sector as well as the sensemaking of key organizational actors related to the coincidence of what we refer to as ‘welfare orientation’ and ‘market orientation’. We argue that this coincidence entails ‘organized ambivalence’ as a persistent overall pattern concerning both the regulatory framework and the ‘mental states’ of major leadership groups. Top managers, generally leaning towards market orientation, have to liaise with co-leaders from the camp of healthcare professions who become unsettled by this orientation so that there are no common grounds for consistent organizational governance, including when it comes to performance assessments. Thereby, relevant decision-makers tend to be ‘caught in ambivalence’ – with the entire sector becoming more erratic and more difficult to govern.

Our article is organized as follows: We first elaborate on what can be inferred from theories on the (collective) handling of institutional complexity and ambivalence in organizations, with this feeding into an analytical grid for empirical investigation (1). Following a short presentation of our methodology (2.1), we then sketch developments in both regulation and industry structure, so as to illuminate the partial ‘marketization’ of the field (2.2). Thereafter, sensemaking patterns will be depicted on the basis of evidence from selected hospitals, through the lens of our analytical grid (2.3). Finally, we draw conclusions regarding both the aforementioned theories and public management.

1. The handling of competing logics in the hospital sector: messages from theory and research

When exploring both manifestations of, and reactions to, competing institutional logics within the hospital sector, one should depart from those frameworks that were shaping these ‘professional bureaucracies’ (Mintzberg 1983) during the twentieth century. Understanding institutional logics as ‘socially constructed, historical patterns of cultural symbols and material practices’ by which actors ‘produce and reproduce their material subsistence’ (Thornton and Ocasio 1999, 804), it stands to reason that several of these logics were already in play at that time. However, employees such as doctors, nurses, social workers, etc., were all led to conform to the expectation that treatments were to be accomplished regardless of per-case costs and the economic well-being of providers. One can refer to this expectation as welfare orientation, enshrined in both professional ethics and a universalistic ‘philosophy’ guiding public service provision in the modern welfare state. Certainly, there were budgetary constraints; moreover, powerful professions tended to pursue self-interests and idiosyncratic world views (Freidson 2001). Nonetheless, the institutional order of the past cultivated the aforementioned normative expectation and conferred procedural autonomy on healthcare professions only within the confines of this orientation.

With the advent of NPM, this institutional order was complemented by what can be labelled market orientation. This term, predominantly used in business studies (e.g. van Wood et al. 2000), has also appeared in work on public sector governance (Pierre 1995; Caruana, Ramaseshan and Ewing 2008; Walker et al. 2011; Laegreid 2014). Market orientation is inherent to the NPM approach insofar as regulation inspired by the latter pushes service providers to improve their ‘microeconomic fitness’ even as service users are invited to behave like ‘consumers’. While such regulation should not be confounded with mere pressures to become more cost-efficient, it is meant to optimize input-out-ratios by creating interorganizational rivalry (Cookson and Dawson 2012). It resorts to ‘carrot-and-stick’ schemes, with commissioners ‘purchasing’ service packages or allocating extra resources to particularly cost-efficient providers. Alternatively, it makes providers operate as independent undertakings, the income of which is contingent on output measured by the number of cases treated; (rough) quality indicators may also play a role here (van de Bovenkamp et al. 2014).

Importantly, contemporary institutional frameworks want hospitals to deliver medical services in a universalistic way and simultaneously become more ‘business-like’. There is ‘regulatory hybridization’ (Schmid et al. 2010, 460) provoking different kinds of organizational behaviour and tensions for those organizing these services. Granted, contemporary healthcare systems contain ‘safety belts’ meant to prevent hospitals from mere market opportunism (e.g. quality assurance schemes); this is why the structural impact of regulatory hybridization should be assessed thoroughly. Yet, to the degree that such impact becomes salient, competing institutional logics can be assumed to pose considerable challenges to the affected organizations.

While modern hospitals always referred to various institutional logics (Friedland and Alford 1991), we are dealing here with the coincidence of logics that are both incompatible among each other and central to their collective action (see Besharov et al. 2014). On the one hand, hospitals have become motivated to import steering tools from private business, such as marketing units, performance management tools or business-like accounting systems (Rautiainen and Järvenpää 2012; Ackroyd 2013; Petterson and Solstad 2014). The result is ‘managerialism’ placing an emphasis on meticulous process control and cost containment; economic governance is considered a lead activity (Edwards 1998) and narrows down the once considerable discretion doctors had over their healing activity.² The incentive structure introduced with market-oriented governance frameworks is likely to impact on how hospitals handle their inherited welfare orientation (see Reich 2014; Kerpenshoek et al. 2016). Under high financial pressure, it may lead them to reject overly complicated cases for which prices do not cover actual costs; to shift money to marketing purposes that otherwise (everything else being equal) would be used for conventional ends (e.g. time devoted to nursing care); and to develop policies for attracting patients whether or not they need (a particular kind of) treatment.³ On the other hand, however, such behaviour sits uneasily with the inherited welfare orientation of the industry; hospitals would be blamed for mission drift once such practices become shared knowledge, given that external stakeholders continue to expect compliance with ethical professionalism and the aforementioned ‘public sector philosophy’.

Hence, the question arises as to how the affected organizations are dealing with such institutional complexity. Drawing on the recent literature tackling this question (e.g. Kraatz and Block 2008), one should keep in mind that hospitals exhibit a distinctive organizational character, with both a largely unchallengeable expert knowledge held by the medical community and strong moral expectations in their wider environment. Thus, many arrangements discussed by this literature are unlikely to be sustainable here. For instance, ‘compartmentalization’ – which means that the compliance with different logics varies across organizational units – will fail should the wider public observe inconsistent organizational behaviour towards several classes of patients. Reay and Hinings (2009) posit that, in the face of growing market orientation, stakeholders of sectors such as professional associations or social movements may invest in lobbying in order to change their regulatory environment. However, success in this respect usually depends on exceptional windows of opportunity; concerning our case, these windows have proved quite narrow thus far (see Bode 2013).

A further option is ‘institutional work’ (Lawrence and Suddaby 2006), with agents referring to a new logic in ways that alter the latter’s concrete implications at organization level. In healthcare, the relatively high and decentralized (street-level) discretion in service delivery provides particular opportunities for this. Thus, recent studies have found hospital doctors preserving their zone of discretion by delegating tasks to ancillary staff (Currie et al. 2012), thereby devolving logic incompatibility upon others. Furthermore, Tonkens et al. (2013), dealing with Dutch hospitals, have shown how this profession tries to protect this zone by seeking reassurance in procedures and a ‘skilful management of appearance’ (Tonkens et al. 2013, 384, see also Crojethovic et al. 2014, with similar observations for Germany). Kerpershoek et al. (2016) provide evidence for hospital doctors feeling compelled to ‘game’ the diagnostic related group (DRG) system in the Netherlands by biased coding procedures and cherry-picking in the encounter with potential patients. Alternatively, a specific internal division of work may become established; according to Martinussen and Magnussen (2011), some Norwegian hospital doctors have developed a positive attitude towards managerialism whereas others remained reluctant. As regards nurses, the respective room for manoeuvre appears rather limited. Internationally, they have been found resisting managerialist prescriptions while often sharing a feeling of ‘powerlessness’ (Hoyle 2014; Carvalho 2014; Van Den Broek, Boseline and Paawe 2014), particularly so in the case of strong ‘performance and financial pressures’ (Currie and Spyridonidis 2016, 92) affecting a given hospital.

Overall, research undertaken thus far suggests that creative institutional work does occur; yet the observed coping behaviour proves tentative or provisional in many instances. What equally comes to the fore is that collective sensemaking (Weber and Glynn 2006) is an important element in the handling of institutional complexity, and that, in this regard, contemporary hospitals confront a state of ambivalence rather than one in which orientations just become more pluralistic or remixed. Many years ago, Merton and Barber referred to ambivalence as a constellation in which social actors are ‘pulled in psychologically opposed directions’. In his eyes, the result is ‘mingled feelings, mingled beliefs, and mingled actions’ (Merton and Barber 1976, 3), challenging profoundly the affected social entities. In contrast, more recent strands in organizational theory argue that ‘the co-existence of competing tendencies’ helps ‘retain adaptability’ (Weick 2004, 663). Piderit (2000) contends that tolerating ambivalence within organizations makes the latter overcome resistance to change, with members seeing not only the dark, but also the bright side of structural transformation. Other scholars (e.g. Creed, De Jordy and Lok 2010) posit that such competing tendencies entail identity work conducive to ‘productive’ organizational change around new cognitive templates.

Concerning hospitals, this distinctive ‘constructivist’ approach to the processing of ambivalence is questionable, however. Fiol et al. (2009, 37), discussing the role of ‘identity dynamics’ in the relationship between CEOs and doctors, argue that ‘decoupled intergroup identities’ can be reconciled, yet only after a long process of collective identity management; moreover, concentrating on ‘attempts to structurally integrate hospitals and physicians’ (Fiol et al. 2009, 39) and on related internal conflicts, these authors do not engage with how regulatory hybridity (e.g. the encounter of market-oriented governance and legal provisions meant to ensure welfare orientation) becomes an external source of tensions that are reproduced constantly. McGivern et al. (2015, 421) observe situations in which managerial roles for hospital doctors are perceived as ‘fruition of formative hybrid identity work’ in a professional’s career; however, they identify many other situations in which such roles are deemed problematic. This chimes with the aforementioned studies according to which many hospital agents do not react to perceived tensions in a stringent way.

Yet, if the enabling role of ambivalence is at least uncertain in the sector under study – and particularly so in a context of institutional logics that are both incompatible and central to that sector – it makes sense to consider potential implications of the aforementioned ‘mingled beliefs and actions’ (in the sense of Merton) more systematically. Ashforth et al. (2014), reviewing the wider literature in a recent article, elaborate on this issue in theoretical terms and discuss a wide spectre of potential configurations. First of all, they consider a reaction they label avoidance, whereby competing orientations are all given a low emphasis so that organizational actors gloss over the tensions related to them; this could happen, for instance, when externally imposed obligations are more symbolic in kind. A further possibility is compromise; this might occur when the emphasis on both orientations is moderate and where actors manage to mitigate tensions by combining ‘black and white into gray’ (Ashforth et al. 2014, 1464); this, for instance, could happen where professionals work to the rule and to restrict their ethical reasoning to selected issues. Ashforth et al. suspect there may also be ‘dominance’ of one particular orientation. Hospital agents could prioritize market orientation pragmatically, e.g., by concentrating efforts on treatments paid for generously by private insurance funds. Finally, there may be ‘holism’ with ‘a simultaneous, and typically conscious acceptance of … opposing orientations’ (Ashforth et al. 2014, 1465). Here, tensions are openly admitted and feed into pragmatic solutions during a mindful process of ‘both/and rather than either/or thinking’, which is ‘potentially resulting in perceived complementarity and even synergy’ (Ashforth et al. 2014, 1466).

Exploring all these potentialities, the above framework provides us with an analytical grid for scrutinizing how institutional complexity is processed within the German hospital sector. Such analysis should (1) focus on tensions between welfare orientation and market orientation; (2) consider regulatory frameworks including both their structural impact and patterns of collective sensemaking at organization level; and (3) concentrate on the cognitive ‘handling’ of ambivalence in the light of theoretically conceivable configurations.

2. Competing logics in action: findings about the German hospital industry

2.1. Methods

Departing from the aforementioned considerations, we first reviewed data on the evolving institutional order of the German hospital sector, including quantitative repercussions on the structure of the industry. Key sources were the German Statistical Office (Statistisches Bundesamt 2014), particularly concerning staff development (volume of salaried work, types of work contract, etc.); and more focused surveys, concerning the workload as perceived by employees, the development of job descriptions, the involvement of consultancy firms, and the economic well-being of the undertakings. These ‘hard’ data were used to illustrate structural change throughout the German hospital sector.

Concerning the cognitive ‘handling’ of hybridity within hospitals, we exploited evidence from a ‘multiple case study’ (Stake 2006) embedded in a larger research project run between 2010 and early 2015.⁴ Theoretical sampling led us to a group of fifteen public and non-profit hospitals located in several parts of Germany, featuring a mix of smaller and larger entities as well as organizational profiles that are common in the country. A major research tool was problem-centred (semi-structured) interviews (Witzel and Reiter 2012) involving administrative, medical and nursing directors (n = 45). Questions generated information about the interviewees’ sensemaking with respect to (1) recent organizational change; (2) the relationship between economic and professional concerns; and (3) influences recent developments had on quality outcomes. Running a systematic cross-check of information provided by interviews with several respondents from the same organization, we were able to control for biased reporting.

During our data analysis based on a qualitative software tool (maxqda), we took stock of ‘first-order’ nodes, that is, themes evoked by our informants; this was followed by a ‘second-order analysis’ (Gioia, Corley and Hamilton 2013, 20) geared to what eventually appeared crucial in the cognitive ‘handling’ of institutional complexity, with a focus on commonalities across organizations and leadership groups. This was accomplished by collating themes and utterances in a number of analytical dimensions. The coding procedure was based on categories such as: changing external expectations; evolving role models; difficulties encountered in the day-to-day practice; and reactions to these. Through in-depth discussion in our research team, we compared results across interviewees in order to distil common features and typical group-related patterns. Thus, several perceptions could be assigned to one sort of overarching sensemaking pattern (e.g. uncertainty inherent to the relationship between leadership groups). The final step consisted of reading the findings through the lens of the responses to ambivalence, as distinguished in the framework of Ashforth et al. (2014), with the aim of assigning identified patterns to the four configurations depicted earlier. In what follows, we condense basic findings down to summary statements and to quotes we consider as particularly telling regarding our research question.

2.2. Competing logics as a hard fact: the evolving set-up of the industry

The acute inpatient care sector in Germany, consisting of 2,000 independent economic entities, is subject to considerable (quasi-)statutory interference (Bode 2013). Hospital law stipulates that each patient has to be treated according to his or her needs and on the basis of scientific standards. A sophisticated quality assurance scheme is mandatory. This suggests that a strong welfare orientation continues to inhabit the industry. However, public regulation has changed markedly. In earlier times, hospitals received budgets based on calculations of the input deemed necessary for meeting needs; administrative capacity planning was relatively rigorous. Meanwhile, sickness funds (Krankenkassen, the most important funding source) pay providers fees for each disorder being cured, via a pricing system through which each illness under treatment is assigned to one ‘DRG. On this basis, prospective case-mix budgets are agreed for all hospitals. The latter can be public, private non-profit or private for-profit; note that the market share of commercial undertakings doubled between 2002 and 2013 when it achieved 18 per cent of all cases under treatment. Providers may treat more patients than anticipated, yet in this case, discounts apply; if they manage to demonstrate that demand has grown, enhanced budgets can be fixed for the subsequent year. In most places, funding for investment equally depends on ‘numeric’ performance while public capacity planning has become less relevant overall.

Hence, the regulatory framework prompts market orientation. Providers are led to gain a comparative edge over competitors in terms of ‘lucrative’ cases attracted; moreover, their economic development depends on their ability to keep per-case costs low, or at least lower than competitors do. Pressures are high as organizational survival has become an issue throughout the sector. In 2013, 30 per cent of all providers did not break even (Augurzky et al. 2015), so financial pressures were an issue. Given that economies of scale prove important and patients enjoy free access to a hospital of their choice, providers are motivated to enhance both capacity and turnover. Consequently, staff reports a densification and acceleration of work (Braun et al. 2010; Crojethovic et al. 2014). From 2000 to 2012, the caseload grew by 7.9% while the amount of beds went down by 10.4% (Statistisches Bundesamt 2014). The number of doctors increased whereas the nursing population (including auxiliaries), as well as non-medical service staff (hotel service, technical supply), was shrinking. This can be read as an operationalization of ‘market orientation’ because economic success mainly depends on doctors, e.g., when hospitals want to demonstrate excellence through medical specialization. Moreover, concerning staff other than doctors, the share of part-time work has grown markedly (by 25 per cent between 2000 and 2012), allowing for ‘cheap’, that is, market-oriented, flexibility responding to fluctuations on the demand side.

Organizational governance has changed as well. By tradition, German hospitals are steered by a ‘troika’ composed of one chief administrator, one head physician and a nursing line manager. While some undertakings have created top management positions, many others intend to transform this ‘troika’ into a business-like executive board (Bode and Märker 2014). Three out of four German hospitals have used a consultancy firm over the recent past, and one out of four undertakings recently trained doctors and nurses in fund management (Blum et al. 2012, 2013). Maier, Crasselt and Heitmann (2014) found that three out of five German hospitals established performance-related salaries for chief physicians (with the number of treatments provided being the main output indicator); two-thirds of the latter were provided with monthly financial reports containing a break-even analysis for each patient, disclosed by medical accountants and ‘DRG coders’, who have appeared as a new occupational group throughout the industry.

As one can see, there is organized ambivalence at the institutional level, which manifests itself in structural change throughout the entire sector. While expectations concerning the compliance with universalistic norms remain strong, the incentives for developing market orientation seem to matter and pose challenges to the affected undertakings.

2.3. Market orientation and sensemaking: evidence from selected organizations

Being interested in how German hospitals meet the aforementioned challenges, we now retrace major lines of reasoning for their governance troika, that is, their CEOs, medical directors (MDs) and nursing line managers (referred to as ‘central nurse’ (CN) thereafter). For these groups, leadership implies central management functions: The first group basically is responsible for an undertaking’s balance sheet; MDs and CNs, while being expected to keep the latter in mind, represent ward leaders belonging to their respective professions. We describe major similarities as well as some group-related differences found across our sample, leaning on the framework of Ashforth et al. (2014; see Table 1 below).

Table 1. Dealing with organized ambivalence (in the light of Ashforth et al. 2014).

Configuration	Sensemaking pattern	Major ‘trap’
Dominance (of one logic/ orientation)	CEOs: instilling market orientation in management and staff	Awareness of this orientation being hard to communicate internally and externally
Compromise (doing justice to two competing logics simultaneously)	Medical directors and central nurses: setting priorities in a context of competing expectations	Concessions with respect to welfare orientation, but unsustainable arrangements
Avoidance (giving low emphasis to one of the two logics and glossing over the related tensions)	[option not on offer]	Both market orientation and welfare orientation (patients’ needs) impossible to ignore
Holism (leaning on both market orientation and welfare orientation, with the prospect of synergies)	Both/and thinking around opposed orientations	No consistent response concerning - the relationship between CEOs and healthcare professionals - the handling of competing logics in the mind set of healthcare professions

First of all, interviewees (whatever their occupational role) provided us with concrete examples of how their activities had become related to the necessity ‘to survive successfully in the market’ (as one respondent put it). Market orientation was perceived as having provoked change in many respects: a propensity to treat users as fastidious consumers; pressures on attracting more patients (especially those covered by private insurance plans); a need for monitoring competitors; an ‘arms race’ among hospitals investing in sophisticated (and certified) innovation; demands for accelerated discharge when reimbursed costs exceeded the earmarked DRG price. Asked about how the challenge of breaking even impacts on their unit, healthcare professionals mentioned the use of less comfortable medical products, decreased space for interprofessional deliberation, reduced time slots for talking to patients and preventive activities, disorganized shift work and problems with substitute pools including for emergency services. This suggests that market orientation had gained prominence in both the actors’ sensemaking and (experienced) organizational change.

Most executive managers pictured their undertaking in business terms; in their eyes, treatments were products; medical units resembled a production line; complaint management schemes and surveys measuring ‘customer satisfaction’ were indispensable. ‘Our hospital is like a typical, historically grown, medium-sized enterprise; I almost act as if I were the owner’, one interviewee noted (CEO_B). Another framed his undertaking’s concern by a simple question: ‘How can we achieve that patients come to us and do not go elsewhere’? (CEO_DK⁵) In a similar vein, one of his fellow managers stated: ‘The undertaking, in this ever tighter context and alongside competitive pressures, has to remain efficient – this is my major task’ (CEO_DD). Executive managers were enthusiastic about meticulous process control and keen to figure out what might be a ‘waste of time and misuse of resources, in order to eliminate this’ (CEO_DK). This seemed to be driven by the suspicion that there were redundant activities in the hospital’s day-to-day operations so that performance could be improved without collateral damages. Some professed that underfunded units (such as maternity wards) should close or merge with neighbouring departments to enhance economies of scale. Altogether, this managerialist attitude suggests a dominance of market orientation in the mindset of this occupational group (in the terms used by Ashforth et al. 2014).

This is not to say that CEOs ignored the special character of their organization. One interviewee used an example (the creation of an on-site weekend ambulance) to describe how he understood his business:

We have an outpatient ambulance service through which GPs provide treatments during weekends. Earlier, they did this in their local offices dispersed over many different places. So we said OK, it makes sense to connect this service to our undertaking, with us [saying] “don’t do that any longer in your own offices”. (…) This was, of course, a benefit to me. Over a weekend, we get eighty patients who see the GP, and out of these, 8 per cent move into our hospital. Thereby, I have a growing income. You can’t officially communicate that this way, but of course this is my goal. (CEO_P)

While the interest in policies meant to boost turnover comes clearly to the fore here, the quote indicates that the interviewee was aware of issues related to welfare orientation, as he mentioned he would not disclose his approach to the wider public. He apparently knew that, in the eyes of the latter, the purpose of a hospital was not to attract (more) patients. Some other CEOs equally alluded to their being accountable in other than mere microeconomic terms. One respondent summed up his complex mission in a nice nutshell, saying that hospital management was a daily ‘tightrope walk’ (CEO_B). From this perspective, the aforementioned dominance of market orientation appears fuzzy.

Many CEOs expected doctors to follow their business policy: ‘A chief physician has to create his own market’, one expounded (CEO_HFG). By attending to marketing events addressing users and family doctors, physicians should promote their hospital in the local environment. Moreover, CEOs said they tried to enforce compliance with their policies by negotiating appropriate work contracts. Accounting schemes were deemed a perfect instrument for passing cost pressures onto ward leaders (as well as their subordinates) and for making the latter understand economic constraints. Some interviewees were quite blunt when it came to their relation with these leaders:

Senior doctors, heads of wards, chief physicians, central nurses, etc. – we’ll have to come to terms with them. Should this fail, we must talk about whether we are well advised to continue our path together. (CEO_DK)

Apparently, the dominance of market orientation is meant to become instilled into the mindset of other leadership groups. For CNs, however, this ‘market game’ seemed to be a huge challenge. One interviewee, when explaining that the workload for her profession had increased tremendously over the last years, encapsulated her mantra in the following question: ‘Are we in line with market requirements? (CN_P). In the face of cost calculations for each individual treatment, stated another one, ‘you must make sure that all processes are running well – but this means for the employee that he must be flexible … that he responds to the demand side’ (CN_DK). Market orientation is palpable in such statements. Concomitantly, most respondents described their approach to hospital management in traditional terms: ‘We do not provide nursing to patients in order to make as much money as possible. It is extremely important that we keep in mind our values.’⁶ (CN_E) While such statements suggest a strong commitment to welfare orientation, tensions are obvious: ‘The budget is of particular importance …; [while] patients absolutely need our help we now have this ‘bloated machinery’ geared to squeeze everything into a billable service’ (CN_W). A colleague from another undertaking noted: ‘We tend to confine ourselves to think in mere economic terms (…). Currently, you can’t manage to guarantee encompassing quality care; you have to set priorities’ (CN_GA). Concerning the way this was accomplished, a line manager mentioned reduced night duty services: ‘This is how I pass on economic pressure’ (CN_L). More generally, ‘pragmatic reactions’ (CN_P) seemed to be the typical way to come to terms with the latter⁷ – notwithstanding the looming problem of staff burnout that eventually ‘cannot be resolved at all’. A peer from another hospital bemoaned the ‘permanent forward motion’ in her task environment which prevented her from making sure that ‘things work properly’ (CN_DD). For her, a key challenge was dealing with bottlenecks due to staff on sick leave: ‘This is never simple but our day-to-day business …: If I have to deny [workforce] support to a ward simply because I need this support elsewhere, … this is just toxic’.

MDs equally expressed discomfort with the ‘market game’. One interviewee laconically stated: ‘People say that competition will make things work; (yet) competition sometimes is a pool full of sharks’ (MD_DK). A fellow from another hospital noted that ‘any kind of marketing has a clear aftertaste – that’s bad manners’ (MD_E). Nonetheless, the prevailing attitude of this leadership group differed from the one we found for the CNs. One MD described his experience as follows:

I have simply learnt that the hospital will have to find out how to economize on costs to some extent … as it should not run into a deficit. … (But) to be honest, I do not believe that this development is in favour of medical therapy. (MD_GAP)

The agenda seems to be ‘coming-to-terms’ with economic constraints, despite a feeling of this impeding medical performance. Many interviewees noted that physicians, while accepting market orientation in general, experienced stress with the permanent need to justify expenditure beyond the DRG fee (per disorder), as controllers were regularly confronting them with ‘balance sheet information’ broken down to their unit. Simultaneously, they insisted that doctors would never take medical decisions on mere economic grounds and claimed they would resist any attempt to oblige them to do so.

However, our interviewees were uncertain about how their profession should deal with economic pressures in a straightforward way. One expounded that ‘the only advantage of this pressure is … that it must be clarified: ‘Is there something you cannot renounce at all? What do we absolutely need?’ (MD_KS). While he saw a case for lean management here, the wording of his statement (‘not at all’, ‘absolutely’) indicates that this implied difficult choices for him. A colleague framed the challenge similarly: ‘One must admit honestly, there are things where you have to say: “OK, if we can’t afford this [type of therapy], I have to decide what I don’t longer want to provide”’ (MD_DK). Most interviewees appeared unable to describe a guideline to conciliate traditional norms with expectations to meet a budget line or to increase income. One even lamented that there was ‘actually no solution for this problem’ (MD_KS). A fellow director from another undertaking added: ‘You can always find this or that quick answer; at the end of the day, however you will be unable to hold up the system’ (MD_G).

Overall, when it comes to dealing with competing orientations, the utterances of MDs and CNs suggest that they find it impossible to give low emphasis to one of them and to gloss over the related tensions. Thus, avoidance (again in the sense of Ashforth et al. 2014) is not a realistic prospect. Many stressed that patients’ needs were to be placed first wherever possible. This attitude insinuates a propensity towards compromise. However, our material suggests that the healthcare professions would like to escape from current arrangements should there be opportunities for this. Setting priorities often implies making concessions. Thus, in the eyes of CNs, the business challenge (of putting everything in a ‘billable service’) can at times only be met by downsizing professional ambitions (‘you can’t manage to guarantee encompassing quality care’) and by living with a ‘burnout’ perspective and a risk of ‘toxic’ constellations. Responses of MDs suggest that their profession assumes to maintain some (more) discretion in its day-to-day activities, e.g., when it comes to decisions on what it does ‘no longer want to provide’ (see above). Yet, as the quotes above illustrate, many do not believe in market orientation being beneficial to inpatient care, and many experience some of the imposed choices as being troublesome. Available options for compromise are often experienced as being unsustainable since healthcare professions feel obliged to square the circle by striking provisional balances between welfare orientation and market orientation.

For CEOs, the biggest compromise challenge consists of finding agreements with those in the ‘troika’ who represent doctors and nurses. Most respondents from this camp asserted that consensual governance was critical to economic success and explicitly stressed a need for all leadership groups working hand in hand. However, while their co-leaders did not openly oppose their general policies, most did not buy it either. Although accepting, or at least perceiving, competitive pressures, they cannot acknowledge the supremacy of market orientation – while at the same time being unable to sidestep the tension between the latter and the traditional welfare orientation. Hence, concerning the handling of this tension among the leadership groups under study, there is limited scope for building arrangements that go beyond mere muddling-through.

All this implies that the German hospital sector exhibits ‘organized ambivalence’ at the site level as well, with this ambivalence taking shape in various ways and with multiple ‘traps’ (see Table 1). MDs and CNs are in trouble when seeking a clear line of approach for their rank and file. Executive managers, convinced of the practicability of market orientation, are inclined to make the latter more influential, maybe hoping that market success relieves their undertaking from difficult trade-offs and helps devolve the latter on competitors. However, they do not share a common grammar with their co-leaders in the troika and fail to translate their policies into an agreed, clear-cut business strategy. For instance, when it comes to assessing organizational performance, diagnostics may remain fuzzy and contested in discussions of the troika, and common decisions may become based on particular criteria at one moment and alternative ones on other occasions. Moreover, as co-leaders refrain from both full compliance and open resistance, and since CEOs never know whether they are dealing with dissidents ‘in disguise’, there is permanent uncertainty about what a hospital’s policy is about. Consequently, within the sector, we find configurations of what one could refer to as constricted ‘holism’ – that is, various kinds of ‘both/and thinking’ (Ashforth et al. 2014, 1466) in the absence of arrangements whereby major leadership groups can conform to the two institutional logics in equal proportions.

3. Conclusions

Exposed to competing institutional logics, German hospitals inhabit an environment that fosters market orientation in a context shaped by traditional professionalism and welfare state universalism. Both the changing industry structure and the sensemaking around it suggest that all involved parties are insecure about which logic to follow – in this sense they are ‘caught in ambivalence’. Ambivalence is reproduced constantly at the institutional level, by a regulatory framework entailing systematic incentives for both market orientation and compliance with what we have labelled ‘welfare orientation’. Since these incentives have structural implications within the entire industry, ambivalence becomes routinized at the organizational level as well. Major leadership groups lack a common ground for agreeable solutions when being urged to ‘process’ the induced tensions. Struggling with incompatibilities between market-oriented policies and welfare orientation, they adopt a mode of ‘both/and thinking’ (Ashforth et al. 2014, 1466) but notice that synergies are difficult to achieve. As decisions cannot follow an overarching principle, a collective muddling-through mentality takes shape. On the whole, there is no escape from institutional complexity.

What we reveal is a distinctive social configuration brought about by such complexity – that is, the ‘mental states’ that major decision-makers (leadership groups) are grappling with continuously. Given its qualitative character, our analysis can only make it plausible that this configuration exists. Organizational responses and their effects on inpatient care are difficult to predict; they will be variegated anyway where undertakings are formally independent (like in Germany). However, our analysis suggests that regulatory hybridity may create ‘traps’ in wider parts of the industry, and that experience with ambivalence may demoralize hospitals in tight situations, e.g., when they fail to break even over a longer period. That said, we cannot infer from our analysis whether regulatory changes in the sector under study have been negative or positive overall.⁸ Further limitations of our study reside in its cross-sectional design (interviewees were asked to describe perceived past change, but retrospective considerations can be highly biased) and in the evidence being confined to top leadership groups – even though our results widely correspond to what other studies have found for their rank and file.⁹

With these qualifications, our analysis advances theory and research in two ways. First, we show that the challenge posed by organized ambivalence may go beyond a smart management of those ‘intractable conflicts’ (Fiol et al. 2009) that modern hospitals exhibit as a matter of principle. Rather, the current institutional order of the German hospital sector becomes a source of endless cognitive confusion and makes organizational actors ‘run in the hamster wheel’ (as one of our interviewees put it). Constructivist theory, according to which ambivalence helps organizations retain or even improve adaptability, does not seem to be useful in our context. At least, solutions discussed by the wider literature concerning how collective actors (can) overcome institutional complexity sit uneasily with enduring regulatory hybridization. Thus, we did not find cognitive processes susceptible to ‘remove an organization from the imperative force of [competing] logics’ (Greenwood et al. 2011, 341).

Granted, numerous German hospitals are keen to develop a new corporate identity, branding themselves as cost-effective enterprises delivering top quality on a competitive healthcare market. Yet, performance criteria remain contested or fuzzy within the sector and within the affected organizations, and market orientation chimes with mere cost-efficiency. While being imperative at some point, it cannot become dominant in their environment as major leadership groups feel that it clashes with the welfare orientation enshrined in both their professional ethics and major stakeholder environments. Whereas relentless ‘institutional work’ is a plausible result of organized ambivalence, it will rarely feed into a new and consistent corporate identity. Rather, there is permanent ‘both/and thinking’ in the terms of Ashforth et al. (2014), which, however, appears less ‘constructive’ than what their concept of ‘holism’ seems to imply. There is no complementarity or synergy of the two competing logics even as the latter can neither be avoided nor translate into a consistent compromise.

Second, in the light of our evidence, market-oriented, NPM-led reforms meant to bring ‘tenacious’ professional bureaucracies under more extensive control may not be crowned with success when it comes to human service provision. Our results confirm findings on implications of NPM-driven regulation elsewhere, pointing to ‘more instability (introduced) into relationships within and between institutions’ (Ackroyd 2013, 29, for the UK). To the extent that leaders and other core agents are caught in ambivalence when dealing with market orientation, it appears unlikely that hospitals, and probably other human service-providing organisations as well, become more ‘governable’ in comparison to the pre-NPM era. This is because settlements reached between the welfare orientation and the market orientation are likely to be inconsistent within hospitals and also across the entire sector; performance criteria remain fuzzy; and stakeholders can never be sure about which of them prevails in a given situation. With growing uncertainties and inconsistent institutional expectations, however, hospitals are facing permanent stress and tend to become erratic in many instances – which makes the public steering of the sector ever more complicated.

Disclosure statement

No potential conflict of interest was reported by the authors.

Additional information

Funding

This work was supported by the German Research Foundation (Deutsche Forschungsgemeinschaft) [Grant no. BO 1922/8-1].

Notes on contributors

Ingo Bode

Ingo Bode is a full professor for social policy, society and organization in the Department of Social Policy, Law and Sociology of the Faculty of Human Sciences at the University of Kassel. He holds a doctoral degree in sociology and has worked at various universities, including SciencePo in France and the University of Edinburgh (UK). His areas of work are the comparative sociology of welfare states and organization studies in the social and healthcare sector. Recent international publications include: “A ‘world culture’ of institutional ambiguity? Comparing the reorganization of hospital care in Germany and Mexico” (Current Sociology, 2015), “Governance and performance in a ‘marketized’ nonprofit sector. The case of German care homes” (Administration & Society, 2014), and “Embedded Marketization as Transnational Path Departure. Assessing Recent Change in Home Care Systems Comparatively”, with Champetier and Chartrand (Comparative Sociology, 2013).

Johannes Lange

Johannes Lange and Markus Märker have been research assistants in a study on the evolving hospital sector in Germany, funded by the German Research council between 2012 and 2015. Prior to that, Markus Märker worked as a lecturer at the University of Kassel while Johannes Lange was a research assistant for a study on rationing in health care at the University of Bochum, Germany. Markus Märker has published: “Medicine in Management or Medics in Management? The changing role of doctors in German hospitals”, with I. Bode (International Journal of Public Sector Management, 2014). Johannes Lange is author of “Zerredete Eindeutigkeit. ‘Unseriöse Operationen’ im Krankenhauswesen als Gegenstand von Diskursambivalenz”, with I. Bode (Sozialer Sinn, 2014).

Markus Märker

Johannes Lange and Markus Märker have been research assistants in a study on the evolving hospital sector in Germany, funded by the German Research council between 2012 and 2015. Prior to that, Markus Märker worked as a lecturer at the University of Kassel while Johannes Lange was a research assistant for a study on rationing in health care at the University of Bochum, Germany. Markus Märker has published: “Medicine in Management or Medics in Management? The changing role of doctors in German hospitals”, with I. Bode (International Journal of Public Sector Management, 2014). Johannes Lange is author of “Zerredete Eindeutigkeit. ‘Unseriöse Operationen’ im Krankenhauswesen als Gegenstand von Diskursambivalenz”, with I. Bode (Sozialer Sinn, 2014).

Notes

1. We are grateful to the reviewers’ suggestions (enriching our argument substantially) as well as to colleagues commenting on conference presentations out of which this article developed.

2. See Witman et al. (2011); Numerato, Salvatore and Fattore (2012); Bode and Märker (2014); similar observations have been made for nurses (see below).

3. OECD data comparing developments across different healthcare systems suggest that nowadays there may actually be ‘over-use … of certain surgical interventions’, but also some ‘under-use’, which implies that patients are denied reasonable treatment (Lafortune, Balestat and Durand 2012, 4).

4. This was supported by a grant from the German research council (DFG).

5. Abbreviations are used here to give a name to anonymized organisations.

6. Two out of the fifteen CNs took a different stance and claimed that their profession was in a good position to improve the ‘market position’ of their hospital; however, they also said their scope of action for contributing to this was limited.

7. These reactions consisted of hiring temporary workers; reallocating staff permanently between various wards; moving patients to other units, etc.; respondents noted that these were provisional remedies but produced ‘interface problems’ in many instances.

8. Thus, hospital treatments may sometimes have become cheaper (per head/everything being equal) in the new institutional environment; moreover, there are voices arguing that managerialism creates greater transparency overall. Yet this is not what our analysis was focusing on.

9. Braun et al. (2010), Crojethovic et al. (2014) as well as contributions to Bode and Vogd (2016) all bear witness to conflicts between professional ethics or quality targets and economic pressures within the German hospital industry.