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Curriculum Center Browse Bibliography Build EPacket Pricing Structure Distribution Process Management Control in Nonprofit Organizations
Franklin Health Associates (A)
Young, David W.
Functional Area(s):
   Management Control Systems
   Healthcare Management
Difficulty Level: Intermediate
Pages: 10
Teaching Note: Available. 
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First Page and the Assignment Questions:
We’ve worked through a lot of problems and I’ve made some changes in the organization. We’re at a juncture now, and we need to think ahead. I’m concerned about whether we can shift to a more progressive and less reactive posture.

The speaker was Paul Johnson, Executive Director of Franklin Health Associates (FHA). Located in Farmington, Maine, FHA had been undergoing a period of rapid growth, and Mr. Johnson wondered whether the organization’s existing management structure and systems were appropriate to meet its needs in the future.


FHA was established in 1971 in the midst of a “hospital war” between two groups in West Central Maine. After each applied separately for Hill-Burton money and was rejected, the two groups were compelled to cooperate and compromise on the hospital’s Farmington site.

At about the same the time, four physicians practicing out of the nurses home of the old hospital began an affiliation with the Community Action Program, funded by the Federal Office of Economic Opportunity. They documented the need for improvement in the geographical and financial access to health care for the 30,000 residents who lived in the 27 rural townships in the nearby mountainous and heavily forested areas. FHA was set up to help fill this need, and was awarded a two-year federal grant. For the next two decades, the organization thrived in an environment of cost-based reimbursement and generous federal support for its outreach programs.

Mr. Johnson became executive director of FHA in June, 2001. At that time, according to him,

... the organization had no logical or deliberate planning. It was separated into the three divisions of Franklin Group Practice [FGP], Franklin Area Health Plan [FAHP], and Research and Development [R&D]. The separation had occurred as a reactive stance, however. The corporation had grown unwieldy and there was infighting over the budget and public image.


FHA was chartered to develop a group practice, a prepaid health plan and minibus transportation system for the poor, and a research program. Its goals included:

  1. The area-wide delivery of comprehensive primary medical care with continuity and a strong preventive emphasis. ...


  1. What is the strategy of FHA? Be explicit, focusing on programs, markets, personnel policies, and financing mechanisms in particular.
  2. Using the organizational structure in Exhibit 1, assess what kinds of responsibility centers have been established at FHA. Are they appropriate according to the criteria for the design of responsibility centers? Why or why not?
  3. What is your assessment of the management control process at FHA? How, if at all, would you change it?
  4. What should Mr. Johnson do?