Considers the issues associated with running multiple business models--a private practice and an academic faculty practice--within the confines of the orthopaedics department of a single medical center. Students assume the role of Neela Wilson, Executive Director of Rittenhouse Medical Center, in managing the operational requirements of, and organizational tensions created by, these competing models. In analyzing the case, students have the opportunity to: (1) gain a better understanding of operational focus and the concept of a "focused factory" in health care, (2) consider the concept of a "factory within a factory" in the context of an academic medical center, and (3) build an appreciation of the managerial challenges associated with operating related, and often competing, business units within the same organization.

Examines the transition of an orthopedic surgical group at a premier teaching and research hospital from a system in which the surgeons are compensated with flat salaries to a system where they are compensated based on profitability. Allows for an examination of several critical issues in incentive strategy, including pay-to-performance in a not-for-profit environment, whether a compensation system is truly aligned with value creation (issues of quality of care and research time), and the difficulty in designing a compensation system in a competitive labor market when the objectives of the institution extend beyond pure profit maximization. This is a rewritten version of an earlier case.