Program management (as an alternative to functional management) was introduced in hospitals in the later 1980s. Essentially, it is modeled somewhat after product-line management, which has been around in the private sector for decades.

The basic principle of product-line management is that it is a more decentralized model (than functional management) and is managed as a portfolio of business units. Each business unit produces a defined product or service and it plans strategically to meet its own competitive needs, while maintaining integrity with the mission of the organization as a whole. Programs in healthcare define themselves according to population groups, a disease, a patient need, a type of medical service, or a type of medical specialty.

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