Textbook - Chapter 5

What is an example of a value?

An example of one such value statement from DukeHealth in North Carolina is: "We hold each other accountable to constantly improve a culture that ensures the safety and welfare of all patients, visitors, and staff" (para. 6).

As the driving purpose of the organization, the __?__ are reviewed as part of the strategic planning process to ensure they continue to be aligned with the organization's future market environment and to help identify future desired strategic directions.

MVVs.

Another market force to be considered is __?__ __?__ __?__. These innovations may represent the threat of substitute products, as new technologies often replace standard operations and services.

Innovations in technology.

Other barriers to successful strategy execution include a __?__ __?__ __?__ of the strategy.

Lack of focus.

Strategy execution is done on what?

A continuous basis and is the critical factor in management of the organization's strategic intentions, optimally providing continual feedback for the development of any future plans.

The development of the plan is most often done with what?

A multiyear time horizon (3, 5, or 10 years, for example) and updated annually.

__?__ can influence the health care market in other ways as well. Different communities have different health care needs—one community may need increased access to primary care channels, while another may need better health education and screenings for chronic conditions.

Consumers.

What are the external parts of the SWOT analysis?

Opportunities and threats.

As a market force, the __?__ __?__—on all levels, federal, state, and local—needs to be monitored for its effects on strategy development as well.

Regulatory environment.

Properly conducted, the __?__ __?__ __?__ will challenge management to robustly confront the facts of its market and the organization, to persistently test planning assumptions, and to continually refine the organization's execution skills.

Strategic planning process.

__?__ __?__ may be driven by the planning or business development function of an organization, but it is the responsibility of leadership at all levels to help execute and manage the organization's strategy.

Strategic planning.

With the development of the tactical plans, the strategic plan is complete. The plan is then presented to what?

The board of directors for approval and endorsement and is then rolled out across the organization.

__?__, health care organizations have come to embrace strategic planning as a valuable tool to evaluate alternative paths and help them prepare for the future.

Today.

The __?__ statement should help define the organization's culture—what characteristics it wants employees to convey to customers.

Values.

Strategic planning in health care has had a relatively short history. As recently as the __?__, strategic planning in the health care industry mainly consisted of planning for new buildings and funding expanding services in response to population growth.

1970s.

The turbulent managed care era of the __?__ only served to further fuel the growth of the field as the cost of health care continually rose faster than the gross domestic product (GDP), and competition among providers intensified.

1980s and 1990s.

With the introduction of the federal Prospective Payment System (PPS) in the __?__, the field of health care strategic planning received a transforming jolt as organizations scrambled to compete in an increasingly demanding environment.

1980s.

What is an example of power of payers?

A good example of this is a market with one or two powerful payers that prefer a "late adopter" stance for new medical technologies. In other words, they prefer not to pay for new technologies until the technologies have been proven either medically effective or financially efficient or both. This would be a significant threat to an organization that strives for a competitive advantage by being first to market with the adoption of new medical technologies. Alternatively, the power of payers may also create opportunities for an organization. An example would be the general preference of payers for less costly outpatient services. Health care organizations that specialize in these types of service offerings (e.g., ambulatory surgery centers, diagnostic/imaging centers) have capitalized on this payer influence in many areas of the country. Of course, as mentioned earlier new models of payment such as the one proposed by the leaders of Amazon, JP Morgan Chase, and Berkshire Hathaway are also expected to have significant impact, although at this point it's anyone's guess as to what that will be.

What is an example of innovations in technology?

A good example of this was the introduction of Picture Archive Communication Systems (PACS). This filmless imaging system significantly reduced the need for storage space for films and readers and the staff to maintain those areas, and allowed for remote electronic accessing of files, ultimately requiring a potentially smaller number of physicians necessary to interpret the images. Innovations in technology may also reduce the need for other types of clinical staff, as in the case of some surgical innovations (e.g., minimally invasive surgery, robotic technologies, drug advancements, etc.), and/or they may significantly increase the requirement of financial resources, as in the case of new radiology equipment (e.g., a new CT scanner, new fluoroscopy equipment, MRI, etc.) or new electronic health record systems (EHRs). As care becomes more personalized and participatory, technology such as nanotechnology and "wearables" will also impact care delivery. Likewise, breakthroughs in medical science may eradicate a chronic or communicable disease, making all the attendant specialists, services, and pharmaceuticals suddenly obsolete—somewhat like going from DVDs to streaming video services. As these and other new technologies become available, their potential impact on operations and systems needs to be considered in strategy development.

The process of strategic planning helps an organization identify and develop its competitive advantage. What is a competitive advantage?

A specific aspect of an organization that allows it to outperform its competitors.

What is another example of the power of the health care workforce?

Another example of the power of the health care workforce is the potential ramification of the specific personnel shortages (e.g., nursing). With a shortage of personnel, wage and hiring expenses increase, jeopardizing the ability to offer those specific services. A nursing shortage may affect a hospital's ability to add beds to meet growing demand for services. A shortage of radiology technicians may affect an organization's opportunity to offer new state-of-the-art technologies. The influence and availability of these and other health care personnel (and the organization's dependency on them) must be considered when developing future strategies.

At any given point in time, there are multiple and often competing initiatives and projects to be undertaken in an organization. By understanding the organization's operating environment and identifying a strategy to reach a desired future state, resources can be allocated __?__ __?__ __?__.

Appropriately and effectively.

What is an example of the power of the health care workforce?

As an example, if obstetrics is a major clinical program of the organization, the organization should closely consider the future anticipated supply and demand of obstetricians (OBs) in its market. With the significant increases in malpractice insurance targeted at obstetricians across the country, many OBs elected to discontinue delivering babies and focus solely on gynecology, while others opted to retire early. This dramatically reduced the supply of obstetricians in many areas of the country and forced some hospitals to hire their affiliated obstetrical staff in an effort to cover their malpractice insurance premiums and keep them practicing. Other hospitals developed "laborists"—OBs hired solely to work in the hospital and deliver babies. These moves are examples of strategies that were adopted by organizations to either maintain or grow their obstetrical services in response to market trends.

The volume forecast is initiated by identifying the organization's service area—often a zip code-defined area from which 70-80% of its patients are drawn—and determining the population use rates for applicable service lines (e.g., cardiology, orthopedics, home care visits, CT scans, etc.). These data are usually collected for several historical time periods (e.g., the previous three years or twelve quarters) and can then be forecasted out several more time periods simply by using a mathematical trend formula, resulting in a __?__ __?__.

Baseline scenario.

Any financial forecasts that are available should also be included, as well as any routine or planned capital spending and/or facility improvement plans. It is critical to tie the financial reserves and needs of the organization to the strategic planning process to ensure the resulting strategies can and will be funded appropriately. Tying the financial information to the volume forecast also serves to provide what?

Budget targets for the upcoming year(s).

As with the volume forecast, several years' worth of key financial indicators should be analyzed to highlight additional strengths and weaknesses of the organization. These may include indicators such as operating margin, net income, gross and net revenues, bond ratings, fund-raising, key financial ratios, payer mix, pricing, and/or rate-setting arrangements. The organization's historical performance against __?__ is also helpful to analyze and should yield further insight into strengths and weaknesses.

Budget.

The key to gathering the most value from the leadership input is to __?__ __?__ (e.g., executives, physicians, managers, etc.) to think within a strategic context, as opposed to the operational mode they are involved in on a day-to-day basis. Merely asking leaders to identify an organization's weaknesses, for example, can result in responses such as poor parking or a lack of marketing, whereas framing the question to identify challenges to the organization in growing service volumes may better yield answers such as an aging medical staff, lack of capacity, etc. It is important to incorporate these identified strengths and weaknesses into the organizational assessment for further discussion.

Challenge leaders.

__?__ __?__, the last market force to be considered, is probably given the most significant attention in most organizations' strategy development.

Competitive rivalry.

What is an instance of regulatory environment?

Congress continually enacts influential legislation, such as the 1986 Emergency Medical Treatment and Active Labor Act (EMTALA), the 1996 Health Insurance Portability and Accountability Act (HIPAA), the focus on mandatory error reporting and physician self-referrals, and of course the Affordable Care Act (ACA) or "Obamacare." Legislation at all government levels can have significant and rippling effects on all participants in the health care industry. Furthermore, the Centers for Medicare and Medicaid Services (CMS) often take the lead in changes in health care payment formulas that are frequently followed by payers at local levels. Other far-reaching issues such as liability reform and quality of care measures may be dealt with on local, state, and federal levels as well. All of these actions can influence a particular health care organization's strategy and need to be monitored and analyzed for their potential impacts.

Today's __?__ are demanding more and more from their health care providers on all levels (e.g., physicians, payers, and health care organizations), both in terms of the availability of specific service offerings and in the delivery of those services.

Consumers.

__?__ also want to be treated by providers who are "like" them, that is providers who understand their specific needs and can relate to them as individuals of, for example, the LGBTQ or Hispanic community. By identifying specific community needs, health care organizations can better target their services and potential growth opportunities. The best way to do this is to understand the consumers in a particular market, and determine in what ways they may need to access health care services.

Consumers.

In any organization's operating environment there are market forces, both __?__ __?__ __?__, that will undoubtedly influence the future success of that organization.

Controllable and uncontrollable.

Monitoring and control of the strategic plan is most often accomplished through the use of an organizational dashboard, or scorecard. A __?__ is a visual reference used to monitor an organization's performance against targets over time. Its simplistic design should allow for quick assessment of areas that may need adjustment, similar to an automobile dashboard.

Dashboard.

__?__ can depict strategic, operational, and/or financial outcome indicators, depending on the organization's needs, but care must be taken to highlight a manageable number of indicators, or the dashboard will lose its functionality.

Dashboards.

Strategy is all about making choices. A clear and focused strategy will guide what?

Decision making, prioritize resource allocation, and keep the organization on its desired course; in choosing which strategies to pursue, an organization is also choosing which strategies not to pursue.

It is important to remember strategic planning is a __?__ rather than linear process and, as such, there should optimally be no distinct beginning or end. Thus, a review of the organization's past strategic performance should be included as part of future strategy development. This review can be as simple as an assessment of whether past strategies accomplished their intended goals or as multifaceted as an ad hoc leadership meeting to discuss roadblocks that led to failure or factors that drove success. Either way, this review can and should provide valuable information for future strategy development and implementation.

Dynamic.

__?__ __?__ __?__ is a critical element in the success of today's health care organizations. Through understanding its competitive and other market environments, an organization can best identify a desired future state and a means to achieve it, but as discussed, the true value of strategic planning lies in the process, and less in the resulting plan.

Effective strategic planning.

Rollout of the plan has what two main steps?

First, the plan is communicated at all levels of the organization; only by communicating the strategy to all necessary stakeholders can an organization gain the support necessary for successful execution of the strategy. Second, supporting plans such as the financial and budgeting, operating, marketing, capital, and master facilities plans are developed or updated with the intent and strategies developed in the strategic plan. Having all of the organization's supporting plans tied to the strategic plan is a critical factor in reinforcing its strategic direction.

Any of a number of market assessment models can be utilized for this analysis, but one of the most common is the __?__ __?__ __?__ developed by Harvard University professor Michael Porter (1998).

Five Forces Model.

In any organization's operating environment there are market forces, both controllable and uncontrollable, that will undoubtedly influence the future success of that organization. Only by identifying these forces and planning for ways to adapt to them can an organization achieve the __?__ __?__. At the extreme, completely ignoring these forces can most certainly lead to organizational death.

Greatest success.

__?__ __?__ __?__ at all levels need to understand the purpose of strategic planning, its benefits and challenges, the key factors for its success, and their vital role in the process.

Health care managers.

__?__ __?__ __?__ need to understand the types of information and intelligence gathered and analyzed for plan development, and how that information is interpreted and acted upon. However, it has often been said that "the plan is worthless but planning is priceless." The value of strategic planning lies not in the plan itself, but in the planning process.

Health care managers.

__?__ __?___ __?__ at all levels have the responsibility to continually monitor their environment—both internal and external—and assess and act upon the possible implications of any trends or events that are of note. They have the responsibility to understand their local market on an ongoing basis and to know their organization's strategic direction and intent. They are responsible for identifying ways to support the organization's strategy and for ensuring that their subordinates have the knowledge and understanding of the strategy in order to do the same.

Health care managers.

__?__ __?__ __?__ information is then applied to each service line, therein highlighting some of an organization's strengths and weaknesses. By holding its market share growth trends constant, an organization can formulate a preliminary idea of how well it would fare if it were to stay its current course (and if its competitors do as well). Examining the forecast from the perspective of market share, contribution margin, and/or medical staff depth will also yield service lines or areas of strength that may need to be protected and service lines or areas that could be developed further.

Historical market share.

Every organization needs to be successful over the long term to survive; a critical factor leading to that success lies in what?

How well an organization can plan for the future and tap market opportunities.

Although no one can predict the future, one can systematically think strategically about it; the purpose of strategic planning is to do what?

Identify market forces and how they may affect the organization and to determine an appropriate strategic direction for the organization to take that will counteract those forces and/or tap their potential. For example, how should a long-term care organization prepare for the increases in life expectancy?

Through an ongoing analysis of the organization's operating environment, matched against its own internal capabilities, an organization's leadership is able to do what?

Identify strategies that will drive the organization from its present condition to that desired future state.

A successful strategic plan is focused and, just as importantly, executable; too many strategies may render the plan __?__ simply because there is too much to do.

Ineffective.

The development of the __?__ __?__ may be the most complex and time-consuming section of the strategic plan in that, in this component, virtually all aspects of the market must be examined to determine whether they represent opportunities or threats for the organization and to determine their future implications for the organization.

Market assessment.

The information gleaned regarding the interaction of these five forces (health care workforce, consumers and payers, innovations in technology, regulatory environment, and competitive rivalry) in the market is matched against the organization's __?__ __?__ __?__ __?__ __?__.

Mission, Vision, and Value (MVV) statements.

Although the __?__ statement is generally the most enduring of the three, each of these statements may be altered over time to adapt to the environment. As an example, the increasing influence of consumerism in health care drove many an organization to revise its vision and value statements to become more customer service focused, which in turn (hopefully) helped to change the organization's culture. Reaffirming and/or adjusting these three statements in relation to market activity is a critical step in determining the desired future state of the organization.

Mission.

The __?__ of any organization is its enduring statement of purpose.

Mission.

To help best ensure success of the strategic plan, dashboard indicators are aligned with what?

Operational plans and their associated identified goals.

Now that we have an idea of what our market looks like and understand our desired intent from our (reaffirmed) MVV, it's time to take a hard, honest look at our own organization. In conducting an internal assessment, an organization turns the analytical lens inward to examine the areas in which it has strengths and weaknesses, as well as how it may build or sustain a competitive advantage in the market. Like the market assessment, the __?__ __?__ has both quantitative as well as qualitative components.

Organizational assessment.

In addition to the more quantitative strengths and weaknesses that can be outlined through the volume forecast and financial condition review, there are subjective strengths and weaknesses that need to be identified for strategy development as well. Identifying these capabilities can be quite challenging, as planners usually have to rely on surveys of and/or interviews with the leadership of the organization to gather this information. This can be both time-consuming and value laden, but this information will be critical input for the plan's __?__ __?__.

Overall success.

The potential impact of this shift to a __?__ __?__ __?__ of care needs to be considered when developing future strategies. We are seeing the initial nuances of this as patients "contact Dr. Google" before seeing their actual physician. They come to the physician's office armed with the latest in medical research, often suggesting their own diagnosis and treatment options. Future care models will not only be patient-centric, but as mentioned earlier will be predictive, preventive, personalized, and participatory

Patient-centric model.

Historically, health care organizations viewed physicians as the primary customers; without them, the organization could not provide services. However, in today's world, the __?__ is becoming the central focus of customer service.

Patient.

What is the Five Forces Model?

Porter identifies five market or industry forces that, when combined, determine the attractiveness of competing in a particular market. For health care, this model can be adapted to analyze the interactions between the power of the health care workforce, the power of consumers and payers, innovations in technology, the regulatory environment, and competitive.

In concert with consumers is the __?__ __?__ __?__. Some markets have multiple payers of various sizes and strengths, while others have one or two major payers that dictate market payments. In either case, a health care organization that relies on these payers must stay abreast of their needs and demands and how each may affect future operations and strategies.

Power of payers.

The __?__ __?__ __?__ __?__ __?___ __?___ __?__ can have significant strategic implications for any health care organization, as the workforce is composed of the front line of caregivers and support staff in providing services. In the SWOT analysis, an organization should look at the availability of all subsets of health care providers that are critical to its success.

Power of the health care workforce.

The __?__ section focuses on past strategic performance and leadership's interpretation of the organization's core capabilities (or lack thereof).

Qualitative.

Depending on the organization's needs and on the types of indicators management identifies, the dashboard should be monitored __?__.

Regularly (e.g., monthly or quarterly). At a minimum, as soon as an indicator highlights a variance from the desired target, managers must address the variance with tactics that correct or alter the results. Optimally, the dashboard should serve to facilitate ongoing management discussion regarding execution of the strategy.

All organizations generally involve key leadership in the strategic planning process, but the extent to which other stakeholders are involved varies considerably. There is no one best answer as to who should be involved in the planning process and how, because each organization and culture is different, but one caveat generally holds true: the more stakeholders that are aware of and own the strategy, the greater the chance of success. That said, the strategic planning process should involve who?

Representatives from the board of trustees, upper and middle management, the medical staff, general staff, patients, and community leaders as much as possible and to the extent appropriate throughout the process. When the plan is completed, it should be communicated to all stakeholders as discussed earlier.

Although strategic planning is a dynamic and not a linear process, the __?__ __?__ attempts to depict a logical progression of the steps undertaken to develop a strategic plan.

SWOT analysis.

From this scenario analysis, several potential strategic directions for the organization may emerge. The __?__ __?__ is the goal that the organization desires to accomplish within the planning time frame. Generally, as each scenario may have different probabilities for success and may require different levels of resource investment, the specific scenario (and strategic direction) that will ultimately be chosen will often depend on an organization's tolerance for risk.

Strategic direction.

__?__ __?__ serves to focus the organization and also its resource allocation.

Strategic planning.

__?__ __?__ will most certainly continue to be a valued function in health care organizations in the future, and management at all levels needs to understand the process, and its purpose and their critical role in development and execution of the successful strategy. This is particularly true in the rapidly changing health care industry as described at the outset of this chapter.

Strategic planning.

__?__ __?__ may also be developed for departments and other levels within the organization and may be helpful to the manager in achieving the department's goals as well.

Strategic plans.

__?__ __?__ is crucial for organizational success and cannot be overstated in terms of importance; unfortunately, this is often an element of strategic planning that many organizations overlook. With the flurry of activity and intensity that usually surrounds the development of the strategic plan itself, there can be a collective sigh of relief following board approval of the plan, and leadership may be relieved to be able to return to their "real work" and the day-to-day operations. Yet successful organizations know that execution is much more important than the plan.

Strategy execution.

Once a strategic direction is chosen, specific desired outcomes should be targeted and strategies to accomplish this identified. As an example, if an organization concludes it will differentiate itself through its orthopedic services (strategic direction), the desired outcome may be to lead the market in orthopedic service volumes within two years. To accomplish this, the organization may identify strategies to increase its surgeon base, add rehabilitation services, or develop a center-of-excellence program. A __?__ is a carefully designed plan to accomplish the desired outcomes.

Strategy.

__?__ is not a quick fix or immediate turnaround, and strong leadership is needed to maintain a long-term focus. In addition, organizational buy-in at all levels is critical. As demonstrated earlier in the example regarding culture, strategy cannot be implemented solely in the top layers of an organization. All stakeholders must be aware of and buy in to the desired future state and the path that leads them there in order to ensure the momentum necessary to achieve results. Optimally, a successfully conducted strategic planning process will generate "strategy champions" at all levels of the organization.

Strategy.

What are the internal parts of the SWOT analysis?

Strengths and weaknesses.

What does SWOT stand for?

Strengths, weaknesses, opportunities, threats.

The final step in the actual development of the strategic plan is the creation of specific __?__ __?__ for each strategy, which are necessary for translating the plan into action.

Tactical plans.

What provides a foundation for strategy development?

The SWOT analysis.

Strategy identification usually begins with what?

The baseline scenario developed for the volume forecast. However, at this point, it is important to apply planning assumptions to the scenario and not simply accept the baseline. For example, will the organization plan to hold market share constant for a particular service, or will the organization hope to grow that market? Alternatively, the organization may decide to discontinue a specific service, perhaps due to predicted declining reimbursement or lack of physicians. By applying different planning assumptions, many different scenarios may result.

What two interrelated activities does the strategic planning process consist of?

The development of the strategic plan and execution of the organization's strategy.

The quantitative section of the internal assessment consists mainly of what?

The organizational volume forecast and an assessment of the financial condition.

What is strategic planning?

The process of identifying a desired future state for an organization and a means to achieve it.

Tactical plans answer what?

The who, what, when, where, and how questions of strategy implementation.

Through analysis of the SWOT, strategy identification can begin. In this stage, the organization's leadership team uses the information provided in the SWOT analysis to identify specific strategies that may be worthy of pursuit either to grow the organization or to protect current areas of strength. Once these strategies have been identified, what must be done?

They must be narrowed down to a manageable number through selection and prioritization, and tactical implementation plans must be created. With the strategic plan completed, operating, marketing, and other supporting plans are developed. Control and monitoring of the plan follows and is most effectively done on an ongoing basis.

It is also critical that the information and data gathered in the market assessment, including the competitor assessment, be incorporated into what?

This forecast in the form of further planning assumptions. For example, are there new technologies on the horizon that will affect service volumes? Or is there a dearth of providers that may counteract predicted increasing utilization of a particular service for a period of time? Desired financial targets also need to be incorporated here.

Throughout the development of the SWOT, the building blocks for strategy identification begin to emerge. If the organization is at the start of the development of a multiyear plan, it will usually conduct a rather thorough SWOT analysis. However, if the organization has an identified long-term strategic direction, the SWOT may selectively analyze only what?

Those areas that are relevant to the identified strategic direction. For example, if the organization has resolved to grow defined service lines, the analysis may focus more specifically on those areas of the market. Alternately, if the direction is diversification, the analysis may focus more on areas related to the organization's current strengths, whether they are related to service line or internal capability. Regardless of the depth of the SWOT, it serves as input for the next step in the process, strategy identification and selection.

What does SWOT analysis include?

Three distinct but intricately related components: the market assessment; the affirmation of the mission, vision, and values of the organization; and the organizational assessment.

.What two important functions does the SWOT analysis provide?

To gather a snapshot of how the organization is currently interacting with the market in comparison to the internal capabilities and intended strategic direction of the organization, and to identify market opportunities and threats that the organization may want to address in future strategic efforts.

What does the mission aim to do?

To identify what the organization does, whom it serves, and how it does it. For example, the mission statement for Genesis Healthcare, a skilled nursing and rehabilitation therapy provider, states "We improve the lives we touch...through the delivery of high quality healthcare and everyday compassion".

A ___?__ statement strives to identify a specific future state of the organization, usually an inspiring goal for many years down the road.

Vision.

The __?__ of the American Hospital Association is "of a society of healthy communities, where all individuals reach their highest potential for health" (para. 1).

Vision.

The __?__ __?__ is initiated by identifying the organization's service area—often a zip code-defined area from which 70-80% of its patients are drawn—and determining the population use rates for applicable service lines (e.g., cardiology, orthopedics, home care visits, CT scans, etc.).

Volume forecast.

What is an instance of Competitive rivalry?

Whether an organization operates in a near monopoly or an oligopoly, strategically savvy organizations always track their competitors' moves and suspected intentions. Although it is unlikely that you will gain access to the actual strategy of your competitors, much information on their strategic intent can be gleaned from their market activities. Information on their service volumes, market share, and news coverage and press releases should be monitored. Ongoing discussions with your own physicians, staff, and suppliers will likely also yield valuable competitive intelligence. Compiling this information together to see a larger picture often leads to an indication of competitors' strategies. Once their strategic intent has been identified, market opportunities for and threats against your own organization can be further addressed.

Strategy execution is also most successful with what?

a combination of strong leadership and organizational buy-in. Although leadership will need to have flexibility to adjust strategies as market conditions and internal developments warrant, they must also have the consistency over time to stay the course. Too often, strategies have failed because the organization has fallen to the temptation of bright and shiny new priorities, or they simply fail to resource the strategy over multiple years or time periods.