The senior team at the hospital campus was livid. Why hadn’t they planned for the inevitable aggressive advance of competing physicians right on their doorstep? Their financials showed lackluster performance on huge investment, the kind of return that would make any administrator flush with embarrassment. Just a few years earlier, compelling market growth in the surrounding community almost begged for a first-rate healthcare institution, and there were none close by, certainly none of the caliber of this team’s reputation. What had gone wrong?
Many entrepreneurial physician groups and healthcare developers are eyeing well-entrenched hospitals in emerging growth markets as easy prey to grow their practices, for services that until recently, were only available in the main hospitals. A significant majority consider core hospital services as a ready-made, cannibalistic opportunity, especially those slow to develop their own ambulatory outpatient centers. And with increasing alarm, healthcare insurers are vindicating these choices based on the lower cost of providing specialized services in an outpatient setting.
This kind of scenario plays out all the time in many regions of the nation, and too commonly in the Valley. The C-suite is asked to position the system for market expansion by anticipating where the growth will be, 4-15 years from now. They are being asked to leverage that prediction with investment in healthcare facilities, physician and medical capabilities, and power relationships that will yield a healthy return. And the toolset of choice? Experience, mixed with gut and a dash of luck.
Enabling the Future
There’s a better way to make healthcare planning decisions. Strategic Planning, often a misused concept, is the process that helps senior decision-makers consistently match powerful visions to opportunities, and with dramatic precision, surmount these opportunities.
Since the term strategic planning is so misused, let us dispel what strategic planning is not:
- It is not coming up with a good idea
- It is not another way of saying a choice
- It is not even the act of coming up with a plan
For any healthcare system that consistently applies its four steps, strategic planning can:
- Increase hospital revenues, profits, and protect/grow market share
- Anticipate and adapt quickly to contingencies
- Connect with and cultivate better tethered relationships with physician partners
- Envision a better future
- Develop staff leadership while reducing FTE’s by 20% or more
- Dramatically cut project cost, per-bed costs and time-to-market on new healthcare facilities
- Plan the right mix of patient-convenient (and profitable) outpatient and innovative inpatient services
- Reinvent how the system delivers quality healthcare, while sustaining fiscal health, and
- Position the organization for long-term success
From Chronic to Better Health
Early last year, a client asked for assistance in surmounting a handful of the above challenges. Revenue streams were becoming shallower, already thin margins were getting even skinnier, an aggressive competitor was wooing customers, and the company’s staff attrition – the better trained positions – were costing more than 9% of the overall budget. The company was saddled with aging infrastructure, and faced huge bed costs in facility replacement. Morale was low among physicians (who began departing at a rapid rate), especially since the C-team felt powerless to improve the situation and they were not very good at keeping this desperation to themselves.
Through a comprehensive environmental assessment, we
discovered that each of these problems was connected to the others in a kind of
feedback loop throughout the healthcare system. Trust in senior management
suffered because contribution to solve issues was stymied. Decisions about
service complement were made without regard to what the customer wanted, and lesson-rendering
complaints were deflected by upper ranks. Facility experts grimaced at the
eventual pain the organization would suffer just maintaining its bed count. Many
issues were considered status quo acceptance, largely because the industry
faces similar difficulties.
And the impact of 18 months of strategic planning? More profitable serving opportunities were discovered. Attrition cost was cut by 60%. Customer outreach helped regain lost market share, while bolstering revenue streams with services and capabilities clients most wanted. Sophisticated design partners developed custom infrastructure evolutions more adaptive with less investment. More importantly, a new culture of leadership emerged, with mid-level employees empowered to contribute to the overall success of the organization, while shouldering accountability for its strategic implementation.
Continued in Pt. 2, which will focus on the tools of strategy and the discovery of what true strategy does for an organization such as a hospital or medical practice.
This article appeared in the Winter 2007 edition of AZ Medical Office,
and is reprinted (including updated title and content) with permission
from Square Foot Magazine. See our web site to learn more about
strategic research and the success of hospitals, health systems, and physician group practices. Just click the link to the left or go to www.michaelharrisgroup.com.
-----Michael
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