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Strategic Planning for Healthcare Services Prepared by: Dr. Alber Paules
What’s the “Strategy”?Why do some organizations succeed while others fail? o This is usually highly attributed to the strategies that an organizations managers pursue; these strategies usually have a major impact on the organizations performance relative to its competitors/rivals.Definition of “Strategy”: o A strategy is a set of actions/methods/ways that managers take to increase the organizations performance. o If an organization achieves superior performance relative to rivals; it is said that this organization has a competitive advantage.
DELL Computer Caseo Between 1998 and 2006, Dell enjoyed very high profitability far ahead of that of competing manufacturers of business computers.o This is attributed to Dell’s success in sustaining a competitive advantage over its rivals (Apple, HP, and Gateway). How? 1. Dell’s business model: selling directly to consumers through the company’s website. The website allows customers to mix and match product features to customize their own computer systems. 2. The way Dell manages its supply chain to minimize the cost of holding inventory.o We can conclude from Dell’s case that Dell’s managers could charge low prices, gain major market share, and become more profitable than its rivals.
Some Definitions• Strategy-making Process: the process by which managers select then implement a set of strategies that aim to achieve a competitive advantage. o Strategy Formulation: the task of selecting strategies. o Strategy Implementation: the task of putting strategies into action.• Strategic Leadership: this is about how managers most effectively manage an organizations strategy-making process to create competitive advantage.
The Strategy-Making Processo Strategy is the outcome of a formal planning process developed by the top management.o Success of any strategy is 10% formulation and 90% implementation.o Selecting strategies is relatively easy (but requires good analysis); the hard part is putting those strategies into effect.
The Strategic Planning Processo The strategic plans generated by the planning process generally look out over a period of one to five years, with the plan being reviewed and updated every year.o The results of the annual strategic planning review are used as input into the budgetary process for the coming year (i.e.) the strategic plan is used to shape resource allocation within the organization.
The Strategic Planning ProcessThe following five steps represent a model for a formalstrategic planning process: 1. Select the organizational statements and strategic goals. 2. Analyze the organizations external competitive environment to identify opportunities and threats. 3. Analyze the organizations internal operating environment to identify the organizations strengths and weaknesses. 4. Select strategies that build on the organizations strengths and correct its weaknesses in order to take advantage of external opportunities and counter external threats. These strategies should be consistent with the organizational statements and strategic goals of the organization. 5. Implement the strategies.
1. Select the Organizational Statements and Strategic Goalso The first component of the organizations strategic planning process is crafting the organizational statements; which provide the framework or context within which strategies are formulated.o These statements include the following: a. The mission: which tells why the organization exists and what the organization does. b. The vision: which tells the organizations desired future state. c. The key values to which the organization is committed. These values tell the employees how they should conduct themselves and how they should do business in order to achieve mission, vision, and goals. d. The organizations strategic goals: that should be achieved to ultimately achieve the vision.
1. Select the OrganizationalStatements and Strategic GoalsAn example for the mission statement: “As a leading private hospital in the Egyptian market, we are committed to the provision of comprehensive healthcare services in all medical and surgical specialties in a safe, modern, and patient-centered environment; for the well-being of the whole community. We strive to achieve excellence in serving our patients, regardless of their cultural, ethnic, or social differences”.An example for the vision statement: “To become the regionally-recognized location of choice for quality health care services in the Middle East region by the year 20XX.”
1. Select the OrganizationalStatements and Strategic GoalsExamples for the key values: o Prioritization of patient safety and satisfaction. o Transparency in communications with our customers. o Adherence to professional ethical and confidentiality rules. o Excellence and continuous improvement. o Equity. o Compassionate care. o Respect for Others. o Evidence-based Practice. o Fostering continuous education and training.
1. Select the Organizational Statements and Strategic GoalsN.B.s• The Quality Council may share in the development of the mission and vision statements, in addition to the key values, which usually reflect the organizations striving towards achieving excellence of care.• These statements serve as a constant reminder of the path in which the origination is moving.• Once approved, these statements should be communicated to the rest of the organization by various means: some organizations post these statements in prominent locations; other organizations print them on the back of the personnel business cards. Additionally, these statements may be published in periodical newsletters, handbooks, or on the hospital’s website.
1. Select the Organizational Statements and Strategic GoalsEstablishing Strategic Goals: • A goal is a desired future state that an organization attempts to realize. • The purpose of the goal is to specify what must be done so that the organization achieves its vision, while based on its mission (i.e.) the goals get the organization moving from its mission towards its vision. • Goals may provide a means by which performance of managers can be evaluated.
1. Select the OrganizationalStatements and Strategic Goals Establishing Strategic Goals: • Well-constructed goals have 4 main characteristics: 1. Precise and measurable. 2. Address crucial/core issues. 3. Challenging but realistic. 4. Specify a timeframe in which goals should be achieved.
1. Select the OrganizationalStatements and Strategic GoalsExamples of Strategic Goals: 1. Hiring competent manpower. 2. Adopting latest technology. 3. Adopting evidence-based practice. 4. Embracing world-class quality systems. 5. Increase the no. of cardiac referrals/admissions.
1. Select the Organizational Statements and Strategic GoalsGoals: 1. Hiring competent manpower. To be accomplished by the year 20XX. i. 100% of privileged practitioners working within the premises of our organization should be board-certified. ii. At least 80% of nurses should be faculty-graduates (not institute- graduates). 2. Adopting latest technology. To be accomplished by the year 20XX. i. Gradual replacement of 100% of the obsolete and old (aged more than 8 years) medical equipment by newer one. ii. Gradually replacing manual medical records with electronic medical records (EMRs) till achieve maximum possible automation of the clinical care process.
1. Select the Organizational Statements and Strategic GoalsGoals: 3. Adopting evidence-based practice. To be accomplished within 24 months. i. At least 80% of the clinical processes provided within the hospital premises should be evidence-based. ii. At least 25% of the clinical processes should have relevant CPGs. 4. Embracing world-class quality systems. To be accomplished by the year 20XX. i. To be accredited by an internationally-recognized accrediting body. 5. Increase the no. of cardiac referrals/admissions by at least 50% annually.
2. External Analysiso Strategy formulation begins with an analysis of the forces that shape competition in the industry in which an organization is based.o The goal of this analysis is to understand the opportunities and threats.o Opportunities arise when an organization can take advantage of conditions in its external environment to formulate and implement strategies that enable it to be more profitable.o Threats arise when conditions in the external environment endanger the integrity and profitability of the organization’s business.o PESTEL analysis tool can be used to understand the external factors and forces in the organizations macro-environment.
2. External Analysis: Porter’s Five Forces Modelo Michael Porter developed a model, in 1979, to help managers with the analysis of the external environment. It’s called the (Five Forces Model).o In his model, Porter focuses on five forces that shape the competition within an industry: 1. The risk of entry by potential competitors 2. The intensity of rivalry among the established organizations within an industry 3. The bargaining power of buyers 4. The bargaining power of suppliers 5. Threat of substituteso Any of the pre-mentioned competitive forces is regarded as threat if becomes strong, and as opportunity if becomes weak.
2. External Analysis: Porter’s Five Forces Model1. Risk of Entry by Potential Competitors: • Established organizations already operating in an industry often attempt to discourage potential competitors from entering the industry because the more organizations that enter, the more difficult it becomes for established organizations to protect their share in the market and generate profits. • High entry barriers may keep potential competitors out of an industry. • Important barriers to entry include economies of scale, brand loyalty, absolute cost advantages, customer switching costs, and government regulations.
2. External Analysis: Porter’s Five Forces Model2. Rivalry among Established Organizations: • Rivalry refers to the competitive struggle between organizations in an industry to gain market share from each other. • The weapons used in this struggle usually include pricing, product/service design, spending on advertisements and promotions, and after sales services and support. • Strong rivalry constitute a strong threat to profitability. Alternatively, if rivalry is less intense, an organization may have the opportunity to raise prices and gain more profits. • The intensity of competitive rivalry within an industry is affected by many factors which include: industry competitive structure, industry demand, and exit barriers.
2. External Analysis: Porter’s Five Forces Model3. The Bargaining Power of Buyers: • Buyers of a certain product/service; whether end-users or intermediaries may be strong enough to bargain with the organizations for lower prices or for better quality (i.e.) higher costs. • Powerful buyers are considered as a threat. This power might origin from the following situations: i. The fact that they purchase a major percentage from the products/services developed by the organization. ii. When the buyers purchase in large quantities (thus pressing for price reductions). iii. When the buyers can threaten to enter the industry (backward integration)
2. External Analysis: Porter’s Five Forces Model4. The Bargaining Power of Suppliers: • Suppliers are the organizations which provide input into the industry (e.g.) pharmaceuticals companies, medical supplies companies, medical equipment companies, medical wastes disposal companies, ….etc. The bargaining power of the suppliers refer to their ability to raise their prices. • Powerful suppliers are considered as a threat. • Suppliers are most powerful in these situations: i. The product/service they supply to organizations in a certain industry has few/no substitutes or when there high switching costs. ii. When the industry is not an important customer to the suppliers. iii. When suppliers can threaten to enter their customers’ industry (forward integration).
Backward and Forward Integrations Backward Integration Backward Integration BuyerPharmaceutical Hospital MCO company Supplier Forward Integration Forward Integration 23
2. External Analysis: Porter’s Five Forces Model5. Threat of Substitutes: • Substitute products/services are those ones of different businesses or industries that can satisfy similar customer needs (e.g., tea, coffee, and soft drink industries; all three serve customer needs for non-alcoholic drinks). • The existence of close substitutes is a strong competitive threat because this limits the ability of the organization to raise its prices and thus increase its profitability. • Microprocessor (like those produced by Intel and AMD) have no substitutes; this gives both companies the ability to charge high prices with no fear of sales reduction.
3. Internal Analysiso Internal analysis is concerned with identifying the strengths and weakness of the organization.o The organization has to identify its distinctive competencies which act as the roots for its competitive advantage.o Distinctive competencies are firm-specific strengths that allow an organization to differentiate its products/services from those offered by rivals, and/or achieve substantially lower costs than its rivals.o Distinctive competencies arise from two complementary sources: 1. Resources: tangible and intangible ones. 2. Capabilities: the organizations skills at coordinating its resources and putting them to productive use; these skills reside in the organizational structure, cultural norms and values, processes, control systems, and hiring systems.
Sample Strategic SWOT Analysis for a HospitalStrengths Weaknesses Design of the building. High turnover rates. Geographical location. Poor internal communication. History and reputation. Lack of a website (in the era of internet). Competent clinical staff members. Many of the non-clinical staff members lack Comprehensive services. English language and computer skills. Lack of any well-recognized accreditation.Opportunities Threats Acquiring a higher market share after being Potential competitors who will enter the renovated and JCI-accredited. market in the near future (whether local or An unsaturated market which can tolerate international ones). the opening of new branches and/or Increased power of the healthcare satellite clinics in strategic locations. insurance companies which sent us more Affiliation with an American hospital than 60% of the total cases admitted at our /center /group and arrangement for hospital last year. periodic visits of its clinical experts. 26
4. Select the Strategieso A list of strategies should be developed; strategies selected should build on the organizations strengths and correct its weaknesses in order to take advantage of external opportunities and counter external threats.o These strategies should be chosen based on their consistency with the organizational statements and strategic goals of the organization (i.e.) the strategies chosen shall ensure that the strategic goals are achieved.
4. Select the Strategieso Examples of “Strategies” include: ─ Improve employee retention and recruitment. ─ Establish new services that promote the continuum of care. ─ Improve the profitability from payers (e.g., by reviewing contracts and utilization patterns) ─ Develop distinctive tertiary services that position the hospital as the preeminent regional referral center. ─ Generating funds from unusual sources (e.g. renting spaces within the premises of the hospital for cafés and restaurants). ─ Achieve a culture of quality that produces superior patient care outcomes and customer satisfaction levels.
Examples for Potential Strategies to achieve a Strategic GoalIncrease the no. of cardiac referrals/admissions by at least50% annually i. Renovating the Cardiac Care Unit. ii. Renovating the Cardiac Cath labs. iii. Establishment of a new chest pain unit (intermediate care unit). iv. Initiating a marketing campaign. v. Dedicate one of the 8 Operation Theater (OT) rooms for the cardiothoracic surgeries. vi. Improving the clinical, functional, and satisfaction outcomes for the cardiac cases. vii. Recruitment of high caliber specialists. viii. Arrangements with foreigner specialists to conduct periodic visits to our hospital.
Examples for Potential Strategies to achieve a Strategic GoalAdopting evidence-based practice. To be accomplishedwithin 24 months. i. Establishment of a dedicated committee to oversee and review the integration of the EBM into the clinical practice in all departments. ii. Establishment of a medical electronic library with membership in professional websites and databases. iii. Integrate the physicians’ adherence to the specified clinical practice guidelines into their appraisal processes.
5. Implement the Strategieso Implementation of strategies involves any or all of the following: − Developing/modifying processes through development/ modification of relevant policies and procedures − Improving efficiency and effectiveness of processes. − Designing and delivering new services. − Changing culture. − Allocation of resources. − Making changes in the organizational structure. − Development of annual operational goals which are consistent with the strategic goals; and for each operational goal, an action plan is developed with list of tactics and deadlines. A senior manager is assigned for each plan. He/she assumes responsibility to provide quarterly updates to the top management.
Balanced Scorecard (BSC)• Nowadays, over half of the Fortune 1000 companies in North America are using the Balanced Scorecard, which has become the hallmark of a well-run organization. Many organizations say the scorecard is the foundation of their measurement and management systems.• It was developed by Robert S. Kaplan and David P. Norton (HBR).• The BSC resembles a dashboard; a dashboard is the indicator panel in the automobile, which is most useful for the driver to monitor key performance metrics such as speed, fuel level, and engine temperature. The driver of a car monitors multiple indicators of performance simultaneously to successfully arrive at the intended destination.
Balanced Scorecard (BSC)• Similarly, a BSC is a tool which contains important measures (indicators) that are linked to the annual operational and strategic goals. It is used to monitor the organizational progress towards achieving the goals.• It is called “balanced” because it tries to distribute the goals and the indicators equally on four balanced perspectives without bias to any of them: financial, customer, internal business processes, and employee and learning.
Balanced Scorecard (BSC)• For example, the following 3-year strategic goal can be placed in the (Employee and Learning) category:Hiring competent manpower. To be accomplished by the year 20XX. i. 100% of privileged practitioners working within the premises of our organization should be board-certified. ii. At least 80% of nurses should be faculty-graduates (not institute-graduates).• A 3-year strategic goal, for example, can have one or more 1-year operational goals. The following is an example 1-year goal for the first year of the pre-mentioned 3-year goal:Reduce turnover rate among board-certified physicians (so that itdoes not exceed 10%) and faculty-graduate nurses (so that it doesnot exceed 20%).
Balanced Scorecard (BSC)• For each 1-year operational goal, measures/indicators are developed; the following are indicators for the pre-mentioned goal: 1. Physicians turnover rate 2. Nurses turnover rate• Each Indicator should has its own target; the following are targets for the pre-mentioned indicators: 1. ≤ 10% 2. ≤ 20%
Balanced Scorecard (BSC)• Indicators data can be updated on a quarterly-basis, for example.• For the BSC to be used effectively as a tool for monitoring a number of indicators; a color scheme of red, yellow, and green coding can be utilized to indicate progress toward meeting the targets.• Any measure with red or yellow highlighting may require the senior manager responsible for that target to submit an improvement plan with dates for completion.
Balanced Scorecard (BSC)3-year goals 1-year goals Measure Targets Person ResponsibleFinancialCustomerInternal Business ProcessesEmployee and Learning