Welcome to week ten of the course! We have covered a significant amount of information throughout the course. Up to this point, we have taken a look at the various “pieces of the puzzle” or individual components that are critical to health financial management. Today, however, we will focus on strategy. The difference between strategy and what we have covered thus far is simple; strategy enables us to view the organization holistically, as opposed to each individual element that makes up the financial picture of the organization.
It is often stated that failing to plan is the equivalent of planning to fail. In the latter part of the 1970s, a new concept of retail clinics emerged in the United States as a means of reducing costs, improving quality, and eliminating barriers to accessing care to those who had limited access or those who were unintentionally disenfranchised from the health system. The concept was known as a “doc in the box” because of the ease in which patients can receive care when they were not able to get appointments with their primary provider or in the absence of a primary provider. The idea was to relieve the overburdened emergency departments for non-emergent care needs. The growth of these clinics rapidly slowed due to changes in reimbursement structure.
Professor, the idea seems to be quite innovative. I would think that those clinics would be a very good solution to the problems that you have indicated. What accounts for the failures of these changes? How did reimbursement structure change so much so that these clinics did not survive?
I agree with Tyler. I, too, would have imagined that these clinics would solve the challenges that we saw during this time.
You both have great points…but, it is important to note that the structure of reimbursement is critical to the clinics’ ability to remain viable.
The increased costs of providing services to patients opposite normal operating hours, expenditure relative to marketing and advertisement, and significant volume fluctuations meant that the operating costs of these clinics were higher. Payers failed to recognize the operating model of these urgent care facilities and only reimbursed at the primary care rates, forcing many of the clinics to close or cease its retail practices. Many would argue that the “retail” concept was an idea “ahead of its time”. Others would suggest that much of the challenges can be traced to a lack of strategic planning.
So, professor, are we not seeing more of this type of clinic nowadays? For instance, the Minute Clinic operated at various CVS pharmacy locations seems to fit the description of the “doc in the box” concept.
Absolutely, Tyler…we have seen a re-emergence of the concept.
Today, the retail clinic concept has re-emerged as a viable force at achieving the goals of balancing costs, quality and access. Today’s retail clinics are viewed as a robust industry providing a service that is not only desired by the healthcare consumer, but embraced by a more informed payer system.
So, is it safe to say that given the challenges that the payers are having with the high costs of care, many are now buying into the concept as a means of reducing costs?
Yes, the idea of alternative ways of providing care using more cost effective means is definitely appealing to the payers. That is precisely why I asserted that the idea was really ahead of its time during initial introduction of the retail clinics.
Are there any other questions at this time?
No, this is very interesting.
I agree. It will be interesting to see how well these clinics perform over the next few years.
In today’s lesson, we will discuss four topics:
organizational mission, vision, and values;
approaches to strategic planning;
the strategic planning cycle; and
constructing the business plan.
Strategic planning is an essential function for healthcare organizations, particularly given the dynamics of an ever-changing environment. Managing rapid, complex, and often discontinuous change requires organizational leaders to be proactive and progressive thinking. The purpose of strategic planning is transformational; it identifies characteristics of the organization and the environment in which it operates in order to establish goals and develop approaches to achieve those goals.
Strategic planning involves clearly defining why you exist (mission), the direction of the organization (vision), and the manner in which you will get there (values). Strategic planning focuses on long-term, mission-driven goals and establishes the best approaches for achieving those goals. A strategic plan sets measurable milestones to guide ongoing adjustments in course and action.
Professor, in your example of the “doc in the box” concept, what could we infer about the strategic plans of those organizations? Is it fair to assume that their plans were not effective or their mission was not well defined?
I think that is a very difficult question to answer. Part of the answer may lie in the fact that their strategic planning process had unidentified gaps. The question one may ask is…did the organizations effectively assess the threats or potential risks? So, I would conclude that there were many variables that affected the viability of the organizations.
A practical assessment of the most salient internal and external factors impacting the organization enables for an informed strategic planning process. The organization’s mission, vision, and values are fundamental elements of the strategic planning process. There are several tools used in the strategic planning process. One very commonly used tool is the SWOT analysis. The SWOT analysis consists of an objective review of the strengths, weaknesses, opportunities, and threats that affects the performance of the organization.
Professor, what determines a strength, weakness, opportunity, or threat?
Good question….keep in mind that strengths and weaknesses are both internal variables to the organization. For instance, an organization’s strength may include a state of the art facility, whereas its weakness may be lack of training for staff development. Both of these factors are within the control of the organization. On the other hand, an opportunity may include increased consumer demand and a threat may be increased demand for expensive medical technology. The latter two factors are not controlled by the organization.
OK…I have a much better understanding. Thanks…
The strategic planning process has garnered a significant amount of scrutiny in recent years for a lackluster response to the turbulence and uncertainty that exists in the healthcare environment. The strategic cycling model addresses many of the shortcomings of traditional strategic planning in a dynamic environment. The cycling model facilitates a deliberate and continuous assessment of the organization’s mission, vision, and values. Moreover, the strategic planning process directs activities in the construction and marketing of the organization’s business plan.
Topic 1: Organizational mission, vision, and values
· Mission Statement
· Vision Statement
· Values Statement
· Organizational Culture
Now let’s talk about organizational mission, vision, and values.
Organizational leadership plays a key role in facilitating the strategic management function and integrating those functions into the organization’s mission, visions, and goals. Every organization exists for a reason and successful organizations are able to interpret effectively interpret those reasons through a well-defined mission statement.
Professor, it has been my understanding that many organizations fail to thrive because of a poor mission or lack of a mission statement. Would you agree?
I would absolutely agree. A mission is considered the foundation of strategic direction. The mission serves as a guide for all the organization’s decision making, including the allocation of resources. The mission should be communicated throughout the organization through a mission statement. The mission statement must contain measurable, definable, and actionable content.
So, professor….what then is the difference between an organization’s mission, vision, and its values?
While the mission statement answers the questions – who are we and why we exist as an organization – the company’s vision statement addresses the question of – who we desire to become. The vision statement describes the future state of the organization.
Every organization has core values, whether the values are implicit or explicitly stated. The values of the organization compel the behaviors used in achieving the organization’s mission. If the behaviors are counter to the values of the organization, even if the mission is achieved, the organization has failed.
The organization’s values shape its culture and ultimately define the character of the organization. In order to build a coherent culture, the organization must comprise of individuals who share a core set of value and a willingness to promote those values.
So, basically the organization’s value is its moral compass.
Topic 2: Approaches to strategic planning
Now let us switch our attention to strategic planning.
Strategic planning is a systematic, formally documented decision-making process designed to ultimately guide the organization to achieving its mission and vision. Each step in the strategic planning process involves information gathering, reflective thinking, and communication. While there is no single formula to completing the strategic planning process; there are, however, guiding principles that are essential to optimizing the value of strategic planning. The process is continuous and ever-evolving. Strategy allows for the organization to move from its current state to its desired state.
Professor, when you say that the process is continuous, does it mean that changes are frequently made to the plan?
Yes, periodic assessment of the strategic planning process must be conducted and appropriate changes made in order to reflect the changes occurring within the environment in which the organization operates and competes.
How does this affect decision-making? Do frequent changes have a negative effect on operations?
Decision consistency is important to effective strategic planning. However, having the ability to adapt to changes is crucial for long-term success of any organization.
Analyzing and understanding the environment supports decision consistency and enhances the organization’s ability thrive. Two very commonly used tools in assessing the environment are the SWOT analysis and the PEST analysis.
The SWOT analysis is an in-depth examination of the organization’s strengths, weaknesses, opportunities, and threats. The strengths and weaknesses are considered internal factors affecting the organization, while the opportunities and threats are external influences. The strengths and weaknesses can be controlled by the organization, unlike the opportunities and threats. Scanning the external macro-environment using the PEST analysis allows for the assessment of the political, economic, social, and technological factors that affect the organization’s long-term activities and performance.
Is the PEST analysis more conducive to meeting the needs of a healthcare organization given its focus on external influencers?
Actually, some organizations are using the PEST analysis to supplement the SWOT analysis.
I think that makes sense given the external environment of health organizations.
Topic 3: The Strategic Planning Cycle
Not let us continue our discussion with the topic of the strategic planning cycle.
The Strategic Planning Cycle consists of four interrelated components:
Planning— A well-constructed strategic plan begins with a rigorous plan.
Implementation— The execution of the overall plan
Monitoring – involves the use of quantifiable indicators to gauge performance and plan effectiveness
Assessment, or Review — A key component of the strategic plan cycle. Assessment aids managers in determining the results of tactical actions in the overall context of the organization’s mission, vision, and values.
The strategic planning cycle integrates various aspects of planning into one unified and coherent process. Five key questions are answered in the strategic planning process. The questions are:
Where do we want to go?
How do we get there?
How do we measure our success?
How did we do? And finally,
How can we improve?
Professor, given the questions…..is there any one aspect of the planning cycle that is considered more important?
These questions are critical to developing and executing the strategic plan. Each aspect of the cycle plays a crucial role in developing and amending the overall strategic plan. The strategic planning cycle entails four interrelated functions – planning, implementation, monitoring, and assessment. Ideally, monitoring should take place initially upon implementation and should be simultaneously conducted with each function of the cycle in order to identify gaps and opportunities for improvement.
I would say that because each function is so interdependent upon the other functions, they are equally important.
That’s a good point, Tyler.
Topic 4: Constructing the Business Plan
· Organization plan
· Marketing plan
· Financial plan
Finally, let us focus our attention to the last topic today, constructing the business plan.
Perhaps one of the most complex undertakings facing leaders of health organizations is the crafting of a business plan. A business plan is comprehensive and serves to align the organization’s operational, financial, and marketing plans. Business plans offer a blueprint that enables for the establishment of a foundation upon which the organization can tailor it mission, focus its vision, and incorporate its values. As the organization grows, a solid business plan can aid in promoting its accomplishments. On the other hand, a poorly constructed plan can impede further growth and create barriers to long-term success.
Professor, how does a business plan relate to a strategic plan?
A strategic plan is actually a type of business plan. They differ in terms of the purpose each serves. A business plan is generally considered and externally focused document that provides insights about a company to potential investors. Whereas, a strategic plan is a tool used internally as a guide for the organization’s strategic direction. Another way to look at it is….a business plan answers the questions who and what, while a strategic plan tells us how and when.
Business planning can help leaders to predict the inevitability of change and allow of contingency plans to address those inevitable changes. Because of the fluid nature of the healthcare environment, many health organizations update the business plans in a three to five year timeframe.
Is the three-to-five year standard? What happens if changes occur more frequently than anticipated? Will the business plan change more frequently in order to address those changes?
That is where effective planning comes into play. Business planning should include forecasting, which will anticipate changes. The main point to remember is that business planning is a continuous process. There are no steadfast rules to the three-to-five year period, but it is pretty standard and is based in part on the changes within the environment.
Thanks Professor…that helps
There are various components to the business plan. The business plan should include an organization plan, marketing plan, and a financial plan.
What is the overall purpose of the organizational plan?
The organization plan should include a description of the management team. A description of the roles of the individuals is important to demonstrating the competency of those who are entrusted to lead the organization. In addition, it is important that the management team shares a common vision, complementary attributes, commitment, and the fortitude to stay the course even amongst the most challenging circumstances.
The marketing plan should include a market analysis.
Professor, what do we expect to find in a market analysis?
The market analysis should contain a description of the industry, including the current size and historic growth rate. Also, you will find information about the target market and distinguishing characteristics of that market. Demographics of the market as well as results from a needs assessment for that particular market are included in the market analysis. Competitor information is another very important aspect of the market analysis.
The financial plan is very important to the investor. The financial plan must outline a forecast of operations. Financial statements are included to provide a solid picture of the business’ financial acuity. The financial statements should include both historical and projected information. The forecasted information may be simple, requiring only a statement of cash flow, or more extensive to include a balance sheet and income statement.
Check Your Understanding
Directions: Choose the best answer then click the submit button.
Question: Which tool is used in strategic planning to assess an organization’s internal strengths and weaknesses and external opportunities and threats?
A) PEST analysis
B) Needs assessment
C) Balanced Scorecard
D) SWOT Analysis
Feedback: SWOT is the acronym for strengths, weaknesses, opportunities, and threats. A SWOT analysis enables for the identification of factors affecting the organization and the environment in which it operates.
Please go to the next slide.
Check Your Understanding
Directions: Choose the best answer then click the submit button.
Question: Which of the following best describes the difference between organizational vision and organizational values?
A) A vision is a concrete plan for the future and values are organizational ethical standards
B) A vision is a look at what an organization might be like in the distant future and values are organizational ethical standards
C) A vision is a standard of ethics and values are plans for the distant future
D) A vision is a statement of the primary emphasis of an organization and values are key points that a company will strive for in the distant future
Feedback: While both A and B describe visions as a look into the future, visions are not concrete plans as visions may change as the needs of the organization or its customers change. Therefore, B is the best choice.
A. Visions are not concrete plans as visions may change as the needs of the organization or its customers change.
C. A vision is a look at what an organization might be like in the distant future and values are organizational ethical standards.
D. A vision is a look at what an organization might be like in the distant future and values are organizational ethical standards.
Planning is essential for health care organizations to remain viable in a highly competitive, ever-changing economic, social, political and technological environment. Health organizations can become vulnerable at any stage of planning; consequently, monitoring plans and making appropriate adjustments become as critical a task as the planning itself. Failure to implement and effectively monitor the strategic planning process is a common challenge and one of the largest stumbling blocks to achieving the organization’s intended goals. As healthcare organizations continue to deal with appreciable changes and uncertainty in the environment, strategic planning will continue to evolve. Essentially, strategic planning is more than a process…it is a systematic and deliberate plan to review the organization’s current position and to identify the desired future state of the organization. In addition, strategic planning enables management to recognize and explicitly state key relevant assumptions about needed revisions to the strategic plan. Health organizations need effective strategy in order to align actions to support its mission, vision and encourage its values throughout the organization.
Thanks for another great class…..this concludes our lecture.
Are there any other questions?
Not at this time… Thanks Professor….
You are welcome!
Congratulations that you have completed all the lectures for this course! I hope you enjoyed the lessons! Good luck with your other courses and your future career in the field of health financial management!