LESSON LERANED 2 WEEK 2
BYSTANDER
PeterOlden_2019_Chapter3Planning_ManagementOfHealthcar2.pdf
5 1
L e a r n i n g O b j e c t i v e s
C H A P T E R 3
P L A N N I N G
People who fail to plan, plan to fail.
Business expression
Studying this chapter will help you to
➤ explain what planning is,
➤ compare and contrast planning at different levels,
➤ explain a model of strategic planning,
➤ examine types of strategies for HCOs,
➤ describe implementation of plans,
➤ explain project planning,
➤ identify sources of data and information for planning, and
➤ understand useful planning guidelines.
C o p y r i g h t 2 0 1 9 . H e a l t h A d m i n i s t r a t i o n P r e s s .
A l l r i g h t s r e s e r v e d . M a y n o t b e r e p r o d u c e d i n a n y f o r m w i t h o u t p e r m i s s i o n f r o m t h e p u b l i s h e r , e x c e p t f a i r u s e s p e r m i t t e d u n d e r U . S . o r a p p l i c a b l e c o p y r i g h t l a w .
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M a n a g e m e n t o f H e a l t h c a r e O r g a n i z a t i o n s5 2
Here’s WHat HaPPeneD Managers at Partners HealthCare assessed their external environment and saw both opportunities (e.g., the continuum of care) and threats (e.g., reduced Medicare pay- ments). They also considered Partners’ strengths (e.g., extensive electronic health records system) and weaknesses (e.g., discharged hospital patients being readmit- ted for more care). Based on this and other information, top-level managers planned new strategic goals for Partners. One goal was to reduce the number of readmitted patients. Managers in the Center for Connected Health—a lower-level unit within Part- ners HealthCare—developed an implementation plan to achieve that goal. It involved using technology to connect Partners’ staff with recently discharged patients at home. Managers planned which staff members would do which tasks in which sequence to accomplish the goal. They planned to use information technology, medical technol- ogy, and communications technology to coordinate care among several services in the continuum of care. They also planned to train discharged patients in self-care and to transmit their health data (blood pressure, weight, and pulse) to the center each day. Via telehealth, staff then could provide just-in-time care and education when needed. This complex project was successfully planned and implemented by managers and staff to achieve Partners’ goal.
A s demonstrated in the Here’s What Happened, managers plan what their organiza- tions and work units will do in the future and how to do it. Managers at all levels of a healthcare organization (HCO) must plan well. Many do so weekly and even
daily. This chapter defines planning and explains how it varies at different levels of HCOs. Planning methods and real-world examples are presented for different levels of manage- ment and stages of planning. These methods include strategic planning, implementation planning, and project planning. This chapter provides useful planning tools to add to your healthcare management toolbox.
WH at Is PL a n n I n g? In simple terms, planning is deciding what to do and how to do it. The planning activity is the first of the five fundamental management functions discussed in chapter 2. Planning should precede the other management functions because a manager cannot properly orga- nize, staff, lead, or control an HCO without first planning. We can also relate planning to three of Mintzberg’s ten management roles discussed in chapter 2: monitor, entrepreneur, and resource allocator.
Planning is, of course, future oriented. When planning, we anticipate and prepare for tomorrow. Students plan which courses to take next semester, where to do an internship
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C h a p t e r 3 : P l a n n i n g 5 3
next year, and what to do during spring break. Managers plan many aspects of HCOs. Can you think of some? Planning enables an HCO’s manager to set a direction for the future that employees should pursue. Managers plan a future direction and then plan how to go there. We read about Partners HealthCare planning in the Here’s What Happened. Good planning enables managers to be proactive rather than reactive. Being proactive is much more effective and fun than reactive crisis management.
Managers plan at all levels of the organization hierarchy. For example, the board of directors and high-level managers of a hospital in Grand Rapids plan for the organiza- tion as a whole using a broad perspective. They plan for the long-term future of the entire HCO. Their plans have enormous consequences for the HCO’s survival and prosperity. At middle and lower levels of the organization hierarchy, managers plan for their individual smaller parts of the organization. They plan for shorter time periods. Their plans identify what different departments and smaller work units will do to achieve the bigger plans set by higher-level managers. Middle- and lower-level planning determines who will do what, when, where, and how with which resources to achieve the broad long-term plans. This type of planning is done by the department directors and unit supervisors within a depart- ment. For example, they plan their own department tasks, monthly work schedules, weekly inventory levels, daily staffing, and many activities. In larger HCOs that have specialized staff, a planning department, planner, decision support specialist, research analyst, or other staff may assist line managers with planning. Some health administration graduates choose planning jobs for their careers. Smaller HCOs have fewer staff specialists, so managers do more planning work themselves or hire planning consultants.
Many HCOs avoid pure top-down planning, in which top managers make the plans and determine the goals by themselves. Instead, the planning is partly bottom-up, meaning that lower-level work units and employees provide input to top managers for higher-level plans. This method provides important information and perspectives about the HCO’s current and future needs, pros and cons of proposals, stakeholders’ views, and whether proposed plans are realistic. Also, when lower-level workers participate in the planning process, they become more committed to implementing the final strategic plan and making it happen. They will not feel the plan was imposed on them without their input.
Planning should precede other management functions. It does not make sense for a community health alliance’s manager to organize job positions, authority, responsibil- ity, and the organization chart without first knowing what the alliance plans to do in the future. Nor does it make sense to hire staff yet. Only after knowing the alliance’s future plans can the manager properly organize the work and jobs, staff the positions, direct the staff, and control their performance to achieve the plans. Let’s learn how managers do high-level broad strategic planning. That will lead into how managers then do focused implementation planning.
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M a n a g e m e n t o f H e a l t h c a r e O r g a n i z a t i o n s5 4
st r at e g I c PL a n n I n g Strategic planning is an HCO’s highest-level planning. It determines how the HCO can succeed in the future, often with an emphasis on beating competitors and satisfying custom- ers. Strategic planning is a decision-making activity that defines where an organization is going, sets its future direction, and guides its future efforts to move the organization toward its intended future (Ginter, Duncan, and Swayne 2013, 21). This planning enables an organization to examine where it is now (point A), decide where it wants to be in the future (point B), and make decisions for how to get there (how to get from point A to point B). In the opening Here’s What Happened, we saw strategic planning by Partners HealthCare.
Prior to doing actual strategic planning, the HCO must prepare for it (Harris 2018). The top management team must identify and communicate the planning process, the schedule, the participants, and the desired outcomes of strategic planning. In many HCOs, the CEO leads the process and may be assisted by a steering committee and a facilitator. The committee includes selected board members, top executives, and physician leaders if the HCO has a medical staff. Steering committee members choose the planning process, determine who should be involved in the process, and create the schedule for it. The committee also selects and works with a planning facilitator, who will manage the day- to-day planning process to ensure it stays on schedule. The facilitator might be an internal executive or an external consultant.
Individual participants, such as board members and other executives, also have key roles. Board members often represent key stakeholder groups, and they have to give final approval to the plan. In hospitals, the medical staff is an essential stakeholder that must participate in the process. However, each HCO has to decide who will be involved, to what extent, and in which parts of the planning process—from top managers and the governing body to middle- and lower-level managers. For example, at some stages of the process, lower-level managers will not participate in some planning meetings yet will offer essential input through surveys and interviews. Advisory groups may offer feedback on preliminary ideas that evolve during the planning process. The entire process may take about six months, although the time frame depends on the HCO’s desire for expediency versus extensive stakeholder participation.
HCOs face many powerful trends and developments that are reshaping healthcare. Managers must make difficult decisions about how their HCO will adapt to changing demographics, value-based reimbursement, mobile health, patient experience, population health, mergers, scientific advances, workforce shortages, and other developments described in chapter 1. To guide decision making, strategic planning has many potential benefits for an HCO if it is done well (Harris 2018, 13–14). Strategic planning does the following:
◆ Gathers input for planning from all parts of the HCO
◆ Provides viable future direction and focus for the HCO
◆ Enables each part of the HCO to align its activities with the HCO’s direction
strategic planning
A decision-making
activity that defines
where an organization
is going, sets its future
direction, and guides
its future efforts to
move the organization
toward its intended
future.
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C h a p t e r 3 : P l a n n i n g 5 5
◆ Sets priorities to address crucial issues
◆ Allocates scarce resources to activities with the biggest potential payoff
◆ Establishes measures of success to gauge progress
◆ Generates commitment to implementation of the plan
◆ Coordinates and unifies the actions of diverse parts of the HCO
◆ Creates shared learning and shared context
However, these potential benefits will be realized only if managers avoid the follow- ing potential problems (Harris 2018, 11–13):
◆ Not involving the appropriate stakeholders (internal and external)
◆ Overanalyzing data and thereby delaying the planning process
◆ Avoiding difficult critical issues
◆ Not including financial planning in strategic planning
◆ Ignoring resistance to change
◆ Not developing consensus and enthusiasm for the plan
◆ Not transitioning effectively from planning to execution
We will next study a strategic planning approach developed by Veralon (a healthcare management consulting firm). Veralon has used this approach to assist many HCOs with strategic planning (Harris 2018). This approach and its four stages are shown in exhibit 3.1 and explained in the following sections.
s t r at e g I c P L a n n I n g s ta g e 1: e n v I r o n m e n ta L a s s e s s m e n t
An HCO’s managers must assess the organization’s external environment and the HCO’s current position in that environment. Thus, this stage actually includes both an external environmental assessment and an internal organizational assessment. This stage helps managers understand the following (Harris 2018):
◆ Assumptions about the external environment in the future
◆ The HCO’s current and future positions relative to competitors, and pros and cons of those positions
◆ Important strategic issues that must be addressed
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M a n a g e m e n t o f H e a l t h c a r e O r g a n i z a t i o n s5 6
With these three pieces of information, managers can judge how well the HCO will thrive and survive in the future. They can also identify factors that will strongly affect future advantage against competitors.
For the external assessment, planners should consider healthcare forces and trends (e.g., demographic, economic, social, financial, technological, and legal, as dis- cussed in chapter 1) and how they affect—or could affect—the HCO. For the internal (organizational) assessment, planners should consider the HCO’s mission, culture, image, facilities, equipment, quality, workforce, finances, competencies, management, and other characteristics. They should also examine services and programs, including distinctive features and key performance indicators (e.g., market share, utilization, profitability). Exhibit 3.2 is an example of an organizational assessment. Planners can then analyze the competitive market to prepare profiles of competitors (including newer, nontraditional competitors) and market forecasts. Exhibit 3.3 is an example of a competitor assessment. (A later section of this chapter describes sources of data for these assessments.)
Environmental Assessment
Evaluate current and future competitive
position
Focus areas to address in order to sustain and advance
Key desired outcomes and priority activities
High-level direction to pursueSpecifics to carry out plan and estimate plan impact
Organizational Direction
Affirm mission, values; establish vision and
overall strategy
Transition to Implementation
Specify action steps, accountabilities, and
resources
Strategy Formulation
Develop goals, metrics, and initiatives
Adapt/ Update
Tr ac
k/ Re
po rt
Where should we be going?
How do we execute?
Where are we?
How do we get there?
exHIbIt 3.1 The Strategic
Planning Approach
Source: Harris (2018, 8). Copyright Veralon Partners Inc. Used with permission.
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C h a p t e r 3 : P l a n n i n g 5 7
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M a n a g e m e n t o f H e a l t h c a r e O r g a n i z a t i o n s5 8
The environmental assessment in stage 1 provides information regarding the HCO’s
◆ internal strengths that it can build on,
◆ internal weaknesses that it can try to reduce,
◆ internal and external opportunities to pursue for competitive advantage, and
◆ external threats to protect against.
With this information, managers can clearly see where their HCO stands relative to com- petitors in its market. In the Here’s What Happened at the beginning of this chapter, managers identified strengths, weaknesses, opportunities, and threats, or SWOTs, of Part- ners HealthCare. (For another example, see exhibit 3.4.) In addition to SWOTs, strategic planners should identify critical issues that must be resolved. Examples of critical issues include the following:
SWOTs
Strengths, weaknesses,
opportunities, and
threats.
Strategy System A System B AMC A AMC B Niche
Provider Comm.
Hospital
Value position ✪ ●●
Market capture ✪ ● ● ✪ O OOO
✪ Horizontal integration (w/ other health systems)
✪ ● ● ✪ ● O
Vertical integration (w/ payers and physicians)
✪ O O ✪ O O
GME and research O O ✪ ✪ O O Marketing and consumer preferences
✪ O ● ✪ O ●
Symbol Description
✪ High risk to XYZ
● Moderate risk to XYZ
O Low risk to XYZ
System A and AMC B are XYZ’s most significant competitors
exHIbIt 3.3 Analysis of XYZ’s
Competitors’ Strategies, 2017
Source: Harris (2018, 120). Copyright Veralon Partners Inc. Used with permission.
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C h a p t e r 3 : P l a n n i n g 5 9
◆ Considering possible merger with a competitor
◆ Integrating the continuum of care to improve care coordination
◆ Partnering with community organizations to improve social determinants of health
◆ Using more horizontal organizational structure
◆ Implementing mobile health to improve health outcomes
By the end of this first stage of strategic planning, managers know the organization’s advantages and disadvantages relative to its competitors, its SWOTs, the strategic issues it must resolve, and where the HCO is (point A). Next, managers must decide where the
Strengths Weaknesses
• Facilities (hospital campuses) • Scope of services • Variety of specialized services • Medical equipment and
technology • Owned health plan • Primary care base • Quality outcomes relative to
competitors
• Limited debt capacity • Siloed system components • Relationship with medical staff • Condition of post-acute and
ambulatory facilities • Leadership in transition • Patient satisfaction
Opportunities Threats
• Rural outreach • System integration • Competitor ownership
transition • Shift to customer-focused
culture • University affiliation • Insurance product
advancement • Affiliations • Transition to value-based
environment
• Local/regional economy • Declining or flat
reimbursement • Specialist alignment to other
systems • Competitor market share gains • Historical perspective
of the organization as non-collaborative
exHIbIt 3.4 An Integrated Health System’s Strategic Profile and SWOTs
Source: Harris (2018, 125). Copyright Veralon Partners Inc. Used with permission.
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M a n a g e m e n t o f H e a l t h c a r e O r g a n i z a t i o n s6 0
HCO should be going (point B). This task involves planning the HCO’s future direction and forming a broad strategy to get from point A to point B.
s t r at e g I c P L a n n I n g s ta g e 2: o r g a n I z at I o n a L D I r e c t I o n
Managers plan their HCO’s organizational direction as their desired future state (Har- ris 2018). To do this, they review and decide four things: their organizational mission, vision, values, and strategy. This process establishes the HCO’s general direction, which will enable the HCO to fit and prosper in the future external environment conceived in stage 1. The mission, vision, values, and strategy should focus on the specific HCO rather than the health sector in general, and “sharp, tailored, directional statements are most use- ful” (Harris, 2018, 138). In large, complex HCOs (e.g., Partners HealthCare) comprising multiple smaller HCOs (e.g., physician practices, hospitals, clinics, home care businesses), strategic planning must develop a unified organizational direction pertinent for all entities. That will guide all parts of the HCO to move in the same direction.
The HCO’s mission statement should clearly and concisely tell stakeholders why the HCO exists—the HCO’s purpose. The statement should be short enough that employees can easily memorize it (Harris 2018). Washington University Physicians in St. Louis has this mission statement: “Our mission is to improve the health of people through excellence in patient care and medical discovery” (Washington University Physicians 2018). Although it might seem that this mission statement did not take long to write, it is actually the result of a lot of thought, analysis, and discussion among strategic planning participants who considered assessments of the organization and its external environment. The same is true for vision, value, and strategy statements. Planning participants should decide on these only after much thoughtful discussion and consideration of assessments from stage 1.
The vision should clearly and concisely tell stakeholders what the HCO aspires to be in the future—for example, in five to ten years. It should be a desirable future state that motivates the HCO’s workers so that they become excited about and strive for the vision. Yet, the vision must be realistic and based on the assessments of stage 1. Amazon states,
mission
The purpose of an
organization; why the
organization exists.
vision
What the organization
wants to be in the long-
term future; what it
aspires to become.
values
Deeply held beliefs,
ideals, and standards
of behavior.
strategy
An idea that guides
an organization’s
decisions, actions,
and behaviors in a
consistent way to gain
competitive advantage.
TRY IT, APPLY IT
Think about your college or university. Try to list three internal strengths, three internal
weaknesses, three internal or external opportunities, and three external threats for that
organization. Discuss your SWOTs with another student.
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C h a p t e r 3 : P l a n n i n g 6 1
“Our vision is to be Earth’s most customer centric company” (Harris 2018, 148).
Values portray the character and soul of the organization. Values are the core beliefs an organization is strongly committed to. They are usually enduring and should not change much or at all during strategic planning each year. These values are part of the organization’s culture, which will be studied in chapter 11. The core values of Washington University Physicians in St. Louis are quality, respect, integrity, discovery, education, partnership, and professionalism (Washington University Physicians 2018). See the Check It Out Online box for the mission, vision, and values of the American College of Healthcare Executives. The Using Chapter 3 in the Real World sidebar provides other interesting examples.
Strategy is the primary means by which an organization intends to achieve its mission and vision (Harris 2018, 150). The strategy is an idea that guides an organization’s decisions, actions, and behaviors in a consistent way to gain competitive advantage (Luke, Walston, and Plummer 2003). Managers may have to revise the strategy during each strategic planning cycle to ensure it fits the changing environment, competitors’ strategies, and new threats and opportunities. Here are two examples of strategy statements (Harris 2018, 153):
◆ Banner Health (a regional healthcare system based in Phoenix, Arizona): Develop a highly coordinated patient experience.
◆ Anthem (a national health insurer based in Indianapolis, Indiana): Capitalize on new opportunities to drive growth.
One well-known approach to strategy is based on two broad patterns of action (Porter 1985). A business may gain competitive advantage to succeed in its market by using either the low-cost strategy or the differentiation strategy. Using the low-cost strat- egy, an HCO would drive down its costs as low as possible. The HCO would not offer expensive features and upscale comforts. The HCO’s facility would not be spacious and
CHECK IT OUT ONLINE
Many organizations post their mission, vision, and values on
their websites. They want stakeholders to know what they are
about. The American College of Healthcare Executives (ACHE) is
the leading professional association for healthcare leaders and
has more than 40,000 members. The ACHE (2018) website lists
its mission, vision, and values as follows:
• Mission: To advance our members and healthcare
management excellence
• Vision: To be the preeminent professional society for leaders
dedicated to improving health
• Core Values: Integrity, lifelong learning, leadership, and
diversity and inclusion
The ACHE website also explains its strategic framework for set-
ting organizational direction. Learn more about this HCO and its
mission, vision, values, and strategic framework at www.ache.
org/about-ache/strategy. Then research online the mission,
vision, and values of other HCOs. Check it out online and see
what you discover.
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M a n a g e m e n t o f H e a l t h c a r e O r g a n i z a t i o n s6 2
attractive, but its costs would be low. An HCO using a diff erentiation strategy would add features that make its products and services diff erent in a way customers like. For example, the facility would be more spacious and attractive than other facilities (but its costs would be higher).
USING CHAPTER 3 IN THE REAL WORLD
Grand View Health Urgent Care in Kulpsville, Pennsylvania
Mission: To provide prompt, customer-focused, quality urgent care services with
convenient hours and shorter visit times to those with common illnesses and
injuries
Vision: To improve the health of our community through convenient patient-centered
urgent care services and partnerships with primary healthcare practitioners
Values:
Compassion—I act with kindness and empathy.
Integrity—I do the moral and ethical thing.
Respect—I treat others fairly and with dignity.
Collaboration—I value the contributions of others in building teams.
Leadership—I embrace these values and lead by example.
Excellence—I go above and beyond.
Service—I am passionate about meeting the needs of others.
Source: Grand View Urgent Care (2018).
Four Rivers Behavioral Health in Paducah, Kentucky
Mission: To provide comprehensive, integrated mental health, substance abuse, and
mental retardation–developmental disability services that promote the health and
quality of life of our community members.
Vision: To inspire confi dence and respect as a provider of comprehensive behavioral
health care. To be a valued partner in alliances that promote the health and quality
of life for our community and its members.
Source: Four Rivers Behavioral Health (2018).
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C h a p t e r 3 : P l a n n i n g 6 3
Each of Porter’s two broad strategies can be applied to a wide or a narrow market. A business might use the low-cost strategy with a wide customer market (e.g., all people aged 18 or older) or with only a narrow customer market (e.g., only college students). Thus, there are four possible strategies:
Low-cost for a wide market Differentiation for a wide market
Low-cost for a narrow market Differentiation for a narrow market
Managers of HCOs should be careful when using the low-cost strategy. Although many people want lower costs and prices for healthcare, some people assume that low costs and prices mean low quality. An HCO with a low-cost strategy that advertises “We have the lowest-cost healthcare in town” might scare away some potential customers. When their health is involved, many people want the best, especially when insurance pays for it. The low-cost strategy can work for some healthcare services, but managers need to think carefully about how it will be perceived.
s t r at e g I c P L a n n I n g s ta g e 3: s t r at e g y f o r m u L at I o n
In stage 3 of strategic planning, the strategy formulation builds on the general organiza- tion direction (set in stage 2) to set specific goals, objectives, and major initiatives that can achieve the new organizational direction. Further, strategy formulation addresses the critical issues previously identified in stage 1 assessments, and it either reaffirms or revises them. These issues must be resolved for the HCO to achieve its vision and mission in the forecasted market and environment. Two examples of critical issues are (1) integration with partners in the continuum of care, and (2) cost reduction to thrive under value-based reimbursement. These issues are based on trends and developments (discussed in chapter 1), which many HCOs address in their strategic planning.
Planners and managers should choose a limited number of critical issues. A typical approach is to identify no more than ten potential issues for further consideration (Harris 2018). Who should choose the final issues to go in the strategic plan? That depends on the planning process. Top managers, board members, a board committee, a task force of selected stakeholders, or others might select the issues (Harris 2018). Diverse perspectives, a manageable number, and comprehensive representation of key stakeholders are useful. Participants can nominate issues and then prioritize them as essential, important, or useful. The most time and effort should then be devoted to the essential issues. For each issue, managers must set a measurable goal that, when achieved, will resolve the issue and enable
goal
A specific, measurable
outcome that will help
achieve the mission
and vision.
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M a n a g e m e n t o f H e a l t h c a r e O r g a n i z a t i o n s6 4
the HCO to move toward its vision and mission. Exhibit 3.5 shows examples of critical issues and metrics to measure goal achievement for those issues.
The management team can now break down each goal into objectives (smaller pieces) that should be achieved in shorter time periods. At this point, the HCO has a clear idea of what is point B and a plan of how to get from the current point A to the future point B in the forecasted future. Goals take longer to achieve than the smaller objectives do. Managers should strive to establish SMART goals and objectives. The SMART acronym “stands for specific, measurable, attainable, result oriented, and time limited (or, alternatively, specific, measurable, action oriented, realistic, and time limited)” (Dunn 2016, 163).
s t r at e g I c P L a n n I n g s ta g e 4: t r a n s I t I o n t o I m P L e m e n tat I o n
In stage 4 of strategic planning, transition to implementation, managers add even more detail to the plans. They specify the actions, steps, tasks, and schedules to achieve the objectives to achieve the goals that resolve critical issues and achieve the organization’s mission and vision. Managers allocate resources and assign responsibility to specific positions to achieve the objectives and goals. Work now shifts from the top managers to managers and staff at lower levels of the vertical hierarchy. Work also shifts from strategic planning to project planning and day-to-day operations. Specific projects are begun that will change work
Critical Issues Key Metrics for Goals
Coordinate care to deliver value
• Top decile nationally in clinical quality • Top decile nationally in service excellence • Top decile in the state in lowest cost of care • Service area counties perform in the 90th percentile
nationally for the majority of health-related indicators
Expand partnerships • 80% of affiliated providers (e.g., physicians, care extenders) are accountable for performance measures
• 25% more incremental providers and staff • “Employer of choice” in the market • 50% increase in annual philanthropic contributions
Grow across the full continuum of care
• Grow net revenue by 25%+ to ensure the appropriate scale to execute strategic initiatives
• Increase market share by 5% (on average) across all services
• Increase total covered lives by 30%
Source: Harris (2018, 168). Copyright Veralon Partners Inc. Used with permission.
exHIbIt 3.5 Critical Issues and Metrics for Goals
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C h a p t e r 3 : P l a n n i n g 6 5
structure, processes, methods, staff, actions, techniques, and other aspects of day-to-day operations. Lower-level planning by managers, departments, and individual work units results in implementation plans that are less abstract and have more concrete tasks and actions.
Detailed work plans may be prepared that outline who will do what, when, and using which resources. Exhibit 3.6 is an example of a detailed implementation plan. Partners HealthCare also developed (in this chapter’s opening scenario) an implementation plan detailing what it must do to achieve its goal of reducing hospital readmissions. Top manag- ers use a progress tracking system to monitor implementation progress on all parts of the strategic plan. Monitoring and controlling performance will be discussed in chapter 12.
The outcomes that follow implementation will answer managers’ questions, such as: How well did our strategies enable us to resolve our critical issues and achieve our mission
Strategic Goal #1
Our health system successfully participates in alternative reimbursement models that emphasize coordinated and longitudinal care for patients
Objectives for Strategic Goal #1
1-Year Target 5-Year Target
Reduction in inpatient stays for ambulatory sensi- tive conditions
–10% –30%
Reduction in readmission rates –10% –40%
Reduction in per member cost of care for ACO attributed lives
–5% –15%
Positive overall operating margin from risk-based reimbursement contracts
2% 5%
Growth in total net revenue attributed to risk- based reimbursement models
+10% +60%
Major Initiatives for Strategic Goal #1
• Refine care models to focus on providing “Right care, Right time, Right place” • Improve coordination and efficacy across care locations—within our system and
with external partners • Enhance operational capabilities to assume financial risk under alternative
reimbursement models • Seek out new and expanded opportunities to participate in alternative
reimbursement models
exHIbIt 3.6 Strategic Goal with Detailed Objectives and Year 1 Implementation Plan
(continued)
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M a n a g e m e n t o f H e a l t h c a r e O r g a n i z a t i o n s6 6
and vision? How well did we achieve our goals? How much did our hospital reduce its readmissions? How well are we addressing the Triple Aim? The answers to these questions will affect future planning and create a new “where we are now” (point A). With imple- mentation, changes occur (internally and externally) that lead back to the beginning of the strategic planning cycle and influence future planning.
PL a n n I n g at Lo W e r Le v e L s Middle- and lower-level managers plan annual goals, projects, and work in their depart- ments that, when accomplished, will help the HCO achieve its higher-level mission, vision,
Projects and Tactics for Year 1 Time
Frame Lead
Resource Require- ments1
Esti- mated
Impact2
Implement three new care coordinator positions for primary care offices
Q1 JS Medium High
Implement nurse hotline service for ACO members
Q2 JS Low Medium
Utilize ACO data to identify opportuni- ties to improve care delivery
Q1–Q4 GJ Low Medium
Institute Lean as a means for streamlin- ing and improving care processes
Q1–Q4 SD Medium Medium
Improve continuity of patient care by providing community partners with an appropriate level of access to patient information
Q3 GJ Low Medium
Develop cost accounting system Q3–Q4 BL High Medium
Pursue bundled payments for selected procedures
Q3–Q4 DD Medium Low
Explore opportunities for alternative reimbursement contracts with commer- cial payers
Q3–Q4 DD Low Low
Source: Harris (2018, 190–91). Copyright Veralon Partners Inc. Used with permission. 1Time and/or financial resources: Low=0.50 person days and/or <$250K during the year; Medium = 50–100
person days and/or $250K–$500K; High = 100+ person days and/or >$500K. 2Net impact from incremental revenue and/or decreased costs: Low = <$100K during the year; Medium =
$100K–$500K; High = >$500K.
exHIbIt 3.6 Strategic Goal with Detailed
Objectives and Year 1
Implementation Plan (continued)
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C h a p t e r 3 : P l a n n i n g 6 7
and goals. During the four stages of strategic planning, high-level managers set workload forecasts for departments in the HCO. These forecasts become the basis for plans in those departments. Department managers can then plan monthly and weekly workloads, such as student interns supervised, healthy lifestyle classes taught, language translation services used, or patient navigators hired. Based on planned workloads, managers forecast the resources needed to produce those workloads—staff, equipment, space, supplies, training, funds, and other resources. They prepare schedules and targets to show when staff will be hired, equipment will be bought, new services will be started, seasonal workloads will vary, and so forth. The cost of each resource is calculated and used to prepare annual and monthly budgets for the coming year. Department managers can get cost data from vendors, finance staff, human resources staff, and procurement staff. The department workload forecast, anticipated resource requirements, and budgets are plans that guide future action and provide targets to reach.
In each department, such as a medical lab, supervisors of smaller work units coop- erate with department managers to plan for even smaller parts of the overall HCO. The supervisor of the lab’s cytology section may create monthly work schedules for staff, weekly estimates of supplies needed, and daily task lists. The histology supervisor, microbiology supervisor, and hematology supervisor do the same. Shift supervisors plan how to divide the work of an eight-hour shift among the staff and may have to adjust plans if the work unit is short-staffed on a particular day.
Individual divisions, departments, and lower-level work units within the HCO prepare their own plans to support the higher-level plans and HCO mission. Managers of these divisions, departments, and units may follow a similar approach to that described previously for strategic planning, although planning at lower levels is more specific to each work unit and focused on implementation plans. For example, imagine a medical supply company in Las Cruces. The sales department, led by Fernando, is responsible for selling medical equipment and supplies. After the company makes its strategic plan, its sales department prepares annual sales plans for products and customer groups that must be achieved for the company to fulfill its strategic plan. As sales manager, Fernando plans by answering for his department the four key questions seen in exhibit 3.1: Where are we now? Where should we be going? How do we get there? How do we execute (implement)?
Fernando answers the first question by assessing the relevant external environment and his department’s current situation and by analyzing the sales department’s SWOTs. The answer to the second question will reflect the higher-level plan’s mission, vision, values, and strategy. The sales department might also have a department mission, vision, and values that must be consistent with those of the overall organization. These can help guide the department and its employees. The third question may be answered by goals and targets set during the high-level strategic planning. That plan may call for a 4 percent increase in revenue from sales to hospitals, a 7 percent increase from sales to long-term care HCOs, a 5 percent increase from sales to medical groups, a 4 percent increase from sales to retail HCOs, and a 3 percent increase from sales to all other customers.
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M a n a g e m e n t o f H e a l t h c a r e O r g a n i z a t i o n s6 8
As sales manager, Fernando breaks these targets down into smaller targets—for example, dividing them up by geographic area. Breaking down the targets helps him plan how to assign his sales team so his department can achieve the target sales increases. This activity answers the fourth question: How do we execute (implement)? How do we increase sales to hospitals by 4 percent, to medical groups by 5 percent, and so on? The answer will be guided by the strategy developed during the company’s strategic planning process, such as a strategy of superior customer service. At this focused level, planning identifies who will do what, when, and with which resources to achieve the target increases in sales. Fernando plans how to assign his sales staff for each month of the year, when to provide sales training, and how much to expect in sales for each potential customer group each month.
The main point is that lower-level work units plan implementation of higher-level goals set by top management’s strategic planning. After higher-level plans are approved by upper management and the board of directors, they are shared with middle- and lower-level managers. These managers are responsible for departments that perform the day-to-day, hands-on work to produce and support the products and services. They prepare implemen- tation plans that, when executed, bring to life the higher-level managers’ plans for mission, vision, values, strategy, and goals. Lower-level department managers draft department implementation plans that identify in detail what their departments must do to help achieve the strategic plan and goals. They review their plans with higher-level managers and reach agreement on priorities, staff requirements, supplies and equipment needs, budgets, funds, and timelines. Sometimes, a higher-level or lower-level project manager and project team might develop the implementation plan, as explained later in this chapter.
Besides determining what their department must do to help achieve an organization’s larger plans and goals, managers must plan for their own department. In Fernando’s case, he and the sales department will identify the department’s goals for next year. For example, one goal might be to devise a better summer vacation schedule for department staff.
P r o j e c t P L a n n I n g a n D P r o j e c t m a n a g e m e n t
Managers often implement projects to achieve goals in an organization’s strategic plan. According to the Project Management Institute (PMI 2017, 4), a “project is a temporary endeavor undertaken to create a unique product, service, or result.” It is an organized effort with sequenced activities that are temporarily done to accomplish an outcome (Langabeer and Helton 2016). Unlike ongoing routine activity, a project is temporary. It has a start and a finish; the total time may range from hours to years. After the project is finished, the product, service, or result is absorbed into the organization’s day-to-day operations.
Think of an HCO you know. What projects might have been done there? Perhaps its projects included establishing a patient portal to enhance customer engagement, creating
project
A temporary endeavor
undertaken to create
a unique product,
service, or result.
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C h a p t e r 3 : P l a n n i n g 6 9
an opioid addiction treatment service as part of the care continuum, or arranging better supply chain logistics.
A project does not just happen; someone has to plan and manage it to make it happen. This task can be simple or complex, depending on the project and organization. At a minimum, someone should plan the purpose of the project, identify specific out- puts the project will deliver, list the tasks that must be done, schedule the tasks, assign people to do the tasks, and list the resources needed to carry out the plan. For complex projects, an HCO is likely to use project management, which is a more comprehensive approach. “Project management is the application of knowledge, skills, tools, and tech- niques to project activities to meet the project requirements” (PMI 2017, 10). Project management is essential for the implementation (execution) stage of strategic planning. Organizations—including HCOs—believe project management helps them achieve many benefits, including better control of resources, customer relations, development times, costs, quality, profit margins, productivity, coordination, worker morale, and reliability (Schwalbe and Furlong 2013, 3).
To start, a senior-level manager appoints a project manager. This individual may be someone other than the line managers shown in a vertical hierarchy. The project manager has responsibility and authority to initiate, plan, execute, monitor and control, and close the project. These processes are defined as follows (PMI 2017, 23):
◆ Initiate. Define a new project or new phase of an existing project by obtaining authorization to start the project or phase.
◆ Plan. Establish the scope of the project, refine the objectives, and define the course of action required to attain the objectives.
◆ Execute. Complete the work defined in the project management plan to satisfy the project requirements.
◆ Monitor and control. Track, review, and regulate the progress and performance of the project; identify any areas in which changes to the plan are required; and initiate the corresponding changes.
◆ Close. Formally complete or close the project, phase, or contract.
Innovative HCOs depend on project managers to bring the organization’s goals and plans to life. Project managers work to ensure assigned projects are completed within established constraints of time, budget, risk, scope, quality, and available resources (PMI 2017; Schwalbe and Furlong 2013). This work involves much thought and action. Project managers analyze the organization’s structure, culture, processes, and people, as well as the influence each might have on a project. They determine key individuals—stakeholders—who
project management
The application of
knowledge, skills,
tools, and techniques
to project activities
to meet the project
requirements.
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M a n a g e m e n t o f H e a l t h c a r e O r g a n i z a t i o n s7 0
have interests in and expectations for the project. Some stakeholders might have conflicting interests (stakes) that must be resolved so the project is not pulled in different directions.
To accomplish this work, a project manager carefully forms a team of people for the project. The size, membership, and structure of the team will vary depending on the project, the organization, and other factors. Forming a project team requires wise thought and choices, as explained in chapter 6. The project manager and team use management skills (many of which are presented in this book), as well as project management tools, software, portals, and apps to plan and manage the following for the project (PMI 2017; Schwalbe and Furlong 2013):
◆ Scope (i.e., expected results and project boundaries )
◆ Schedule and timing of detailed tasks and activities required
◆ Resources needed
◆ Cost and budget
◆ Procurement of supplies, equipment, and services
◆ Risks involved
◆ Work needed from other people and stakeholders
Managers in HCOs may like the excitement, involvement, and achievement that come with project management. Some earn special certifications from the PMI, such as Certified Associate in Project Management (CAPM) or the more advanced Project Manage- ment Professional (PMP). Project management requires many of the same tools, methods, and competencies as general management, but it applies them to specific, time-limited projects. Recall, from chapter 2, Gulick’s five management functions and Katz’s three types of management skills. Project managers use all of them. Project managers create teams, coach, lead, motivate, make decisions, resolve conflicts, communicate with others, and so on (PMI 2017). You will learn many of these skills in later chapters of this book on team building, motivation, decision making, leading, and other management work. While you study this book, think about how you can apply what you learn to project management.
Project managers in HCOs should realize that healthcare is different from many other products and services. Healthcare projects may directly affect people’s health and have life-and-death consequences. Healthcare is often personal and emotional, especially for patients. Finances may be complex, hard to measure, and difficult to assign within a project. Compared to outcomes in other industries, healthcare outcomes often are harder to measure, quantify, and link to a specific project, although outcome measurement has been improving. Thus, managing healthcare projects can involve unique challenges (Schwalbe and Furlong 2013).
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C h a p t e r 3 : P l a n n i n g 7 1
Project management requires the breakdown of work activities into ever-smaller, increasingly detailed steps that enable more precise plans (Langabeer and Helton 2016). To do this well, the project manager must interview people who have relevant knowledge, observe relevant activities, and read relevant documents, taking detailed notes. With this information, the project manager can then prepare a Gantt chart. This project planning tool shows what must be done, when, and in which sequence to accomplish a project on time. Besides showing start and end points for each step, the chart may also name who is responsible for each step. Gantt charts have many variations; one example is shown in exhibit 3.7. Simple Gantt charts can be made in Microsoft Excel by inserting a bar chart. For more complex charts, managers use commercial software designed specifically for project planning and management.
A Gantt chart shows the tasks or activities needed to complete a project. A good practice is to state each task using a verb followed by a noun: for example, identify (verb) employees (noun). Each task can be broken down into smaller tasks; managers decide how much subtasking to include. Managers set anticipated start and end dates for each task, considering constraints, deadlines, work schedules, and other factors. When man- agers decide how tight to make the timeline, allowing some flexibility is usually a good idea. Tasks are generally listed vertically on the left side by start date, beginning with the first task at the top and continuing to the last task at the bottom. A horizontal bar beside each task shows its start and end points. Many variations are possible. Different shapes may indicate different tasks and activities; different colors may indicate importance, risk, or other characteristics. If more than one person will be responsible for a task, planners can label the task with initials, names, or job titles. Once the project begins, managers monitor progress and gradually darken each task bar to show progress on (or completion of ) each task. All tasks in exhibit 3.7 have been completed except the last task (monitor training outcomes). Actual (versus planned) start and end dates may be added. Managers can revise the chart if necessary. We will return to Gantt charts in chapter 12.
Data a n D In f o r m at I o n f o r PL a n n I n g How do managers find data and information for planning? What sources can you think of? Some people believe they can find anything on the internet, and in fact the internet is very helpful to planners and managers. A lot of quantitative information for assessing the
Gantt chart
Graphic arrangement
of tasks needed to
complete a project,
in sequence and with
start and end dates for
each task; may include
other information,
such as the person
responsible and
resources needed for
each task.
CHECK IT OUT ONLINE
You can find many examples of Gantt charts online. Some are
simple with just basic information, while others are complex
with detailed layers of information. Some charts become so
large that they are divided into subcharts that combine to por-
tray an entire project. A search for Gantt charts will find many
variations of this useful planning tool. Check it out online and
see what you discover.
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M a n a g e m e n t o f H e a l t h c a r e O r g a n i z a t i o n s7 2
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C h a p t e r 3 : P l a n n i n g 7 3
local and national external environments is available online. Resources include websites, government databases on hundreds of relevant topics, competitors’ promotional materials, spokespersons’ speeches, interviews with industry experts, and predictions of stakeholders such as vendors, professional associations, and community leaders.
Another source is your own HCO. It has printed and digital records, files, docu- ments, reports, past plans, and archives. HCOs continually capture data about customers, supplies bought and used, quantities of products and services, staff hours worked, and much more. Some HCOs combine their data with data from hundreds of other sources and then perform data analytics to better understand their organization, customers, competitors, and external environments. Ask your HCO’s chief information officer or other managers what types of data are available and how to access them.
People are another source of data and information, especially qualitative informa- tion. Talk with stakeholders (internal and external) to obtain their feelings and opinions. Gather their points of view about what might happen next year. Ask others what they think your main competitor will do. Be sure to talk to people who use your products and services and people you coordinate with. They can help you learn about the strengths and weaknesses of your HCO and its departments. Your manager will have valuable opinions, as will your department’s workers. Talk with people outside your HCO, too—vendors and sales representatives, staff in relevant local government agencies, and employees of health organizations that your HCO works with. These sources will get you started. You will surely discover others during your career.
fI n a L tH o u g H t s ab o u t PL a n n I n g Managers should consider these guidelines when they plan:
◆ View planning as a continual process, not as a one-time event.
◆ Realize that planning is orderly yet messy, sequential yet circular.
◆ Allow for flexibility in the planning process and in the plan.
◆ Combine objective analysis with subjective judgment.
◆ Use—but don’t overuse—historical records and data.
◆ Be open to new ideas, including “crazy” ideas.
◆ Look inward (at the organization) and look outward (at the external environment).
◆ Value both the plan and the process of planning.
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M a n a g e m e n t o f H e a l t h c a r e O r g a n i z a t i o n s7 4
Planning is deciding what to do and how to do it. Planning is future oriented, continual, and done at all levels of an HCO. Planning must be done well because it sets the stage for the other management functions—organizing, staffing, leading, and controlling. Managers at higher levels plan for the long term with a broad perspective of the HCO. At lower levels, managers plan for shorter periods and for smaller parts of the HCO. Higher-level planning is concerned with what to do, while lower-level planning is concerned with how to do it.
Strategic planning is essential for an HCO to prepare for its future. This type of planning enables an HCO to examine where it is now in its external competitive environment, where it wants to be in the future, how it will get there, and how it will execute (implement) the plan to get there. Strategic planning should include analysis of SWOTs, stakeholders, and critical issues. This analysis leads to creation of the HCO’s mission, vision, values, strategy, goals, and objectives. An HCO then uses more detailed implementation plans and project plans to determine how to achieve its goals. Managers use project management methods and tools to plan and implement complex projects to achieve these goals. Quantitative and qualitative data and information for planning may come from many sources inside and outside of an HCO.
o n e m o r e t I m e
FOR YOUR TOOLBOX
• Strategic planning approach
• Strategy
• Environmental assessment
• Organizational assessment
• SWOT analysis
• Porter’s strategies
• Project management
• Gantt chart
• Planning guidelines
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C h a p t e r 3 : P l a n n i n g 7 5
1. Discuss what is planning and what is strategic planning.
2. Compare and contrast planning at higher levels of an HCO with planning at lower levels.
3. Referring to exhibit 3.1, discuss how strategic planning is done. Which part of the model do you think would be most challenging for you?
4. Discuss how project planning and project management are done. Which parts of project management do you think would be most challenging?
These questions refer to the Integrative Case Studies at the back of this book.
1. Disparities in Care at Southern Regional Health System case: Apply the first stage of the strategic planning model (shown in exhibit 3.1). Use information from the case to describe “where we are now” for Southern Regional Health System (SRHS). Then write a proposed mission and vision to indicate “where we should be going” for SRHS.
2. Hospice Goes Hollywood case: Apply the first stage of the strategic planning model (shown in exhibit 3.1). Use information from the case to describe “where we are now” for Hollywood Hospice. Then write a proposed mission and vision to indicate “where we should be going” for the hospice.
3. How Can an ACO Improve the Health of Its Population? case: Assume Vandalia Medical Center (VMC) developed the Vandalia Care accountable care organization (ACO) as part of VMC’s strategic planning. Which external opportunities and which external threats might have led VMC to start the ACO? Which critical issues do you think VMC is trying to resolve by developing the ACO?
4. Managing the Patient Experience case: Skim the case and then focus on the next-to- last paragraph that describes the development of the educational video. Prepare a Gantt chart to show a plan to implement Mr. Jackson’s video project. Use information from the case and your imagination to decide which tasks to include in your Gantt chart.
5. The Rocky Road to Patient Satisfaction at Leonard-Griggs case: Prepare a Gantt chart to show a plan to implement the survey process at one of the physician practices. Use information from the case and your imagination to decide which tasks to include in your Gantt chart.
f o r D I s c u s s I o n
c a s e s t u D y Q u e s t I o n s
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M a n a g e m e n t o f H e a l t h c a r e O r g a n i z a t i o n s7 6
RIVERBEND ORTHOPEDICS MINI CASE STUDY
Riverbend Orthopedics is a busy group practice with expanded services for orthopedic
care. It has seven physicians and a podiatrist, plus about 70 other employees. At its big,
new clinic building, Riverbend provides extensive orthopedic care. Several technicians
provide diagnostic medical imaging, from basic X-rays to magnetic resonance images.
The physicians perform surgery in their own outpatient surgery center with Riverbend’s
own operating nurses and technicians. Therapy is provided by three physical thera-
pists and one part-time contracted occupational therapist. In addition to staff provid-
ing actual patient care, the clinic has staff for fi nancial management, medical records,
human resources, information systems/technology, building maintenance, and other
administrative matters. Occasional marketing work is done by an advertising company.
Legal work is outsourced to a law fi rm. Riverbend is managed by a new president, Ms.
Garcia. She and Riverbend have set a goal of achieving “Excellent” ratings for patient
experience from at least 90 percent of Riverbend’s patients this year.
The seven physicians and one podiatrist own Riverbend Orthopedics and together
are the board of directors. Ms. Garcia is currently leading the board of directors in its
strategic planning. They all feel the “Healthcare Trends and Future Developments” sec-
tion of chapter 1 is relevant to Riverbend. They also note that only 57 percent of patients
rated the ease of scheduling appointments as “Excellent” during the past year. All ap-
pointments are scheduled by telephone.
mInI case stuDy QuestIons
1. Ms. Garcia asks you to help identify fi ve to seven critical planning issues for Riv-
erbend based on the trends and developments in chapter 1. What issues do you
suggest the planning should address? Rank the issues as high, medium, and low
priorities. You may make reasonable assumptions and inferences.
2. Ms. Garcia asks you if project planning could be used to improve the scheduling of
appointments. How would you answer her?
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C h a p t e r 3 : P l a n n i n g 7 7
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r e f e r e n c e s
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L e a r n i n g O b j e c t i v e s
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