Walden University Wk 4 Health & Medical Care and Accesibility Question

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What impacts organizational strategies for HSOs? How do health care administrators address factors that contribute to, affect, and compromise operations for HSOs?

Situational analyses assist health care administrators in determining those factors that contribute to the overall situation concerning the operation of an HSO. As examined earlier in the course, there are a variety of factors that may contribute to how health care administrators design, implement, and revise initiatives for improvement within HSOs. As you continue your examination of these factors within the context of improving performance in HSOs, consider the role of strategic assessment in addressing those factors for maximizing improvement.

For this Assignment, review Case 3, “HSO Strategic Assessment,” in Chapter 9 of the text, Managing Health Services Organizations and Systems. Reflect on those factors from the general and health care environments that most greatly impact the situational analysis in the case. Then, consider how these factors might affect organizational strategies implemented in an HSO. Review the Week 4 Case Questions document in this week’s Learning Resources to complete the Assignment.

The Assignment (4–6 pages):

  • Complete the case questions presented.
  • Be sure to support your answers with support from the literature.

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The current issue and full text archive of this journal is available at www.emeraldinsight.com/1755-425X.htm Healthcare strategic management and the resource based view Healthcare strategic management Bita Arbab Kash Department of Health Policy and Management, Texas A&M Health Science Center, College Station, Texas, USA Aaron Spaulding Department of Public Health, Brooks College of Health, University of North Florida, Jacksonville, Florida, USA Larry D. Gamm 251 Received 18 June 2013 Revised 19 November 2013 19 December 2013 Accepted 23 December 2013 Department of Health Policy and Management, Texas A&M Health Science Center, College Station, Texas, USA, and Christopher E. Johnson Department of Health Services, University of Washington, Seattle, Washington, USA Abstract Purpose – The purpose of this paper is to examine how two large health systems formulate and implement strategy with a specific focus on differences and similarities in the nature of strategic initiatives across systems. The aim is to gain a better understanding of the role of resource dependency theory (RDT) and resource based view (RBV) in healthcare strategic management. Design/methodology/approach – A comparative case study design is used to describe, categorize and compare strategic change initiatives within a children’s health and a multi-hospital system located in two competitive metropolitan markets. A total of 61 in-person semi-structured interviews with healthcare administrators were conducted during 2009. Summary statistics and qualitative content analysis were employed to examine strategic initiatives. Findings – The two health systems have as their top initiatives very similar pursuits, thus indicating that both utilize an externally oriented RDT method of strategy formulation. The relevance of the RBV becomes apparent during resource deployment for strategy implementation. The process of healthcare strategic decision-making incorporates RDT and RBV as separate and compatible activities that are sequential. Research limitations/implications – Results from this comparative case study are based on only two health systems. Further, the RBV perspective only takes managerial resources and time into consideration. Practical implications – Given that external resources are likely to become more constrained, it is important that hospitals leverage relevant internal resources, in the identification of competitive advantages and effective execution of strategic initiatives. Originality/value – The author propose a refined healthcare strategic management framework that takes both RDT and RBV into consideration by systematically linking strategy formulation with deployment of resources. Keywords Strategy implementation, Resource based view, Healthcare strategic planning, Strategic management framework Paper type Case study This study was funded by the National Science Foundation’s Center for Health Organization Transformation’s Grant No. IIP-0832439. Journal of Strategy and Management Vol. 7 No. 3, 2014 pp. 251-264 r Emerald Group Publishing Limited 1755-425X DOI 10.1108/JSMA-06-2013-0040 JSMA 7,3 252 Introduction Organizational strategy is dependent upon a defined mission or set of objectives that are intended to help direct an organization toward a desired outcome (Rangan, 2004). However, despite having overarching goals to accomplish, the manner that an organization chooses to fulfill its mission is often limited by resource availability (Froelich, 1999; Nimwegen et al., 2008; Rangan, 2004). Resources can be internal or external to the organization, and be further segmented into resources an organization acquires or resources an organization already owns. How a healthcare organization views the state of its internal and external resources and coordinates the deployment of these resources dramatically affects strategic decision making and fulfillment of strategic goals. The purpose of this comparative case study is to examine the similarities and differences in strategic decision making across two large metropolitan health systems operating in two separate markets within the same state. Resource dependency theory (RDT) and the resource based view (RBV) theory are used to interpret responses to environmental factors and internal resource considerations in strategy development (Swayne et al., 2006; Barney and Clark, 2007; Hillman et al., 2009; Pfeffer and Salancik, 1978). Each theory (RDT and RBV) contributes to how healthcare managers can behave as they analyze their external and internal situation and resources. This comparative case study adds to our understanding about the nature of strategic decisions and initiatives, their differences and similarities, and how managers allocate resources during strategy implementation. Interpretation of results from this analysis will also assist in the development of a conceptual framework for healthcare strategic management. Internal and external resource considerations in healthcare strategic management The application of externally oriented RDT in strategic planning and management is closely tied to related and well-studied theories including: open systems theory, institutional theory and transaction cost economics. All explain how environmental forces influence organizational decisions (Pfeffer and Salancik, 1978; Jensen and Meckling, 1976; Williamson, 1975; Meyer and Rowan, 1977). RDT is focussed on how managers act strategically to reduce environmental uncertainty and dependence (Pfeffer and Salancik, 1978), and it has been proven to be relevant through years of empirical research (Hillman et al., 2009). RDT, together with transaction cost theory (Williamson, 1975) are often the primary perspectives strategists use to understand mergers and acquisitions, joint ventures, and vertical integration (Hillman et al., 2009; Meznar and Nigh, 1995; Pfeffer and Salancik, 1978). RDT has been closely aligned with healthcare strategic management over the last four decades of regulatory demands, payment structure changes and uncertainties about the external dependencies as reflected in the healthcare strategic planning literature (Shortell et al., 1990; Swayne et al., 2006). The resource dependency perspective and seemingly increasing external environmental pressures often results in a limited number of viable strategic options. This condition promotes a theory-based expectation of hospitals clustering into strategic groups resulting in a large group of “low-cost leader” hospitals and smaller group of “differentiation strategy” hospitals (Marlin et al., 2002). RBV on the other hand, although utilized parallel to RDT as part of the strategic planning process, is relatively a newer discipline within the strategic planning and management framework (Newbert, 2007; Priem and Butler, 2001), and is not wellestablished or tested within healthcare strategic planning. Nonetheless, the application of the RBV to strategic management has been rapidly growing and diffused into the strategy literature starting. The RBV’s focus is on competitive advantage based in internal resources an organization develops or hires in order to implement specific product market strategies (Priem and Butler, 2001; Wernerfelt, 1984), and more recently has been applied to healthcare settings in order to compare resources vs resource deployment capabilities during specialty surgeries (Huesch, 2013). With this perspective on unique internal resources needed to implement strategy, the RBV has been used in the fields of strategic management, human resources management and information technology strategic planning (Barney and Clark, 2007; Mahoney and Pandian, 1992; Noda and Bower, 1996; Wade and Hulland, 2004). The problem Looking across the US healthcare sector, one can easily detect common strategic initiatives shared among hospitals, including process re-engineering, care coordination, horizontal integration, electronic medical records (EMR), culture change, quality improvement, and physician engagement, among others. All seem to be driven by the need to prepare for future environmental changes associated with healthcare reform, and are often embedded within an organization-wide strategic plan (Vest and Gamm, 2009). An external orientation predicts firm behavior based on external environmental changes, constraints, and benchmarks, which can result in similar strategic decisions and initiatives across healthcare organizations due to the common external forces experienced (Marlin et al., 2002). Intuitively, the hospital sector is expected to be highly externally oriented as it faces a rapidly changing and demanding environment of regulation and payment changes. However, it is clear that different organizations perform at different levels, thus prompting the question: do external or internal environmental considerations primarily drive strategy formulation? Further, if internal resource coordination and deployment does differ across hospitals, how does the allocation of certain internal productive resource capabilities play a role in defining the strategic management framework? This study of two large health systems is geared toward improving our understanding of the strategic decision process, strategic initiatives, and management behavior related to strategy implementation in hospitals. To do this, we rely upon healthcare leaders’ assessments of their organizations’ strategic initiatives. We seek to identify similarities and differences among strategic initiatives across the two health systems based on how the initiatives are identified and described. Further, this study allows for the evaluation of rankings of initiatives, managers’ time consumption, and number of key managers involved in each strategic initiative. We facilitate this analysis by grouping strategic initiatives, similar in nature and focus, and comparing results between the two very different systems. In addition, we try to understand the importance of the external vs internal environmental considerations in formulating strategy. To improve our understanding of the nature of strategic initiatives within health systems we focussed on the following three research questions: RQ1. Are the nature and focus of the strategic initiatives among the two health systems highly similar or different? RQ2. Was strategy driven by internal and/or external environmental forces? Healthcare strategic management 253 JSMA 7,3 RQ3. How do the two systems differ in allocating internal resources (time and key managers) to strategic initiatives and groups of similar initiatives? Results will provide an enhanced conceptual and empirical base for understanding the nature of strategic management in healthcare and the balance between external and internal resource considerations. 254 Methods This paper uses comparative case study design to describe, categorize and compare the strategic initiatives within two large, metropolitan healthcare systems (Yin, 2010; Anaf et al., 2007). In-person semi-structured interviews were conducted with top-level healthcare leaders and administrators within these two settings during 2009. Summary statistics and qualitative content analysis were employed to identify characteristics of the strategic change initiatives as identified and described by interviewees. To facilitate the cross-case comparative analysis the research team used content-analytic summary tables capturing information about strategic initiatives identified and described by interviewees (Miles and Huberman, 2010). Setting The two health systems participating in this study are located in different urban markets within one state. Table I includes an organizational profile for both health systems. The Children’s Health System is located in a large metropolitan area that is highly concentrated with healthcare providers and competing hospital systems. The Children’s Health System Table I. Health system and interviewee profiles System integration Vertical Market area Large urban 1 Number of hospitals in the system 2 Number of beds (licensed) 612 Number of employees 5,540 Mean Census 2011 380 Study sample size 32 Male (% of total at each system) 50 Clinician (% of total at each system) 34 Average tenure at health system (years) 10 Average healthcare management experience (years) 16 Highest level of education – cumulative (% at each system) Associates degree 3 Bachelors 25 Masters 56 PhD/Doctor 16 Position level (% at each system) Executive Vice President/President 6 Senior Vice President 24 Vice President 19 Associate Vice President 3 Director/Chief/MD 45 Assistant Director 3 The Multi-Hospital System Horizontal Large urban 2 25 3,800 22,500 2,163 29 57 23 11 24 0 13 60 27 36 27 30 0 7 0 This health system is vertically integrated through a strong primary provider network and in the process of further vertical integration into women’s health services. Interview participants included executive leadership, vice presidents, and administrators. The second health system is a horizontally integrated multi-hospital system (25 acute-care hospitals) spread over a geographically large metropolitan and sub-urban market. The Multi-Hospital Health System’s market can also be characterized by intense competition among hospitals and healthcare providers. The study participants worked at the system’s corporate office and were responsible for the overall direction, operation, and financial health of the system. Data collection and participants The semi-structured interviews were conducted as focussed, open-ended discussions which prompted the participants to provide more structured discussion around elements concerning nature of strategic initiatives as well as rating and ranking of initiatives (Blumer, 1969; Bogdan and Biklen, 1992). Before interviews commenced, meetings with several top leaders of each organization were conducted in order to identify, name and define a set of current strategic initiatives. In the case of the Children’s Health System, a number of discrete projects were identified. In the case of the Multi-Hospital System, the leaders pointed to five major overarching initiatives associated with a broad organizational strategic plan. During these meetings, standardized open-ended questions were developed and agreed upon. These standardized questions help reduce biases associated with variance in interviews by different researchers as well as biases associated with leading or prompting (Patton, 1990). Study participants’ responses also generated answers to questions relating to: time and effort spent on each initiative and prioritization of strategic initiatives. Each participant was also allowed additional time to provide related information that the questions did not probe. In all, 61 interviews (32 interviews at the Children’s Health System and 29 interviews at the Multi-Hospital System) were conducted by four researchers, all of whom were involved in the interview development process. At both organizations, the research team used a combined positional and snowball sample approach which started with the senior executive team and progressed down the organizational hierarchy as interviewees identified other key participants with initiatives. When no new individuals were identified we concluded the interview process (Biernacki and Waldorf, 1981). Analytical approach For this study, we focussed on results from four interview questions: (1) identification and description of strategic initiatives (open ended question); (2) the number of key managers engaged in each strategic initiative; (3) percentage time spent on each strategic initiative (as self-reported by the interviewees); and (4) ranking of initiatives in terms of how mission critical they are to the system. Although the classic view of RBV includes people, capabilities and financial resources, we did not focus on financial resources allocated to strategic initiatives identified in the two systems, assuming that financial resources have been made available by top Healthcare strategic management 255 JSMA 7,3 256 management to allow successful implementation. Further, the RBV perspective places increased attention on the development of “dynamic capabilities” and “productive resources” as potential sources of competitive advantage (Penrose, 1959). The research team focussed great attention on these aspects of the RBV perspective when analyzing descriptive statistics and qualitative data describing strategic initiatives. Results center around the qualitative, descriptive nature of the first question, assuring that the respondents agree on the number and nature of each initiative identified. We approached the results of the administrators’ interviews with the purpose of understanding the nature of each strategic initiative. Similarities and differences were identified based on how alike the assigned title, purpose and descriptions of the initiatives were across the two health systems using content-analytic summary tables. Coding of the interview transcripts was performed by teams of two researchers with the addition of a third independent coder who validated the coding and helped in situations when the first two coders disagreed. Findings The 61 interview participants in the two health systems had between 1 and 41 years of healthcare experience, had been at their current organization between six months to 39 years, and included 19 physicians (physician administrators and clinicians). The interviewees were split equally in terms of gender: 29 females and 32 males. At the Children’s Health System the majority of the interviewees held positions of Director/Chief/ MD, Vice President or Senior Vice President. The Multi-Hospital Health Systems interviewees mostly held positions of Executive Vice President/President, Senior Vice President, or Vice President. A complete profile of the interviewees and the two health systems is presented in Table I. Detailed discussion of key staff members and leaders as sources of “distinctive competencies” follows in the discussion of results linked to the implementation of strategic initiatives. In general, we considered organizational capabilities that are distinctive enough such that they might confer competitive advantage to the firm as “distinctive competencies” and explained them as such (Wernerfelt, 1984). Results by health system – the children’s health system This organization was pursuing eight strategic initiatives including: (1) an inpatient quality and patient safety program; (2) a medical education consolidation initiative which included the restructuring and formalization of the relationship with a medical school in order to ensure a continuing supply of medical providers; (3) implementation and integration of a new EMR (EPIC); (4) a culture of Cost Containment initiative to better manage utilization of resources; (5) a new clinical building to house an innovative program and a satellite hospital to support a new clinical program initiative; (6) various coordinated patient flow improvement initiatives across the system; (7) a research center involving large investments in research initiatives and a new research building; and (8) launching of a physician service organization to serve as a hospital-based billing and collecting service for contracted physicians’ professional fees. The multi-hospital health system At the time of the study, five initiatives designed to transform its 25 hospitals were being pursued as part of the system strategic plan, each associated with specific goals to meet over the next five to ten years. These initiatives included: (1) a quality and safety initiative, which focusses on reducing medical errors; (2) a culture change initiative, including application to the Malcolm Baldrige National Quality Award program; (3) a physician engagement initiative, through which the health system desires to advance physician alignment with the organization; (4) a cost-effectiveness initiative which is intended to help the organization to more effectively manage resources; and (5) a provider and coordinator of care initiative which is designed to align and integrate patient care and coordination throughout the system. Healthcare strategic management 257 A total of 13 strategic initiatives were identified across the two health systems. The Multi-Hospital Health System did not identify any building projects. Results presented in Table II list each initiative identified in the two settings and present the number of key managers engaged in each strategic change initiative, average time spent on transformations, and the average rating of the transformation by respondents in terms of how mission critical they perceive the transformation to be for the organization. The number of key managers the Children’s Health System had engaged in its eight strategic change initiatives ranged from 11 to 34 members (including administrators and managers at many levels of the organizations). The Patient Flow initiative had the fewest key personnel engaged, while the culture initiative, which spanned across Strategic planning initiative The Children’s Health System 1. Quality/patient safety 2. Medical consolidation 3. EPIC – IT implementation 4. Culture/cost containment 5. Building project – new clinical program 6. Patient flow 7. Building project – new research center 8. Physician services organization The Multi-Hospital Health System 1. Quality 2. Culture 3. Physician engagement 4. Cost-effectiveness 5. Provider and coordinator of care Mission critical priority Average Final rank rank Time consumption Average time Final consumed rank Number of key personnel involved Count 2.6 2.9 3.7 3.7 1 2 3 3 17.5 5.5 15.3 25.7 2 8 3 1 21 21 28 34 4.8 5.1 5 7 14.1 7 4 7 28 11 5.1 7 10.3 6 25 4.9 6 12.8 5 24 2.1 2.3 2.7 3.4 1 2 3 4 17.5 23.8 20.6 17.1 3 1 2 4 13 16 14 15 3.6 5 14.07 5 12 Table II. Interview results by health system JSMA 7,3 258 the entire organization and had to be transplanted to the new hospital site, occupied the largest number of administrators. The organizational structure, including the strategy implementation approach, at the Children’s Health System followed a highly decentralized coordination approach and predominantly divisional organization, allowing for multiple bundles of key managers to form around initiatives as well as by location and service lines. This organic formation of multiple bundles of key resources by initiative and location was identified as a distinctive capability at the Children’s Health System. The Multi-Hospital System, in contrast, relied on fewer key administrative personnel for each of their five initiatives as can be seen from the last column in Table II. The Multi-Hospital System engaged anywhere between 12 and 16 key personnel in its five major initiatives. Strategic decision making and implementation approach across the 25 hospitals within this system can be described as highly centralized and standardized. Interviewees demonstrated this coordinated resource allocation capability by providing very consistent descriptions of initiatives and by using “script-like” language in these descriptions. This highly coordinated and standardized resource and talent allocation approach was facilitated by the matrix type organizational structure of the system. This system also provided us an example of “distinctive competence” where institutional leaders created purpose by organizing the structure of strategy implementation with focussed mission (Selznick, 1957). The interviewees were asked about the percentage of time they estimated to have spent on each initiative during the last six to 12 months. This time consumption measure is based on a self-reported time estimate and provides indication as to the human capital usage for the initiatives. In both health systems, the initiatives that rank lowest on mission criticality also rank lowest in terms of average percentage of leaders’ time consumed. Table II shows that the Cost Containment initiative is consuming the greatest amount of time followed by the Quality/Patient Safety initiative, and the EMR implementations at the Children’s Health System. The top three most time consuming strategic initiatives at the Multi-Hospital System were the Culture Change initiative, followed by the Physician Engagement initiative, and Quality/Patient Safety (Table II). Quality and Culture initiatives were the top two most time consuming initiatives for both organizations studied, reinforcing the perspective that highly mission critical initiatives are most likely driven by external forces (RDT), and therefore, very similar across hospitals. Despite clear similarities across the two hospitals in terms of nature of strategic initiatives, the systems deployed and organized key resources differently to achieve sustainable implementation results. Differences in resource deployment were associated not only with differences in organizational structure, as discussed before, but also due to availability of key management time and the unique administrative network that links and coordinated bundles of such key resources (Penrose, 1959). Finally, the administrators at the Children’s Health System ranked the top three most mission critical initiatives as follows: Quality/Patient Safety; Medical Consolidation; and EMR (EPIC-IT). At the Multi-Hospital System the Quality initiative was ranked first, followed by Culture, and Physician Engagement. It is important to mention that many administrators were engaged as key personnel in multiple transformative initiatives; this was true for both organizations. Comparative results Table III illustrates how the research team grouped the strategic initiatives together based on observed similarities in focus and nature of the initiatives. There are clearly Average % time Mission critical rank Number of key personnel involved Organization Initiative Health System Children’s Hospital Health System Children’s Hospital Health System Children’s Hospital Health System Quality 17.5 1 13 Quality/patient safety Physician engagement Physician services organization Cost-effectiveness 17.5 20.6 1 3 21 14 12.8 17.1 6 4 24 15 Culture/cost containment Culture 25.7 23.8 3 2 34 16 more similarities than differences between the two health systems when examining their strategic initiatives. The system leaders even use similar titles and names for the initiatives that are similar in nature. We found that seven out of 13 initiatives identified clearly fell into three common groups of strategic initiatives across health systems. Both health systems seem to be engaged in initiatives driven by external requirements and industry standards for quality and patient safety, expected reimbursement changes that will require a closer partnership with physicians, and the need for cost containment. Strategic initiatives that were identified as similar across the two systems were grouped together and compared within each of three strategic initiative groups. The three resulting strategic initiative groupings are: Quality and Quality/Patient Safety; Physician Engagement and the PSO; and culture and Cost Containment (Table III). The strategic initiatives that did not group are the two building and the medical consolidation projects within the Children’s Hospital System and the Provider and Coordinator of Care initiative pursued by the Multi-Hospital System. Based on respondents’ descriptions, the building projects were related to further vertical integration of the Children’s Health System driven partly by mission and scientific advances that make women’s health services an extension of pediatric specialties; while the Provider and Coordinator of Care initiative was an opportunity for the Multi-Hospital System to leverage its horizontally integrated system to benefit from future population health based models of reimbursement. It is important to note that the Multi-Hospital System’s Provider and Coordinator of Care initiative is very similar to the well-established and integrated primary care provider network at the Children’s Health System. Both systems demonstrate significant attention in strategy to ensuring responsiveness to a changing external resource environment. In both, finance related initiatives and physician engagement initiatives are clearly connected to the external resource considerations and demands linked to healthcare reform, which is aligned with the RDT point of view. The quality and culture initiatives were driven by both RDT (via value-based purchasing and patient satisfaction reporting requirements) and internal resource capabilities and allocation considerations in both health systems. The building of a maternity center at the Children’s Health System and a new research institute was also driven by a combination of external and internal resource considerations. Healthcare strategic management 259 Table III. Comparison of strategic initiative groups by health system JSMA 7,3 260 Research limitations This study has two general research limitations. First, the results of this comparative study are based on only two settings, although both systems were multi-hospital systems operating in highly competitive market areas. Second, this study did not consider financial resources allocated to implement strategy by measuring actual dollar amounts. However, the RBV related elements studied include number of key managers, time consumption, and the combination and coordination of these human resources and capabilities, which do indirectly address some financial considerations. We hope to expand this work in progress in future multi-site study by applying additional elements of the RBV framework. Discussion The results from the comparative case study, combined with our review of RDT and RBV literature, indicates a strong influence of RDT in healthcare strategic decision making. We also observed variations in strategy implementation approach related to resource coordination and allocation, which supports the conclusion that RBV is most relevant to hospitals when engaged in implementation of mostly externally driven strategic initiatives. This helped us develop a conceptual framework for healthcare strategic management that incorporates and balances both theoretical approaches (Eisenhardt and Zbaracki, 1992; Nemati et al., 2010; Friday-Stroud and Sutterfield, 2007). This conceptual framework, as depicted in Figure 1, illustrates important external and internal perspectives and analytical steps that need to be part of today’s healthcare strategic decision-making and management process. The conceptual framework starts with the situation analysis stage, which ideally should include both RDT and RBV perspectives. The framework incorporates the strategy implementation step that links resource allocation back to the RBV perspective as suggested by the comparative case study results. We believe that as RBV gains importance in strategy implementation within healthcare organizations (and other firms faced with a dynamic external environment of regulation and competition), it will gradually become part of the earlier stages of the strategic planning process. External Environment: Highly Regulated Resource Dependency RDT Scarcity of Resources Strategic Alternatives Strategic Decision Capital Resources Figure 1. Strategic decision-making framework – role of RDT and RBV in the strategic management process RBV Human Resources External Environment: Highly Competitive Allocation of key Staff and Talent Multiple Strategic Initiatives & Implementation Planning Investment in and deployment of key management resources and talent to effectively implement strategy will over time build larger organizational capacity designed to take advantage of external environmental challenges requiring industry wide quality and efficiency gains (Kash et al., 2013) Contribution to knowledge and theory Based on our results and the proposed healthcare strategic management framework, healthcare systems generally take on an external environmental perspective in order to establish strategic choice and, as a result, develop similar strategic initiatives. This process is theoretically driven by the RDT components of a highly regulated and uncertain external environment that hospitals are facing today. The internal perspective is not as prevalent in strategic decision making, but plays a greater role in the implementation phase, through offering key human resources and organizational capacity building functions which are foundational in the development of future strategies. Therefore, we suggest that in today’s healthcare environment of heightened regulation and market competition, the two perspectives (as presented in Figure 1) – external (supported by RDT when evaluating the external environment) and internal (supported by RBV) – are compatible and necessary in the healthcare strategic management process. Based on the two healthcare systems studied, strategy development seems to be primarily driven by external environmental constraints, while strategy implementation has the ability to strengthen the RBV perspective as healthcare organizations give considerable attention to how to develop and deploy talents and capabilities needed to carry the strategic initiatives. Our model of strategic decision making in healthcare presents the application of RDT and RBV as separate and compatible activities that are often sequential today. We infer from the results of this study that the relevance of the RBV perspective becomes apparent as the healthcare strategist examines internal resources when pursuing strategic initiatives driven by the constraints of a highly regulated external environment. These results confirm the overarching RDT argument that organizations respond and react to environmental condition by using internal resources to manage and respond to an external dependence (Pfeffer and Salancik, 1978). Therefore, the deployment of specific combinations of relevant internal resources to achieve strategic goals in the implementation of often similar strategic initiatives across healthcare systems can eventually lead to the identification of competitive advantages within the health system as more attention is given to the relevance of the RBV. These observed differences in human resources deployment in implementing similar strategic initiatives supports the notion that strategy making in healthcare organizations is often embedded in an internal process of resource allocation and deployment (Noda and Bower, 1996), suggesting that decisions concerning development and deployment of key management resources and talent will eventually drive strategic decision making and define competitive advantages in the hospital sector. Practice implications Healthcare strategic planning conversations are often centered on shared external uncertainties faced by all US hospitals, including health care reform, specific reimbursement and program spending cuts, and other payment incentives. Solutions to these uncertainties often result in similar strategic decisions, indicating that today’s healthcare organization are often first focussed on external environmental requirements (Swayne et al., 2006). Healthcare strategic management 261 JSMA 7,3 262 A compliment to this external view in the early stages of the strategic planning process (the situation analysis stage) is the RBV, which takes an internal orientation by systematically evaluating relevant organizational resources, which could present potential competitive advantages. The RBV indicates that organizations should focus on combinations of rare resources that promote an organization’s competitive advantage (Newbert, 2008). It is of particular interest to the healthcare strategic planning and decision making process as it helps organizations identify “distinctive competencies” in a highly innovation-driven market often expected to be disrupted by low cost-high value substitutes to traditional medical care models (Wernerfelt, 1984). When healthcare organizations combine the internal RBV perspective with relevant external environmental factors, they are able to develop differentiation and/or diversification strategies focussing the organization on specific markets or specialty services (Mahoney and Pandian, 1992). In an ever evolving, and complex healthcare market, driven by changing government payment systems, regulation demands, challenging trends in population health, as well as increased market competition and disruptive innovations; the RBV is expected to become more relevant to healthcare strategic management (Christensen et al., 2009; Zimlichman and Levin-Scherz, 2013; Peteraf, 2006; Newbert, 2007; Wessel and Christensen, 2012; Gilbert et al., 2012), and now reinforced in this refined framework for healthcare strategic management. 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Zimlichman, E. and Levin-Scherz, J. (2013), “The coming golden age of disruptive innovation in health care”, Journal of General Internal Medicine, Vol. 28 No. 7, pp. 865-867. About the authors Dr Bita Arbab Kash is an Assistant Professor at the Department of Health Policy Management at the Texas A&M Health Science Center. Her areas of research include organizational capacity for change and transformation, strategic management, and nursing home staffing and turnover. Her most recent project, funded by NSF’s Center for Health Organization Transformation, examines elements of an integrated primary care provider network as sources of competitive advantage by applying resource based theory. Dr Bita Arbab Kash is the corresponding author and can be contacted at: bakash@srph.tamhsc.edu Dr Aaron Spaulding is an Assistant Professor in the Department of Public Health (Health Administration program) at the University of North Florida. His research focus includes: organization theory, organization behavior, and strategic management. Dr Larry D. Gamm, PhD is the Director of the NSF-supported Center for Health Organization Transformation and Regents Professor in the Department of Health Policy and Management at the Texas A&M Health Science Center. Dr Gamm’s research and teaching interests have focussed primarily on leadership, key technologies, and change in healthcare organizations. He has led research and published for many years on electronic medical record implementation (more recently on Health Information Exchange), chronic disease management, organization change, primary care and medical homes, community health partnerships, and rural health. In addition to teaching doctoral courses on management of organizational innovation and interorganizational research, he teaches the MHA capstone course titled Health Systems Leadership. Dr Christopher E. Johnson is an Associate Professor, Director, Programs in Health Services Administration and the Austin Ross Chair in Health Administration in the Department of Health Services at the University of Washington. He specializes in work that seeks to understand how health care organizations and communities impact health care outcomes for the elderly, under-served populations, and Veterans. To purchase reprints of this article please e-mail: reprints@emeraldinsight.com Or visit our web site for further details: www.emeraldinsight.com/reprints Reproduced with permission of copyright owner. Further reproduction prohibited without permission. HEALTHCARE REFOR Successful Strategic Planning for a Reformed Delivery System Alan M. Zuckerman, FACHE, president, Health Strategies & Solutions, Inc., Philadelphia, Pennsylvania H ospitals and health systems continue to consolidate and purchase physician practices; payment reform and quality initiatives are kicking into high gear; 123 new accountable care organizations are being rolled out; and workforce supply issues are emerging or reemerging. These are just a few of the challenges that call into question the enduring value of strategic planning in an environment characterized by increased uncertainty and greater and faster change. Can—or should—we try to plan for three to five years into the future when we do not know how healthcare reform will really affect the field? Shouldn't we be completely focused on immediate needs and initiatives? While addressing the most pressing and immediate concerns and hot spots tends to be a natural response, leading organizations recognize that strategic planning, and the focus and prioritizing that it calls for, is more important now than ever before for several reasons: • Increasingly scarce resources require short- and long-term allocation perspectives. • The larger, more diverse, and more geographically dispersed organizations currently being formed benefit greatly from the alignment that results from strategic planning. • Uncertainty and fast-paced change call for adaptability, which research demonstrates is greater when there is a clear direction, strategy, and alignment among organizational leaders. To maximize the yield from strategic planning in these turbulent times, the strategic planning process is being adapted to be more relevant to contemporary organizations. Healthcare leaders are advancing strategic planning from a periodic exercise to a more continuous and integrated (with other key management functions) strategic management process (see Figures 1 and 2). This type of process is dynamic and increases an organization's capacity to deal with "curveballs, " emerging developments and threats, and change in general. ADDRESSING HEALTHCARE REFORM AND ENVIRONMENTAL CHALLENGES OTHER A framework that identifies and describes key attributes of major environmental challenges affecting nearly all healthcare providers today is shown in Figure 3. Healthcare reform challenges are significant and complex, with major direct and 168 IMPLEMENTING HEALTHCARE REFORM FIGURE 1 Transitioning Your Strategic Planning Process to Strategic Management Periodic Strategic .. Planning ^ ^ ' Plans prepared every 3-5 years ' Implementation is unsystematic ' Operations I divorced from planning ' Finance can be at odds with planning Ongoing Strategic Planning Strategic anagement Full plans eve: 3-5 years; updates annually Implementation is managed Finance/ operations interfaced with planning Management unsystematically strategic Continuous, evolving plans • Continuous, managed Woperations integrated witli planning Management mostly strategic Source: Copyright 2014 by Health Strategies & Solutions, Inc. Used with permission. FIGURE 2 Annual Strategic Management Process Components Environmental assessment update Organizational direction review Strategy formulation update Input to capital and operating budgets Interface withfinanceand operations during budget and annual management plan preparation Review and adjustment as needed Ongoing implementation of plans developed Quarterly (at least) leadership review of progress and adjustment as needed Ongomg review and testing of opportunities against strategic plan Adjustment of plan's strategies and actions as needed Source: Copyright 2014 by Health Strategies & Solutions, Inc. Used with permission. 169 louRNAL OF HEALTHCARE MANAGEMENT 59:3 MAY/JUNE 2014 indirect financial implications, particularly as commercial insurers follow the lead of the federal government in payment reform. In all likelihood, future reimbursement rate increases will lag health cost inflation by at least a few percentage points. This factor alone forces providers to significantly reduce costs while upping their competitiveness to try to maintain or increase revenues—a twofold challenge. While historically strategic planning in healthcare has focused nearly exclusively on growth through increasing share and enlarging the market, strategic planning today includes five new imperatives (see Figure 4): 1. Sufficient scale and scope or niche play: Organizations will need to scale up or focus in order to survive in the future. For most, scaling up will involve inorganic growth through mergers, acquisitions, and new partnerships. In major metropolitan areas, a limited number of consolidated organizations will emerge, probably with annual revenues in excess of $2 billion. These organizations will be the ones that can meet the integration, alignment, and value challenges that result from healthcare reform. 2. Cost competitive: Being cost competitive has never mattered before, but with new underlying financial pressures, all organizations will need to continually reduce costs for the foreseeable future by about 3-5% annually. Competition for patients will also increasingly be based on ability to provide value (quality + service H- cost). FIGURE 3 Future Industrywide Development Assumptions: Main Drivers of Industry Change, 2014-2018 1 Economic decline and slow recovery 2 Healthcare reform • Payment for value • Transparency and technology requirements • Coverage expansion • Medical loss ratios and tax increases for payors • Declining reimbursement 3 Increasing competition Direct Impact • Federal and state budget deficits, funding cuts and cost-containment efforts • Reduced capital access • Competing on value • Substantial new overhead • Increasing proportion of provider volume from low-margin patients • Cost-shifting from insurers to providers and patients • Real integration • Limited population growth expected • Increasingly large, well-heeled competitors • Increased marketing and ambulatory network •^•i—g»m»imiimi»Tir'rB-i:: developments Major Implications for the Future, 2014-2018 Horizontal integration: Hospital/system consolidation Vertical integration: Continuum of care including insurance products Physician alignment: Employment; large physician groups Payer consolidation: Commerical payer consolidation Value competition: Relative cost and quality performance The ultimate implication is the widespread proliferation of tightly integrated (and eventually dosed or near-dosed) systems. 170 IMPLEMENTING HEALTHCARE REFORM FIGURE 4 Strategic Imperatives to Win Under Heaithcare Reform •ti Sufficient Scale and Scope Source: Copyright 2014 by Health Strategies & Solutions, Inc. Used with permission. 3. Demonstrated quality: Quality is part of the value challenge, and it is increasing in importance with reimbursement impacts from the federal government and the initiation of quality incentive-based contracts with certain payers. As quality measurement improves, the focus will shift to outcomes and away from the current structure and process measures. 4. Exceptional service: Also part of the value challenge, a focus on exceptional service has caused nearly all organizations to materially raise their game over the past 10 years. Since healthcare is fundamentally a service business, rigor in this area will continue to be a key aspect of competitive success in the future. 5. Real integration: Success in dealing with cost competitiveness, quality, and service challenges in particular will necessitate not just having all the players or parts of a system of care but knitting them together in a truly integrated manner across the continuum. As healthcare organizations move toward population health approaches and are called on to take financial risk for the populations covered, the ability to provide an integrated, patient-focused product will be critical. STRATEGIC PLANNING IN ACTION UNDER REFORM How one health system approached the strategic imperatives challenge is illustrated in Figure 5. This organization consolidated clinical and service quality into one imperative. The figure illustrates a number of aspects of its strategic challenge, most notably in the 171 JOURNAL OF HEALTHCARE MANAGEMENT 59:3 MAY/JUNE 2014 FIGURE 5 How Can We Best Address the Four Strategic Priorities in the Next Five Years? Priorities Our Influence/ Control Over Future State Demonstrated quality and exceptional service Primarily internal Cost connpetitive Primarily internal Real integration Both internal and external Sufficient scale and scope Both internal and external Our Gap (Current vs. Future) What Is Required to Address Gap Estimate ot What Is Our Our Current Organization's Desired Position in Future the Metro Position?' Area' 5 • Commitment exists; step up efforts 6 m^ 1 Commitment exists; continued strong emphasis needed Commitment exists; step up efforts 4 • Time for building scale is long; need to start soon 2 •^ ' '^^ "•' '¿¿> •^ 8-9 Strategies to Accomplish Priorities • Standardized care • Physician support and engagement 7-8 • Culture change • Board support of changes required • Focus and execute 7+ Inorganic growth/ system building or joining "1 = bottom 10th percentile; 5 = average; 10 = top 10th percentile. estimate of its current position, in the leadership team's view of the desired future position, and in the key strategies to accomplish these priorities: standardized care, physician support and engagement, culture change, board support of (difficult and politically sensitive) initiatives and decisions, and focused execution (note that the key strategies for the first three priorities are the same; see column 6 in Figure 5). As the leadership of this healthcare system discussed, the strategic imperatives for most healthcare organizations today will be similar. How well they are addressed, and how quickly, will distinguish the successñil organizations from those that struggle. CONCLUSION Strategic planning, or better yet, strategic management, is an increasingly important discipline in today's rapidly changing healthcare environment. Addressing the challenges of healthcare reform is paramount, and the interplay of other market dynamics poses additional complications. Strategic management allows leaders to exert a greater degree of control or influence over these external forces and steer their organizations toward a new fiiture, even though it may have many uncertainties. For more information about the concepts in this column, contact Mr. Zuckerman at azuckerman@hss-inc.com. 172 Copyright of Journal of Healthcare Management is the property of American College of Healthcare Executives and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. Strategic Planning Strategic Planning Program Transcript [MUSIC PLAYING] NARRATOR: As with every area of health care, operations management is evolving and continuously facing new challenges. Ronald McDade, Benjamin Rosenthal, Neil MacDonald, and Dr. James Langabeer describe some key trends and pressing concerns they see in the field of operations management. [MUSIC PLAYING] RONALD MCDADE: There is a conflict in many managers today between sustaining their daily operations, taking care of the patients who were there today and the staff who were there today, and finding the time to undertake the improvement efforts, the new strategies, and those new directions that are out there. One of the fundamental tenets of improving our daily operations is making sure the improvements we make are in sync with the strategic direction of the corporation, of the hospital, of our department. It would be foolhardy to undertake a change that we think is a great improvement and for it not to be aligned with the strategy of our organization. JAMES R LANGABEER II: I think the people that really understand the more technical skills, the quantitative skills gained in operations management, have a huge role to play in the strategy of a hospital or health care organization. So bringing these two together-- bringing an understanding of what's going on at the tactical daily level and putting that into the perspective of where is this hospital trying to go in the future-- that's really where the market-- where this thing is going. BEN ROSENTHAL: Huge challenge today is the economy, health care reform, and how that's going to apply to the day to day operations in a health care organization. There are just too many unknowns today. All that is eventually evolved and regulations are written where manager's are going to have to comply with. That's going to have a significant impact, because then the issue becomes how to translate it to my budgeting. For example, proposals are to significantly reduce reimbursement to Medicare and Medicaid. What does that mean to my operations, if I was running the food service department, I was running the nursing unit, or the emergency room, OK, what does that mean? The flip side of that, our financial incentive to implement electronic information system, if you will. I think it's great idea, I think it's about time. But the question again from an operational perspective, what does it mean to me when I have to transition from what exists, whether it's manual or an old version of a electronics system, what does that mean to training educational staff, what does it mean to the daily processes and procedures, what does it © 2016 Laureate Education, Inc. 1 Strategic Planning mean to my staffing levels to comply with that, the interactions with other departments? There's a whole host of issues, and all of that you're going to need to have some quantitative analysis or forecasting because you need to project the impact it's going to have on your operations. Ultimately, the outcome we hope will be significantly better than what it is, much more efficient, more effective. But the transitional cost is going to be difficult to project. NEIL MACDONALD: As leaders, we do our managers a disservice by not really clearly articulating to them those three, four, five, six things they should focus on. In health, care we're obviously concerned about patient satisfaction, employee satisfaction, quality that we render, our financial performance. All of those things we're asking our nurse managers, our department managers, to measure those things and report back on a regular basis how we're doing. So you can imagine at times of peak census, when we have no beds available in the hospital, staffing might be short, people have called out as a result of the H1N1 flu or illness, or sickness or whatever, our managers are running around trying to hold everything together, and it's a very difficult thing for them to do. So I think one of the obligations we have is to work with our managers, work with our supervisors, prioritize for them those things that we think as a leadership team are important. [MUSIC PLAYING] © 2016 Laureate Education, Inc. 2 Week 4 Case Questions Strategic Assessment in Health Services Organizations Chapter 9, Case 3: “HSO Strategic Assessment” Questions: 1. Compile a list of situational analysis considerations (e.g., factors, items) that are relevant to the selected HSO. 2. Identify and describe past and present organizational strategies the HSO has implemented or is implementing. 3. Discuss the context in which the HSO made strategic choices. Use the list of aspects of context discussed in Chapter 9 in your response. © 2016 Laureate Education, Inc. Page 1 of 1
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Outline HSOs
HSOs are systems that aim to enhance the quality of the medical care services in the
given community.
Situational Analysis (Question 1)
o Health Support providers, according to others, cover outpatient treatment, care
homes, clinics, and physician care.


Hospital care was chosen as the representative HSOs because it accounts for
approximately 35% of total annual spending.



According to the course materials, the concept of situational analysis in the scenario of
HSOs focuses on analyzing existing health conditions.



It is essential for reviewing and preparing various health policies together with action
strategies that aim to increase patients' satisfaction.
HSOs Strategies (Question 2)



Capabilities, vulnerabilities, opportunities, and risks frequently facilitate organization
methods when it comes to in-hospital care.



Organizational plans of health care institutions are the fundamental of vulnerabilities and
risks.



Previous management methods included developing a strategy, assessing the appropriate
structure, ensuring clinical results, and developing a regional network.



The chosen HSO called in the preceding reference has applied the above operational
techniques. In this scenario, establishing a roadmap entails things such as patient care
institutions' dreams, missions, and objectives.
Strategic Choices (Question 3)



The health organization chosen in the corresponding scenario took a form of a strategic
decision to achieve a leadership position in the medical field, financial success, and
advantage in the market competitiveness.



These decisions allow regular information assessment, reporting, and dissemination
during daily operations.



The financial approach's decision is significant in the patient care field since it illustrates
the disparities between the vulnerable and those with decent health care income, as the
textbook materials depict.
Conclusion



As this paper underlines, any Health Service Organization's overall goal is to enhance the
quality of the medical care service while ensuring patient satisfaction.



Implementing adequate SWOT analysis and focusing on attaining a leading position in
the competitive market are only a few of the examples listed in this paper.


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