Strategic Planning For Healthcare Services

Strategic Planning for
Healthcare Services

Prepared by: Dr. Alber Paules

What’s the “Strategy”?
Why do some organizations succeed while others fail?
o This is usually highly attributed to the strategies that an
organization's managers pursue; these strategies usually
have a major impact on the organization's performance
relative to its competitors/rivals.

Definition of “Strategy”:
o A strategy is a set of actions/methods/ways that
managers take to increase the organization's
performance.
o If an organization achieves superior performance relative
to rivals; it is said that this organization has a competitive
advantage.

DELL Computer Case
o Between 1998 and 2006, Dell enjoyed very high profitability far
ahead of that of competing manufacturers of business
computers.
o This is attributed to Dell’s success in sustaining a competitive
advantage over its rivals (Apple, HP, and Gateway). How?
1. Dell’s business model: selling directly to consumers
through the company’s website. The website allows
customers to mix and match product features to
customize their own computer systems.
2. The way Dell manages its supply chain to minimize the
cost of holding inventory.
o We can conclude from Dell’s case that Dell’s managers could
charge low prices, gain major market share, and become more
profitable than its rivals.

Some Definitions
• Strategy-making Process: the process by which managers
select then implement a set of strategies that aim to achieve a
competitive advantage.
o Strategy Formulation: the task of selecting strategies.
o Strategy Implementation: the task of putting strategies into
action.

• Strategic Leadership: this is about how managers most
effectively manage an organization's strategy-making process to
create competitive advantage.

The Strategy-Making Process
o Strategy is the outcome of a formal planning process
developed by the top management.
o Success of any strategy is 10% formulation and 90%
implementation.
o Selecting strategies is relatively easy (but requires
good analysis); the hard part is putting those strategies
into effect.

The Strategic Planning
Process
o The strategic plans generated by the planning process
generally look out over a period of one to five years,
with the plan being reviewed and updated every year.
o The results of the annual strategic planning review are
used as input into the budgetary process for the
coming year (i.e.) the strategic plan is used to shape
resource allocation within the organization.

The Strategic Planning
Process
The following five steps represent a model for a formal
strategic planning process:
1. Select the organizational statements and strategic goals.
2. Analyze the organization's external competitive environment
to identify opportunities and threats.
3. Analyze the organization's internal operating environment to
identify the organization's strengths and weaknesses.
4. Select strategies that build on the organization's strengths
and correct its weaknesses in order to take advantage of
external opportunities and counter external threats. These
strategies should be consistent with the organizational
statements and strategic goals of the organization.
5. Implement the strategies.

1. Select the Organizational
Statements and Strategic Goals
o The first component of the organization's strategic planning
process is crafting the organizational statements; which provide
the framework or context within which strategies are formulated.
o These statements include the following:
a. The mission: which tells why the organization exists and
what the organization does.
b. The vision: which tells the organization's desired future
state.
c. The key values to which the organization is committed.
These values tell the employees how they should conduct
themselves and how they should do business in order to
achieve mission, vision, and goals.
d. The organization's strategic goals: that should be achieved
to ultimately achieve the vision.

An example for the mission statement:
“As a leading private hospital in the Egyptian market, we
are committed to the provision of comprehensive
healthcare services in all medical and surgical specialties in
a safe, modern, and patient-centered environment; for the
well-being of the whole community. We strive to achieve
excellence in serving our patients, regardless of their
cultural, ethnic, or social differences”.

An example for the vision statement:
“To become the regionally-recognized location of choice for
quality health care services in the Middle East region by
the year 20XX.”

Examples for the key values:
o Prioritization of patient safety and satisfaction.
o Transparency in communications with our customers.
o Adherence to professional ethical and confidentiality
rules.
o Excellence and continuous improvement.
o Equity.
o Compassionate care.
o Respect for Others.
o Evidence-based Practice.
o Fostering continuous education and training.

N.B.s
• The Quality Council may share in the development of the mission
and vision statements, in addition to the key values, which
usually reflect the organization's striving towards achieving
excellence of care.
• These statements serve as a constant reminder of the path in
which the origination is moving.
• Once approved, these statements should be communicated to
the rest of the organization by various means: some
organizations post these statements in prominent locations;
other organizations print them on the back of the personnel
business cards. Additionally, these statements may be published
in periodical newsletters, handbooks, or on the hospital’s
website.

Establishing Strategic Goals:
• A goal is a desired future state that an organization
attempts to realize.
• The purpose of the goal is to specify what must be done
so that the organization achieves its vision, while based
on its mission (i.e.) the goals get the organization moving
from its mission towards its vision.
• Goals may provide a means by which performance of
managers can be evaluated.

Establishing Strategic Goals:
• Well-constructed goals have 4 main characteristics:
1. Precise and measurable.
2. Address crucial/core issues.
3. Challenging but realistic.
4. Specify a timeframe in which goals should be
achieved.


Examples of Strategic Goals:
1. Hiring competent manpower.
2. Adopting latest technology.
3. Adopting evidence-based practice.
4. Embracing world-class quality systems.
5. Increase the no. of cardiac referrals/admissions.

Goals:
1. Hiring competent manpower. To be accomplished by the
year 20XX.
i. 100% of privileged practitioners working within the premises of
our organization should be board-certified.
ii. At least 80% of nurses should be faculty-graduates (not institute-
graduates).
2. Adopting latest technology. To be accomplished by the year
20XX.
i. Gradual replacement of 100% of the obsolete and old (aged
more than 8 years) medical equipment by newer one.
ii. Gradually replacing manual medical records with electronic
medical records (EMRs) till achieve maximum possible
automation of the clinical care process.

Goals:
3. Adopting evidence-based practice. To be accomplished
within 24 months.
i. At least 80% of the clinical processes provided within the hospital
premises should be evidence-based.
ii. At least 25% of the clinical processes should have relevant CPGs.
4. Embracing world-class quality systems. To be accomplished
by the year 20XX.
i. To be accredited by an internationally-recognized accrediting
body.
5. Increase the no. of cardiac referrals/admissions by at least
50% annually.

2. External Analysis
o Strategy formulation begins with an analysis of the forces that
shape competition in the industry in which an organization is
based.
o The goal of this analysis is to understand the opportunities and
threats.
o Opportunities arise when an organization can take advantage of
conditions in its external environment to formulate and
implement strategies that enable it to be more profitable.
o Threats arise when conditions in the external environment
endanger the integrity and profitability of the organization’s
business.
o PESTEL analysis tool can be used to understand the external
factors and forces in the organization's macro-environment.

2. External Analysis:
Porter’s Five Forces Model
o Michael Porter developed a model, in 1979, to help managers
with the analysis of the external environment. It’s called the
(Five Forces Model).
o In his model, Porter focuses on five forces that shape the
competition within an industry:
1. The risk of entry by potential competitors
2. The intensity of rivalry among the established organizations
within an industry
3. The bargaining power of buyers
4. The bargaining power of suppliers
5. Threat of substitutes
o Any of the pre-mentioned competitive forces is regarded as
threat if becomes strong, and as opportunity if becomes weak.

1. Risk of Entry by Potential Competitors:
• Established organizations already operating in an industry
often attempt to discourage potential competitors from
entering the industry because the more organizations that
enter, the more difficult it becomes for established
organizations to protect their share in the market and
generate profits.
• High entry barriers may keep potential competitors out of an
industry.
• Important barriers to entry include economies of scale, brand
loyalty, absolute cost advantages, customer switching costs,
and government regulations.

2. Rivalry among Established Organizations:
• Rivalry refers to the competitive struggle between
organizations in an industry to gain market share from each
other.
• The weapons used in this struggle usually include pricing,
product/service design, spending on advertisements and
promotions, and after sales services and support.
• Strong rivalry constitute a strong threat to profitability.
Alternatively, if rivalry is less intense, an organization may
have the opportunity to raise prices and gain more profits.
• The intensity of competitive rivalry within an industry is
affected by many factors which include: industry competitive
structure, industry demand, and exit barriers.

3. The Bargaining Power of Buyers:
• Buyers of a certain product/service; whether end-users or
intermediaries may be strong enough to bargain with the
organizations for lower prices or for better quality (i.e.) higher
costs.
• Powerful buyers are considered as a threat. This power might
origin from the following situations:
i. The fact that they purchase a major percentage from the
products/services developed by the organization.
ii. When the buyers purchase in large quantities (thus pressing
for price reductions).
iii. When the buyers can threaten to enter the industry
(backward integration)

4. The Bargaining Power of Suppliers:
• Suppliers are the organizations which provide input into the
industry (e.g.) pharmaceuticals companies, medical supplies
companies, medical equipment companies, medical wastes
disposal companies, ….etc. The bargaining power of the
suppliers refer to their ability to raise their prices.
• Powerful suppliers are considered as a threat.
• Suppliers are most powerful in these situations:
i. The product/service they supply to organizations in a certain
industry has few/no substitutes or when there high switching
costs.
ii. When the industry is not an important customer to the suppliers.
iii. When suppliers can threaten to enter their customers’ industry
(forward integration).

Backward and Forward Integrations

Backward Integration Backward Integration

Buyer
Pharmaceutical Hospital MCO
company
Supplier

Forward Integration Forward Integration

23

5. Threat of Substitutes:
• Substitute products/services are those ones of different
businesses or industries that can satisfy similar customer
needs (e.g., tea, coffee, and soft drink industries; all three
serve customer needs for non-alcoholic drinks).
• The existence of close substitutes is a strong competitive
threat because this limits the ability of the organization to
raise its prices and thus increase its profitability.
• Microprocessor (like those produced by Intel and AMD) have
no substitutes; this gives both companies the ability to charge
high prices with no fear of sales reduction.

3. Internal Analysis
o Internal analysis is concerned with identifying the strengths and
weakness of the organization.
o The organization has to identify its distinctive competencies
which act as the roots for its competitive advantage.
o Distinctive competencies are firm-specific strengths that allow
an organization to differentiate its products/services from those
offered by rivals, and/or achieve substantially lower costs than its
rivals.
o Distinctive competencies arise from two complementary sources:
1. Resources: tangible and intangible ones.
2. Capabilities: the organization's skills at coordinating its resources
and putting them to productive use; these skills reside in the
organizational structure, cultural norms and values, processes,
control systems, and hiring systems.

Sample Strategic SWOT Analysis
for a Hospital
Strengths Weaknesses
 Design of the building.  High turnover rates.
 Geographical location.  Poor internal communication.
 History and reputation.  Lack of a website (in the era of internet).
 Competent clinical staff members.  Many of the non-clinical staff members lack
 Comprehensive services. English language and computer skills.
 Lack of any well-recognized accreditation.
Opportunities Threats
 Acquiring a higher market share after being  Potential competitors who will enter the
renovated and JCI-accredited. market in the near future (whether local or
 An unsaturated market which can tolerate international ones).
the opening of new branches and/or  Increased power of the healthcare
satellite clinics in strategic locations. insurance companies which sent us more
 Affiliation with an American hospital than 60% of the total cases admitted at our
/center /group and arrangement for hospital last year.
periodic visits of its clinical experts.
26

4. Select the Strategies

o A list of strategies should be developed; strategies
selected should build on the organization's strengths
and correct its weaknesses in order to take advantage
of external opportunities and counter external threats.
o These strategies should be chosen based on their
consistency with the organizational statements and
strategic goals of the organization (i.e.) the strategies
chosen shall ensure that the strategic goals are
achieved.

4. Select the Strategies
o Examples of “Strategies” include:
─ Improve employee retention and recruitment.
─ Establish new services that promote the continuum of care.
─ Improve the profitability from payers (e.g., by reviewing
contracts and utilization patterns)
─ Develop distinctive tertiary services that position the hospital
as the preeminent regional referral center.
─ Generating funds from unusual sources (e.g. renting spaces
within the premises of the hospital for cafés and restaurants).
─ Achieve a culture of quality that produces superior patient
care outcomes and customer satisfaction levels.

Examples for Potential Strategies
to achieve a Strategic Goal
Increase the no. of cardiac referrals/admissions by at least
50% annually
i. Renovating the Cardiac Care Unit.
ii. Renovating the Cardiac Cath labs.
iii. Establishment of a new chest pain unit (intermediate care unit).
iv. Initiating a marketing campaign.
v. Dedicate one of the 8 Operation Theater (OT) rooms for the
cardiothoracic surgeries.
vi. Improving the clinical, functional, and satisfaction outcomes for
the cardiac cases.
vii. Recruitment of high caliber specialists.
viii. Arrangements with foreigner specialists to conduct periodic
visits to our hospital.

Examples for Potential Strategies
to achieve a Strategic Goal
Adopting evidence-based practice. To be accomplished
within 24 months.
i. Establishment of a dedicated committee to oversee and review
the integration of the EBM into the clinical practice in all
departments.
ii. Establishment of a medical electronic library with membership
in professional websites and databases.
iii. Integrate the physicians’ adherence to the specified clinical
practice guidelines into their appraisal processes.

5. Implement the Strategies
o Implementation of strategies involves any or all of the
following:
− Developing/modifying processes through development/
modification of relevant policies and procedures
− Improving efficiency and effectiveness of processes.
− Designing and delivering new services.
− Changing culture.
− Allocation of resources.
− Making changes in the organizational structure.
− Development of annual operational goals which are consistent
with the strategic goals; and for each operational goal, an action
plan is developed with list of tactics and deadlines. A senior
manager is assigned for each plan. He/she assumes responsibility
to provide quarterly updates to the top management.

Balanced Scorecard (BSC)
• Nowadays, over half of the Fortune 1000 companies in North
America are using the Balanced Scorecard, which has become the
hallmark of a well-run organization. Many organizations say the
scorecard is the foundation of their measurement and
management systems.
• It was developed by Robert S. Kaplan and David P. Norton (HBR).
• The BSC resembles a dashboard; a dashboard is the indicator
panel in the automobile, which is most useful for the driver to
monitor key performance metrics such as speed, fuel level, and
engine temperature. The driver of a car monitors multiple
indicators of performance simultaneously to successfully arrive at
the intended destination.

• Similarly, a BSC is a tool which contains important measures
(indicators) that are linked to the annual operational and
strategic goals. It is used to monitor the organizational progress
towards achieving the goals.
• It is called “balanced” because it tries to distribute the goals and
the indicators equally on four balanced perspectives without bias
to any of them: financial, customer, internal business processes,
and employee and learning.

• For example, the following 3-year strategic goal can be placed in
the (Employee and Learning) category:
Hiring competent manpower. To be accomplished by the year 20XX.
i. 100% of privileged practitioners working within the premises
of our organization should be board-certified.
ii. At least 80% of nurses should be faculty-graduates (not
institute-graduates).
• A 3-year strategic goal, for example, can have one or more 1-year
operational goals. The following is an example 1-year goal for the
first year of the pre-mentioned 3-year goal:
Reduce turnover rate among board-certified physicians (so that it
does not exceed 10%) and faculty-graduate nurses (so that it does
not exceed 20%).

• For each 1-year operational goal, measures/indicators are
developed; the following are indicators for the pre-mentioned
goal:
1. Physicians turnover rate
2. Nurses turnover rate

• Each Indicator should has its own target; the following are
targets for the pre-mentioned indicators:
1. ≤ 10%
2. ≤ 20%

• Indicators data can be updated on a quarterly-basis, for
example.
• For the BSC to be used effectively as a tool for
monitoring a number of indicators; a color scheme of
red, yellow, and green coding can be utilized to indicate
progress toward meeting the targets.
• Any measure with red or yellow highlighting may
require the senior manager responsible for that target
to submit an improvement plan with dates for
completion.

3-year goals 1-year goals Measure Targets Person Responsible
Financial

Customer

Internal Business Processes

Employee and Learning

Strategic Planning For Healthcare Services

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