Strategic Planning for Private Hospitals

Strategic Planning for Private Hospitals

What is a Strategic Plan?

Dr. Dan Beckham explains strategic planning like this: "The allocations of scarce resources to your best opportunities" (Beckham, 2010, p. 6). Actually, he goes on, writing an editorial for the journal Trustee, strategic planning involves several things: one, what is most important to advance the quality of service in the hospital; two, designing a "systematic process" that helps lead seamlessly to the future. Strategic planning forces management to make choices, and, Beckham explains, that is what makes strategic planning "…both so difficult and so beneficial" because it "generates focus" (p. 6).

Typically a solid strategic plan for a hospital takes up to five years, Beckham writes, and albeit there is no one correct way to design a strategic plan, once it is in place "…a hierarchy of supporting decisions" must be made and aligned. According to Beckham -- who is president of a strategic consulting group, the Beckham Company -- approaching a strategic plan is generally done in five phases: a) collecting and analyzing information; b) defining the hospital's "critical issues"; c) developing an "overreaching vision"; d) carefully identifying the "tactics and actions" that will be part of the strategy; and e) making certain that the implementation is effective (p. 6).

Beckham stresses that the process must be based on the views and input of all the stakeholders, including the doctors. Speaking of doctors, Beckham says they are "the most credible voice in the strategic planning process when it comes to their needs" and of course the needs of the hospital's patients. Moreover, Beckham asserts that the doctors in the hospital going through the strategic planning process should not assume that the hospital's executive team understands the importance of the strategic planning process. Often executives know operational issues backwards and forward, but they may not relate to strategic planning, hence, communication between staff (especially the physicians) and executives is vital.

Literature Review

On the subject of board members and executive staff at a hospital, Corey Christman writes that the hospital board is "…an essential component" of the strategic planning process but too often the board becomes "an untapped resource for the marketing department" (Christman, 2007, p. 1). For the marketing department, Christman insists that while they don't generally align with board members, in the case of putting together a strategic plan marketing staff "…should take the time to understand [their] responsibilities, investigate their interests, and get to know their areas of expertise" (p. 1).

Granted, Christman continues, it's the managers and the CEO that put the strategic plan together, but the board should be involved because it is "ultimately responsible" for the plan that is produced (p. 1). Also, it is becoming more and more common for marketing staffers in a hospital to actually have time before the board "…to report and explain what they're doing and what their marketing initiatives are" since marketing and strategic planning is pivotal in terms of the well-being of hospitals in the competitive marketplace, Christman writes (p. 3).

Christman references the views of Alan Zuckerman, president of Health Strategies & Solutions, Inc., in Philadelphia. Zuckerman says there are three aspects to the board's responsibilities vis-a-vis strategic planning. The first is to provide "…policy development" that helps to define and continue the mission of the hospital; the second is to offer direction, input, and advice to the hospital's leadership and "…to give voice to the various stakeholders they represent"; the third aspect is to "provide oversight" to the whole hospital by listening and responding to employees' "ideas, proposals, and recommendations" (Christman, 2007, p. 3).

Older Strategic Planning Issues -- Remarkable Similarities with 2010's Issues

Striking a chord similar to Christman -- albeit 25 years earlier -- is professor R.K. Ready of the University of West Florida, who writes in Health Care Management Review that the hospital CEO needs the "…information, insight, and plain hard work of…the board of trustees, medical staff and administrative staff" (Ready, et al., 1982, p. 27). So there is really nothing new under the sun for hospitals in terms of their need to work as a unit when preparing strategic plans. Ready explains that there was in 1982 a lot of complaining in hospitals; medical staff complains that the administration "does not listen to them"; the board complains that programs and spending they are asked to approve "…are fragmented and difficult to appraise"; administrative staff complain that CEOs give them responsibilities "…but not authority"; and "everybody complains about regulation" (p. 27).

Historically, Ready continues, hospital planning has been "filled with trial and error" due to the above-mentioned grievances along with the fact that "positive incentives" for strategic planning by hospitals have been few and far between (p. 27). But after pointing out the flaws and drawbacks, Ready offers advice in his article that is timeless and should be taken into account by all hospitals -- private and public, nonprofit and for profit -- in 2010. That is, a hospital "has a continuing need to look good" through the eyes of the board, patients, "benefactors, local government and the community at large," Ready asserts. And an obvious way -- then and now -- to look good is "…to announce plans from time to time." Those plans should be tied to bold strategic planning. The plans should not just PR fluff, but real declarations of "purpose" tied to "very broad, long-range goals" that are difficult to disagree with, Ready writes (p. 30).

Another way to explain these broad, long-range goals that Ready suggests are important can be announced in the form of a "wish" list, which gives "the illusion of structure" even though the strategic plan is not firmly in place (p. 30). That list shows the public that the hospital "…is at the forefront of the industry" and has a continuing need for "the support and generosity of the community," Ready continues. From there, the nuts and bolts of a real meaningful strategic plan must be carved out, with all stakeholders as participants, according to Ready.

As noted in the paragraphs above, the need to invoke strategic planning projects for hospitals is certainly not new, as Ronald L. Zallocco and colleagues explain in the Journal of Health Care Marketing (Zallocco, 1984, p. 19). The need in 1984 for strategic changes -- particular in tax-exempt hospitals -- resulted from problems similar to those experienced in 2010: a) changing reimbursement patters (due to Medicare changes like reimbursement ceilings); b) increased competition from "for-profit and multi-hospital systems" as well as urgent care centers, hospices, geriatric outpatient care centers and "outpatient ancillary group practice"); and c) demographic changes (changing age mix and population shifts) (Zallocco, 1984, p. 19).

It is interesting that twenty-six years ago hospital administrators had not only begun pursuing "…innovative, even bold, management and marketing solutions," but that hospital administrators were adapting strategies that, as Zallocco writes, "…are striking in their similarity to techniques used in business firms" (p. 19). The author almost sounds naive when he writes that emulating the strategic planning for hospitals is logical because "…there is much similarity in the problems faced by businesses and by hospitals today" (p. 19). Someone probably told Zallocco after reading his piece that hospitals are in fact businesses and need to be run as businesses, not as unique healthcare institutions somehow impervious to market changes and functioning as an island apart from other service-related businesses.

In 1992, "information technology" (it) was a fairly new concept, but hospitals needed to be totally up to speed on it then as surely as they need to now (Henderson, 1992, p. 72). While there is little doubt that it has evolved by giant leaps and bounds subsequent to 1992, the issues remain largely the same when it comes to upgrading it in a hospital, hence the relevance of Henderson's narrative on it. Henderson explains that when hospitals are embracing a strategic alignment of their technologies -- which is an ongoing process in 2010 for many hospitals -- management necessarily must ask the following questions: a) How do we get doctors and nurses up to speed on using the newest cutting edge it? b) What are the 2 or 3 "emerging information technologies" that are critical to our hospital's strategy? c) What supporting applications, architectures, and communication capabilities do we need to make our strategic plan fully functional? And d) What training will our professionals need to make sure we have the skills to fully utilize new it we are putting in place? (p. 72).

Along with the questions posed above, when it-themed strategic planning is underway, Henderson suggests these pivotal issues be confronted by hospitals: One, does our hospital contract out for it services or do we design and maintain the systems ourselves? Number two: does our hospital align with another healthcare organization to bring it services online? And three has our hospital engaged in discussions as to our it business strategy and the linkage with strategically structured it positioning within our various components? (pp. 74-75).

Nurses are the "glue" of the hospital culture and yet their departments "…wield little power" and their staffs often suffer "from low status" and the "inability to control practice," Janet L. Lukacs, RN, asserts (Lukacs, 1984, p. 11). So, with those issues clearly on the table (as they are today in many hospitals), strategic planning in hospitals offers nursing directors a direct path to increased effectiveness, Lukacs explains. The way for nurses to get in on the strategic planning movement and increase their clout and effectiveness within the hospital structure, Lukacs explains, is to do the research necessary that matches patient / client needs and preferences "with specific provider strengths and competencies" (p. 12). Doing that research and making certain that those data and narrative get into the strategic plan is paramount to upgrading their departments, Lukacs goes on. "Knowledge of user needs must be accompanied by free and direct communication with the public," Lukacs reminds. She goes on, insisting that nurse executives "…carefully review and contribute to information upon which institutional plans are based…in order to identify implications for nursing practice and develop needed channels of communication with the public" (p. 13). That is cogent advice for today's nurse executives albeit the advice was offered twenty-six years ago.

Ronald L. Zallocco has participated in another scholarly article, this one published in 1991 in which he researches how many hospitals had engaged in strategic market planning up to that point in time. In a survey that 127 hospitals responded to -- the researchers had sent questionnaires to 500 hospitals -- data indicates that 63% of respondents reflected that they were "satisfied or very satisfied" with their strategic market planning processes, Zallocco writes (p. 8). The hospitals that were not satisfied with their strategic planning processes tended to be smaller "…and have just begun to understand what marketing planning can contribute" (Zallocco, 1991, p. 8).

What Zallocco emphasized those years ago is today just as pertinent to the economic health of hospitals: a) consultants can indeed play a useful part as "change agents" when it comes to marketing planning and defining the process, however the administrators should not relinquish the strategic planning process to outsiders; and b) completion to a thoughtful strategic planning process should be followed up with a performance evaluation and "reward system."

Hospital libraries should not be left out of the mix when it comes to strategic planning processes, according to Judith a. Siess (Siess, 2005, p. 37). Indeed, in order to participate in the planning, the library personnel need to: a) analyze the present situation; b) examine the library's mission statement and unspoken vision to determine the "preferred [future] scenario" prior to developing objectives and goals; c) write an "action plan" in concert with other hospital departments (as alluded to earlier in this paper); and d) implement the plan, carefully evaluating it to be certain it meets the objectives and goals (Siess, 2005, p. 37).

One of the reasons Siess published this piece is that "…many librarians are afraid of strategic planning" likely because they don't understand it, she says (p. 37). People often do get "caught up in the moment, fighting fires and keeping their heads above water" and hence they put the future aside and forget about it. However, Siess goes on, hospital library leadership must assure staff that by preparing a strategic plan, there will be "…intangible benefits" in addition to the practical functionality of simply laying out what the library needs to be relevant to staff and clients (p. 39).

One intangible benefit, Siess explains on page 39, is that after preparing the strategic plan staff will gain a "greater understanding of each job in the library, its importance, and the ways each related to the library's mission." Also, library personnel will have a greater appreciation for and understanding of the library's clientele and the information needs those patients have. Moreover, Siess continues (p. 39), the librarian provides "evidence of an ongoing assessment of the knowledge-based information needs" of the hospital; after all, libraries are expected to be fully up-to-date with technological advances and equipped to find solutions to information management problems. Siess (pp. 41-44) offers "Four Cornerstones of Planning": a) predict the future; b) decide what you want your future to look like; c) decide how you will get there; and d) implement the plan. These are appropriate not just for libraries, but also for any component of any hospital wishing to embrace the future with strategic planning today.

Francois Champagne and colleagues writing in the journal Long-Range Planning take the position that a hospital should not follow traditional business models when developing strategic plans for their future. Because hospitals are "professional bureaucracies" and "most of the influence lies with the professionals" who deliver the healthcare services, therefore the doctors and nurses "have a vital stake" in the long-term success of the hospital (Champagne, 1987, p. 77). The suggestion is that yes, management and board members must be involved, but the biggest strategy-making thrust must come from doctors. Moreover, the strategic planning of health services "…rests on the consideration of the health needs of the population," Champagne asserts, not just on what the hospital believes its needs are in order to meet its mission statement.

Champagne (78-81) offers a strategic planning model that worked successfully in three Canadian hospitals (Ottawa General; Valleyfield Hospital; and Institut de Cardiologie de Montreal). He calls it the ARA Planning Model, and it would appear to be applicable to any hospital in the U.S., UK, or elsewhere. It is based on "active-reactive-adaptive" (ARA) dynamics and has two main components (the need for "epidemiological focus" and "the necessity of using a participative process") that are broken down into four parts, Champagne explains.

Those four parts: a) Internal analysis; b) analysis of the clientele; c) analysis of the population; and d) a macro-environmental analysis (Champagne, 1987). In the case of the Institut de Cardiologie de Montreal, this hospital went through the ARA model and through the epidemiological process they determined the hospital didn't need more beds but rather it needed enhanced research and promotional activities instead.

Methodology

There are many ways to launch a strategic planning process at a hospital. But when it comes to strategic planning the literature does not thoroughly report the specifics of hospital operations strategy -- the methodology of how it comes together -- according to Timothy W. Butler and associates (Butler, et al., 1996, p. 137). In fact operations strategy is an area that is "largely neglected in the literature," Butler explains. Hence, the article is presented as a way to fill in some of the blanks that other scholarly articles do not offer.