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KSM Blog | Katz, Sapper & Miller CPA

5 Pitfalls to Avoid When Preparing Your Hospital’s Strategic Plan

Posted 1:45 PM by

The Affordable Care Act turned the traditional healthcare business model on its head by reducing fee-for-service reimbursement levels and turning the focus toward value. Now the questions that every hospital and health system leader must answer are: How can we improve population health and patient care in a value-based environment, and what is the appropriate level of investment?

And this means hospital strategies, which traditionally focus on delivering fee-for-service sick care, have to change, too.

As hospital leaders navigate the transition from volume-based to value-based payments and build out their strategic plan, they must watch out for some pitfalls that often trap the unwary.

Pitfall #1: Failing to define success

Does success mean staying independent? Does it involve a merger or joint venture with a larger health system? Partnering with like-minded providers through clinical co-management arrangements or other alignment structures? There is no one right answer – and the only wrong answer is failing to ask the question. 

Pitfall #2: Excluding providers from the planning process

In the past, strategic planning in healthcare organizations was primarily a top-down budgeting exercise. But when administrators drive the planning process without input from physicians and other clinicians, they miss critical factors, such as emerging technologies, new treatment pathways, and how these changes in processes will affect patients. Value-based payment models encourage providers to drive out unnecessary costs and reward them for coordinating care and eliminating redundant efforts. Bringing everyone to the table gives all parties a chance to work together to identify the factors that improve quality while bending the cost curve. An especially important step that many organizations overlook is to include the people who are closest to the patient, such as operating room nurses and other staff nurses. As long as they are in an environment where they feel comfortable speaking up, they will give the best insights into how to deliver higher-quality, more efficient care.

Pitfall #3: Being too short-sighted

For healthcare organizations that want to continue to thrive in the value-based environment, growth is imperative. However, growth can be challenging when the focus is solely on how to increase market share in regions where they are already dominant. If the core market is saturated, then eking out another 5% market share might be more difficult than building market share in an adjacent market.

The best strategy depends on the unique set of market dynamics at play. However, if your hospital’s vision involves geographic expansion, keep in mind that each market requires its own strategy. While the core strategy might be the same, the execution of that strategy will vary from market to market. In established markets, the strategy might focus on efficiency and cost-cutting initiatives. But in regions where the organization must steal market share from established players, growth might require significant investment in talent or infrastructure. Remember, sometimes you have to spend money to make money, which can be counterintuitive for organizations with a cost-cutting culture.

Pitfall #4: Getting distracted

Successful organizations have the discipline and fortitude to stick to their established priorities. But, there certainly are valid distractions — for example, a game-changing technology or a new competitor threatening your market share in a core market. This is why organizations must have a process and structure for handling new developments and other ideas that come up in-between strategic planning sessions. Typically that process involves a board-level discussion about how to address the emerging issue and evaluating it in light of the strategic goals. If the board isn’t willing to drop any of the existing priorities, then they must agree to add the resources (money, manpower, organizational oversight) necessary to add the priority to the list.

Pitfall #5: Not creating action plans

Action plans that create personal accountability are the antidote for issues that distract from strategic plan execution. Action plans should account for the following:

  • What can we realistically achieve this year, and what are our top priorities?
  • Who will be responsible for each priority?
  • What are the key milestones over the next 12 months?
  • Where will that progress be reported and over what time period?

Remember that strategic planning is not a one-and-done exercise. Most provider organizations do not integrate strategic planning into their ongoing operations, which only ensures that the plan will sit on a shelf until the next cycle. Use the organizational goals as a touchstone against which every operational decision is assessed and measured.

Finally, compensation must reflect those organizational priorities. In the most successful companies, the employee evaluation system ties each individual’s bonus to personal goals, departmental goals, and company-wide goals. This ensures everyone knows that in order to get that bonus, they must work together with people in their own department and other departments to hit the strategic goals.

Remember, if you are a leader in the organization, the buck stops with you. Demonstrate through the structures you establish and your personal behaviors that everyone will be held accountable for meeting the organization’s strategic goals.

If you need help building a growth-focused strategic plan that can navigate a complex healthcare environment, contact your KSM healthcare advisor.

About the Author
John Martin is managing director of healthcare consulting with Katz, Sapper & Miller's Healthcare Resources GroupJohn leads a team of healthcare consultants who provide financial, strategic and operational solutions for hospitals, health systems and physician groups. Connect with him on LinkedIn.

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