Health Care Organization Strategic Plan: The Case of Samaritan Medical Centre
Strategic Planning and Organizational structure
Organization Structure
Strategic Planning and Organization Structure
Present strategy of the Organization
Environmental Analysis and Setting Strategic Goals for Samaritan Medical Center
Internal Environment Analysis
of Samaritan Medical Center
Budget Strategy Assumptions
The elements of a projected budget
Implementation of Strategic Management
Communication of the Plan to the Employees
Evaluation and Control of Strategic Plan
Strategic Planning and Organizational structure
The process of formulation and implementation of the company objectives and goals the considerations of which are based on the resources available with the company and the internal and external environment that the company is functioning and competing in is termed a strategic planning (Nag, Hambrick & Chen, 2007).
In this context strategy can be defined as the course of action that an organization develops with the optimum use of resources with the aim of achieving its long-term goals. The process of providing guidance to the direction, focus the efforts and defining the organizational set up clearly so that a company can take steps to direct if resources and respond to a changing environment can also be defined as strategy.
Since every strategy needs a plan, therefore, the planning of a strategy is defined as strategic planning. The collection, assimilation and analysis of analytical data and such data is used as inputs in the process of strategic planning are parts of the planning process (Nag, Hambrick & Chen, 2007).
To create a strategy plan for an organization it is first important to define the mission, vision and goals of the organization. This is so because every strategy is aimed to achieve the mission vision and goals of the organization and the plan is formulated keeping in mind what is to be achieved using the resources of the organization.
Linked to the strategy formation and the achievement of the mission, vision and goals of an organization, is the aspect of the structure and culture of the organization. The structure and culture of the organization defines the way the company functions and understanding both are necessary to formulate whether a change in any of the two aspects are needed to implement a new strategy (Sheehan, 2010).
Mission, Vision and Goals of Samaritan Medical Centre
For Samaritan Medical Centre, the case at hand it is important to define and understand the mission vision and goals of the organization. It is necessary to define the vision, mission and goals of the organization both in the long-term and the short-term.
Situated at Watertown, New York, Samaritan Medical Center is a not-for-profit community medical center with 294-bed and offering a full spectrum of inpatient and outpatient healthcare services.
The civilian and the military community that are located in the area is served by the medical centre through primary and emergency care as well as highly specialized medical and surgical services that include cancer treatment, neonatal intensive care, behavioral health and addiction services and imaging services (Samaritanhealth.com, 2015).
The basic principles of the Samaritan Medical Center are quality, compassion and safety.
To serve the long-term health care needs of the community, the centre has inpatient and outpatient services and numerous community clinics and satellite testing centers. The 272-bed long-term care facility called the Samaritan Keep Home and the 288-bed long-term care facility called Samaritan Summit Village a are examples of long-term community care efforts by the centre.
Mission:
“Samaritan shall provide high quality, comprehensive, safe, and compassionate healthcare services to meet the needs of our civilian and military community” (Samaritanhealth.com, 2015)
Vision
“Samaritan will be recognized, foremost, as the preferred provider of Inpatient, Outpatient, Emergency, and Long-Term Care services in Jefferson County. Additionally, our health system will enhance selected specialty services to meet the needs of the North Country” (Samaritanhealth.com, 2015).
The values of the non-profit medical centre are honesty, empathy accountability and respect. These are termed as the 5 key values and use the acronym H.E.A.R.T. As he centre attempts to create a culture where quality care and service excellent is a collaborative processes that is accomplished in part by establishing standards of performance for all employees. The acronym H.E.A.R.T. describes the behaviors necessary for employees and leadership at SMC to provide care that is safe and compassionate while supporting the community (Samaritanhealth.com, 2015).
Organization Structure
The formal role configuration, procedures, governance and control mechanisms and authority and decision-making processes of a firm is termed as the organizational structure (Dugdale & Lyne, 2010).
Arrangement of organizational subsystems is the basis of building an organizational structure. There are four basic principles that organizational structure is built upon. These are hierarchy of authority, specialization standardization or formalization and centralization.
The aim of building an organizational structure is to achieve goals and objectives that fit into the surrounding functional environment. Organizational structures typically exhibit division of work, managerial and non- managerial manpower allocation and the flow of decision, responsibility and exchange of information.
At the Samaritan Medical Center, there is a functional organizational structure that is built and if followed (Samaritanhealth.com, 2015).
A functional generally consists of a chief executive officer and a limited number of corporate staff. There are functional line managers in important organizational areas such as production, accounting, marketing, R&D, engineering, and human resources.
The aim of a functional organizational structure is to group the organization’s reporting relationships on the basis of specialty or functional areas. The advantage of this form of structure is that a person, who can adequately understand and review the work, and with experience in their same specialty is in-charge of managing the staff. There are opportunities for staffers to move up within their functional areas and thus acts a motivation for the staff to remain with the organization for a long time. Thus the organization gains from the term expertise and company knowledge of the staff over time which is further enhanced by knowledge sharing and lateral job moves to learn new skills.
The primary disadvantage of this structure is that there is often an environment of competition between the different functional areas which can result in a lack of understanding of what other areas do for the company. There is often poor communication between the various divisions or functional areas.
At the Samaritan Medical Center, this structure is followed with a CEO at the top of the management tree. There are various functional departments like doctors, nursing, medicine, finance, administration, etc. In the organization and each of the functions is headed by a functional head who report to the CEO directly. The CEO in turn reports to the Board of directors of the organization (Samaritanhealth.com, 2015). A pictorial representation of the organizational structure looks like below:
Board of Directors
CEO
ADMINISTRATION
MEDICINE
FINANCE
NURSING
DOCTORS
According to this diagram above, the various functions are headed by functional heads or line managers who report directly to the CEO who in turn reports to the board of directors of thee organization.
Strategic Planning and Organization Structure
An environment of ownership among the various stakeholders of the Samaritan Medical Center’s is created by the organizational structure as the structure is team-based. The structure of the organization helps in achieving the mission, vision and the aims and objectives of the organization through the effective implementation of its core values of accountability, empathy, honesty and respect. The structure allows accountability of every functional area in the form of a hierarchy. There is a certain degree of freedom within the structure as each of the divisions functions independently and reports to just one person. Therefore it is easier to build coordination between the divisions from the top — CEO level planning (Kelly, Kelly & Kelly, 2006). This also allows for fostering of mutual respect as the strategic plan relies on collaboration, shared goals, common assessments and other aspects of cooperation to achieve its various plans and missions. It is also a structured system of tasks, workflows, reporting relationships, and open communication channels that link the diverse parts of the organization.
Therefore it can be concluded that the structure of the organization is appropriately designed and strategically planned to help the organization achieve its vision, mission and goals. The structure by which a company is organized, is the keystone that keeps the business functioning. Organizational structure is what tells stakeholders how it is organized and how it works. The structure also tells how leaders are chosen, decisions are made, and how participants are recognized. Health care organizations develop long- and short-term goals which translate into organizational growth. The process of strategic planning is essential when implementing change in an unpredictable health care environment (Gru-nig, Ku-hn & Ku-hn, 2005).
Present strategy of the Organization
The target market for Samaritan Medical Center is the residents of the tri-county region (Jefferson, Lewis, St. Lawrence Counties, and Ft. Drum). Considering that the surrounding area is rural, there is a higher elderly population, and there is a large Amish community, approximately 20% of the population has private health insurance with the remainder being Medicare, Medicaid or private pay.
The beliefs and values of Samaritan Medical Center is one of the reasons this health care organization has been able to serve its community in the way it has. Policies must be adhered to at all times. Violation of policies can cause legal action to be taken against the organization or the health care professionals that are employed by Samaritan Medical Center. Such legal action can cause unexpected financial losses for the organization and a decreased in organizational trust by the community.
II: Environmental Analysis and Setting Strategic Goals for Samaritan Medical Center
Environmental analysis of any organization has two parts — internal and external environments.
Internal Environment Analysis
The internal environment of an organization helps determine the readiness of the company to react to the business requirements of the hour and how the company can adjust its internal characteristics to suit the external business environment (Kuratko, Hornsby and Covin, 2014).
The strengths and the weaknesses that are present in the company, the resources that are available in the company that can help in business development as well as the threats that the company is likely to face with respect to the resources available and the competencies that the company has which can be looked at as opportunities to foster growth of the company are indicated by the internal environment analysis. (The Internal Virtual Environment in Strategic Business Management: an Integrated Approach, 2013).
Internal environment analysis is done by the SWOT analysis of an organization. In the case of Samaritan Medical Center the SWOT analysis is as follows:
Strengths
Strong leadership with extensive knowledge and experience
Strong therapeutic environment
Strong marketing process
Consistently organized committee structure
Excellent results from CMS (Centers for Medicare and Medicaid) and TJC (The Joint Commission) surveys
Weaknesses
Decrease in available inpatient beds (high census, low availability)
Increase in overnight stays for Same Day Surgeries
Interdepartmental teams need to be more efficient and patient focused
Poor communication between departments
Opportunities
Continue refinement of pharmacy process to continue significant cost savings
Continue to provide a more efficient responsive process for physicians and nurses
Create a Short Stay Unit to free inpatient beds
Threats
Compliance with Medicare regulations
Difficulty attracting nurses and physicians
Reviewing the SWOT analysis better explains the opportunities available that could be made use of and the threats to be aware of, all in consideration of the organizations strengths and weaknesses (Ginter, Duncan & Swayne, 2013).
The above SWOT analysis reveals that the Samaritan Medical Center has extensive knowledge and experience coupled with good leadership, marketing activities and medical therapy and treatment facilities. The centre also has formulated long terms health facilities for the entire community. The number of beds however is proving to be inadequate for a majority of the population that depends on community health care and this is increasing pressure on the centre due to longer overnight stays and demand for Same Day Surgeries.
There is also a difficulty in attracting adequate physicians and nurses due to the location are a potential threat to the organization. However the continuance of refinement of the pharmacy process to continue significant cost savings and the creation of a Short Stay Unit to free inpatient beds is an opportunity that the organization can utilize to foster better growth. There is also requirement for the organization to comply with the changing medical rules and regulations failing which the organization can get entangled in severe legal procedures that can derail its strategic plans to foster better growth and expansion of services (Samaritanhealth.com, 2015).
External Environment Analysis
The external analysis reveals the opportunities that are present in the general outside functional and business environment of an organization and the ones that the organization can take advantage of. It also identifies the potential problems in terms of technical, political, cultural and economic factors that can impinge on the growth plans of the organization. The external analysis is coupled with the internal analysis of an organization to form a strategized plan to foster growth. While making the strategy an organization has to form the plan to combat and take advantage of the external threats and opportunities — got from the external environment analysis, using the resources of the company — obtained from internal environment analysis (Khan & Khalique, 2014).
There are two basic ways to analyze the external environment of an organization — PESTLE analysis and analysis using Porter’s 5 Forces that looks at the competition..
Applying the PESTLE analysis for Samaritan Medical Centre:
Political — the political environment that an organization functions in affects the development of new plans and the marketing decisions. It is important that there is political stability for any organization to function well. Samaritan Medical Center operates in a politically stable environment without interruptions to operations.
Economical — Economical factors is very important for any organization. The functioning of an organization requires resources that it has to purchase those resources. For those organizations that sell products or services, the purchasing power of consumers- decided by the general economic condition, is also important.
Being in the medical field, Samaritan Medical Center has to consider the financial capabilities of its client in offering services. The center has to purchase the resources for providing medical services. It also operates in a region where there is predominant dependence on social health care and hence the organization has to be very sensitive to economic condition (Samaritanhealth.com, 2015).
Social — Any organization operates in societies and hence societal conditions are of considerable importance. Products and services that organizations offer depends on what the consumers want and need and these needs and wants are driven by social norms. Samaritan Medical Center has to consider the demographic factors and preferences of the market so as to provide the services customers want. Thus social conditions are important for the organization.
Technological — Organizations have to keep with the advancement of technologies that are critical for their field of functioning. The medical world is fast developing and technology has made medical delivery easier, safe and economical. Therefore Samaritan Medical Center has to keep up with new technologies of treatments and equipment to provide the best service to clients and at economical rates as it is a non-profit organization.
Environmental — environmental rules and regulations are becoming stringer every day. In the medical service industry, regulations regarding the safe disposal of medical waste are very critical. Samaritan Medical Center has to ensure that they protect the environment and use it sustainably. The health care facility should hygienically dispose of their waste to prevent harming the people or contaminating the environment (Samaritanhealth.com, 2015).
Legal – the health care facility has to ensure to observe all the required rules and regulations of the Federal Government, State, and various licensing agencies. Given the concern for patient health and safety, rules and regulations are updated regularly. Adhering to rules prevents expensive fines, ensures stable operations and trust from consumers (Gordon et al., 2000).
The above PESTLE analysis shows that Samaritan Medical Center has the capability to achieve the set strategic plan as it has the human resources and equipment necessary to achieve their goals. It has already established a market share that it can build on through effective marketing and offering excellent service to the current clientele.
The staff is dedicated to the success and growth of the organization observing the values in place. Samaritan Medical Center can respond to the changes in the environment as the strategic plan is flexible to environmental changes. The staff too has a good change management program in place.
The customer analysis reveals that the organization is delivering what the customer wants and can afford, the competitive analysis reveals the threats the business faces from the competitors, while the environmental analysis informs on the opportunities available. Samaritan Medical Center has opportunity to expand its market share and services it provides by collaborating with other organization as it has those capabilities.
Porter’s 5 Forces Analysis of Samaritan Medical Center
This is used to analyze the company’s business environment and industrial context. The five forces that affect the market of a specific industry are competitors, new entrants, substitute products, customers and suppliers. This tool helps identify the threats and in a market and help in implementation of strategic management (Roy, 2009).
Threat from Competitors — being in the medical service industry, there are numerous other similar and larger service providers in the market and hence the Samaritan Medical Center has to come up with strategies that make it look more attractive than other services or incorporate such services into its system. Though health care systems do not typically function as other business organizations, however the centre needs is influenced by the competitors and stiff competition can cause problems for the company in getting adequate human resources. However the centre has some advantages that create differentiation for it. For example Samaritan Medical Center has clinics to reach out to those not able to go to the hospital. Most health care facilities do not offer this service, and this differentiates Samaritan Medical Center (Samaritanhealth.com, 2015).
Threat of New Entrants — health care industry require both, expertise and financial capability as well as a lot of planning. This is more important for non-profit medical service provider. Hence it is not easy for anyone to enter the industry. Hence Samaritan Medical Center does not face much threat from new entrants as the entry level barriers are quite high.
Threat of Substitute Products — there are always alternative forms of treatment and hence the threat from substitute forms of treat is a reality for Samaritan Medical Center. There is also threat from the or the medical plans such as Medicare and other medical plans.
Bargaining Powers of Customers – Samaritan Medical Center seeks to reach out to those that are not financially stable and at the same time boost revenue to continue operations. The customers have bargaining power is high as there are other health care providers they can get services from. This means Samaritan Medical Center has to come up with incentives that will attract customers.
Bargaining Power of Suppliers – Suppliers have little bargaining power as they already have an agreement with Samaritan Medical Center, but these contracts can be revised with time depending on changes in pricing of products or quantities required. Moreover there is a large pool of suppliers that Samaritan Medical Center can resort to in case there is any fallout with one or more suppliers. Hence suppliers do not have much of a say in the relationship with Samaritan Medical Center (Samaritanhealth.com, 2015).
III Financial Analysis of Samaritan Medical Center
According to Grable, Klock, & Lytton (2008), both the financial plan and the projected budgets help an organization to be successful both in the present and in the future operations. Even though the two aspects go hand-in-hand, they are different in how they influence organizational financial success. The main differences include the fact that the budgets helps one the map out the key expenses that will be incurred in weeks or months to come while financial plan helps on to plan for funding financial objectives and goals in 5 years and over. Creating a financial plan means make a long-term strategy for achieving goals while making budget implies the management of money in . In a financial plan, organizations track records of progress in quarterly and semi-annually basis which in a budget, expenses and incomes are tracked in a weekly and monthly basis (Grable, Klock & Lytton, 2008).
In a financial plan, there are fiscal details that are included. Stovall & Maurer (2011) states that the fiscal details indicate the flow organizational debts and the sources of revenues (Stovall & Maurer, 2011). This portion of the fiscal details is included in the financial plan. The debts that the organization incurs through both external and internal borrowing and other means of financing its operations are also included in the financial plan. It also includes the tax liability of the company to the tax authority. Finally, another important financial detail is revenues that are collected from business operations. These revenues are from sources such as Medicare, Medicaid, Private insurance, and self-pay (patient deductibles and co-pays).
Budget Strategy Assumptions
In developing a strategic budget various financial assumptions are made for a particular period of time (DuanYuanPeng, 2011). For the Samaritan Medical Center budget it is assumed that the increase in revenue, salaries and supply expenses per year would be 10%, 4% and 5% respectively. It’s also assumed that maintenance, miscellaneous and salaries as a percentage of revenue would be 1%, 1%, and 65% respectively. It is also assumed that there will be a 3% per year increase in SSU patients. Other assumptions are the costs for room and board at 67 dollars/hour, average length of stay for an SSU patient of 8 hours, Medicare reimbursement is estimated at 80% of actual organizational charges and private insurance reimbursement is at 100% (in-network allocation).
The elements of a projected budget
Swedroe, Grogan, & Lim (2010) argued that there are elements that are included in a projected budget that makes it a complete product that will positively influence the financial decision making of an organization. By definition, budget elements are resources such as capital, people, materials or any other thing that is required to complete a project, program or a task planned to be undertaken (Swedroe, Grogan & Lim, 2010).
These elements can be categorized into two sections which are the direct costs and F&A (facilities and administrative) costs.
These direct costs include monthly or annual salaries and wages, employee benefits, medical equipment costs, supplies and resources, patient medical care costs, renovations and alternations, publication costs, subject fees, alterations and renovations, computer usage rates, allowable telecommunication charges, postage and allowable telephone etc.
The finance and administration costs include space, payroll, utilities, building depreciation and accounting.
Apart from the expenses mentioned above there are capital expenditures and expenditure for contingency plans.
The current business model follows the add-on model where the core offerings are priced competitively and numerous extras that help drive the final price for the health care consumer. Financial adjustments made during the process include accruals. As time passes, most revenue and expenses are largely accruals. Deferrals are another adjustment as cash is usually received in advance from customers before being earned and disbursed to pay expenses.
The strategic financial plan for Samaritan Medical Centre is as follows:
Estimated Number of Patients 1300 1430 1573
Revenue
Year 1
Year 2
Year 3
Medicare (Short Stay)
$557,440
$613,184
$674,502
Private Insurance (Short Stay)
$696,800
$766,480
$843,128
Total revenue
$1,254,240
$1,379,664
$1,517,630
Expenses
Salaries
$815,256
$896,782
$986,460
Supplies and equipment
$188,136
$197,543
$207,420
Maintenance
$12,542
$13,797
$15,176
Miscellaneous
$12,542
$13,797
$15,176
Total expenses
$1,028,477
$1,121,918
$1,224,232
Net profit
$225,763
$257,746
$293,398
Strategies to create SSU (Short Stay Unit)
Remodle existing space to create SSU
Train or hire additional staff to work in SSU.
Purchase supplies and equipment for new unit
Assumptions
Increase in revenue/year
10.00%
Increase in salaries/year
4.00%
Increase in supply expense/year
5.00%
Maintenace as a % revenue
1.00%
Misc as a % of revenue
1.00%
Salaries as a % of revenue
65.00%
Increase in SSU Patients
3%
Costs for room/board only (SSU)
$67.00
per hour
Average Lenth of Stay (SSU)
8
Hours
Medicare reimbursement
80%
Private Insurance reimbursement
IV: Implementation of Strategic Management
It is not enough to formulate strategies and plans for organizations. It is essential that organizations implement the plans meticulously into action to enable to get the benefits of the plan. Essentially every strategic plan requires some change in one or more sphere of functioning of organization. It is also assumed that the implementation of strategic plans would often meet with some barriers and hindrances. Hence it is necessary that the strategic plan is also coupled with a plan for implementation that essentially means reduction of the hindrances and implementing the change according to the strategic plan (Kragh & Andersen, 2009).
There can be several barriers to the implementation of the strategic plan these can be:
Resistance to Change: People like to exist in a status quo and resist change. In organizational set up it is an accepted fact that many employees tend to continue with the existing systems and are opposed to accepting any form of change. Thus people who want to prefer to work in an organization that is more stable and does not change and thus such people are barrier to the implementation of strategic plans. It has often been seen that such barriers happen in gradual process that builds up with time (Cameron & Green, 2004).
Unknown Current State: barriers can happen if the medical centre tries to implement the change without making proper assessment of the situations inside the organization and thus are faced with barriers.
Integration: since there are many divisions and functionalities in the Samaritan Medical Centre, there can be a problem there is not proper coordination between the various departments. Implement of the strategic plan would affect a number of departments and functional aspects (Senior & Fleming, 2006). For a large organization like the Samaritan Medical Centre, therefore it is critical to include all the divisions and coordinate all the functionalities.
Competitive Forces: the strategic plan has to accurately read and analyze the external environment. These are usually the triggers for strategic planning. In case such analysis is done in a wrong way, there may be obstacles to implementation as the plan would not be commensurate with the reality. Technology is one of such assessment and any strategic plan with a wrong estimation of the external technical factors can lead to confusion and create barrier to plan implementation (Floyd, 2002).
Complexity: creating a strategic plan that is essentially very complex may act as a barrier to implementation as that would create misunderstandings and the plan would not be implemented accurately as planned (Murthy, 2007).
Therefore Samaritan Medical Centre needs to take care of the above barriers that can derail the implementation of the strategic plan.
Communication of the Plan to the Employees
Identification of the barriers is essential to go the next stage that is eliminating the barriers to the implementation.
There can be several methods that the plan can be communicated to the employees.
One to one interactions: this is possibly the best method that can be adopted by Samaritan Medical Centre. The line managers are the best people to conduct this exercise and talk to the employees on an individual basis or in small groups to discuss and explain the plan.
General Organizational Communications: this is the process where the organization can send detailed pans to the employees through e-mails and hard copies. The advantage of this method is that the organization can provide details of the plan and the implementation process.
V. Evaluation and Control of Strategic Plan
After elimination and initial implementation of the strategic plan, it is important for Samaritan Medical Centre to assess and evaluate the success of the plan at intermediate stages of the plan. This can be considered as the final stage in strategic planning and implementation.
It is important that the medical centre conducts periodic evaluation and control of the plan implementation. This process essentially consists of reviewing internal and external factors that are the bases for current strategies, measuring performance and taking corrective actions (Oliver, 2000).
Internal evaluation can be done through the process of on the effect assessment of the new plan, through interviews and consultation process of the employees and the customers and the visual verification of the obvious changes in the employees and the overall output of the organization. This evaluation can be done at certain periods of interval.
The periodic evaluation of the plan and its implementation would also help in identifying faults and short comings in the strategic plan and hence would be useful in making necessary changes. These evaluations should be compared against periodic objectives that should be set during the strategic plan creation and the correction would help the plan being more aligned to the objectives of the Samaritan Medical Centre.
The measures that need to be taken to assess the effectiveness of the implementation of the plan should be quantifiable performance statements and certain guidelines need to be followed. Such measures or guidelines should be (Jeffs, 2008):
Relate to the goal and strategy of the clinic
An identified time frame should be the basis of the plan and in context of a target that is to be reached
The guidelines should be trackable for a number of periods of interval and not just for a few periods.
The guidelines should be set by the Samaritan Medical Clinic authorities with outside help if necessary
A number of measures or guidelines can be used such as:
Efficiency measures: this involves the measurement of the productivity and cost effectiveness as measured as ratio of outputs against inputs. Such measures can be number of patients treated against the number of medical staff employee per patient and the number of medical tests done within a specific period.
Outcomes measures: measures that demonstrate the impact and benefit of activities and are the end result of whether services meet proposed targets or standards. Examples include the percent increase in internships and the application to enrolled yield rate.
Quality measures: the measures that generally show improvement in accuracy, reliability, courtesy, competence, responsiveness, and compliance and that are indicative of the effectiveness of expectations. Examples of quality measures include number of audits with no findings or within a range of accuracy.
Project measures: this is generally stated as the percent complete and measures the progress against an initiative that has a terminus (Sadler, 2003).
The plan entails that corrective measures should be taken in terms of when there is a shortfall of in the financial objectives set according to the strategy. The number of patients arriving at the clinic and the number of patients paying for the services can be another measure of success and an indicator that clinic can use to check implementation and make changes. Internal process like percentage operating costs, billable efficiency, quality of services, defects ration, new services success, delivery response of customer, etc. can be used as indicators for success assessment and possible change in plans is necessary.
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