Successful Strategic Planning for a Reformed Delivery System

Abstract

Hospitals 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 shortand 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 dear 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 OTHER ENVIRONMENTAL CHALLENGESA 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 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. …