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Moving Toward Strategic Planning

Unique To Healthcare
PETER M . GINTER, P H . D . , AND LINDA E. SWAYNE, P H . D .

T H E TWO FEATURE ARTICLES in this issue present the state of tlie art in and
the application of strategic healthcare planning.

THE TEN BEST PRACTICES AND FOUR STAGES OF


SOPHISTICATION
In examining the state of the art, Alan Zuckerman identifies ten best prac-
tices. Apparently, performing well on the first nine of the ten positions an
organization at stage two in his four-stage model of strategic planning sophis-
tication. Performing well on number tenmanaging strategicallyvaults an
organization into stage three. To achieve the highest level of sophistication
(stage four), Zuckerman proposes that the organization needs to employ an
additional five practices drawn from "pathbreaking" companies outside of
healthcare.
Zuckerman asks, "What should healthcare organizations do to increase
the rigor and sophistication of their strategic planning practices?" One might
argue, "Nothing!" If planners and executives are in agreement and pleased
with the results (as reported in his study), perhaps making strategic planning
more complicated and time consuming (rigorous and sophisticated) may not
be such a great idea. His assumption seems to be that "more advanced" will
mean more effective in the long run, but at the margin, the time or cost
required or the degree of effectiveness gained may not be worth the effort.
Zuckerman's best practices are separated into five that are related to the prod-
uct and five that address the process of strategic planning. Only the fifth prac-
tice, achieve real benefits, is actually a product; all the rest are processesthe
means and not ends in themselves. Furthermore, all ten best practices are not
created equal, but rather several serve as inputs to others. In addition, the five

Peter M. Ginter, Ph.D., is professor and chair ofthe department of health care
organization and policy at the School of Public Health ofthe University of
Alabama at Birmingham; Linda E. Swayne, Ph.D., is professor and chair ofthe
marketing department and interim chair ofthe management department in the
Belk College of Business, The University of North Carolina at Charlotte.

PETER M . G I N T E R A N D L I N D A E. SWAYNE 33
practices (planning characteristics) out- may be applied to any industry. "Fine
lined by Zuckerman and drawn from grain" (stage four) practices may or may
pathbreaking companies outside ofthe not apply. Healthcare needs to defme its
healthcare sector are actually "characteris- own stage-four strategic planning quali-
tics" or "qualities" for performing the ten ties. Unique considerations might
best practices. include the following.

1. Some strategic alternatives available to


STAGE-FOUR STRATEGIC PLANNING
non-healthcare organizations may not be
FOR HEALTHCARE
realistic for many healthcare organizations.
For years we have advocated that health-
For example, unrelated diversification or
care organizations should adopt strategic
vertical integration may not be viable, as
management practices developed in the
organizations with a single dominant core
business sectorespecially considering
business that is both capital intensive and
the relatively long history of strategic
human intensive have considerable diffi-
planning in business and the relatively
culty operating successfully outside of that
short history of its use in healthcare. Cer-
core. Further, service area limitations
tainly, in the late 1980s and 1990s many
restrict market expansion (market devel-
healthcare organizations had much to
opment) for many services. New technolo-
learn from pathbreaking companies. It
gies and techniques are often developed
appears that this approach has, for the
by outsiders (drug companies, research
most part, worked pretty well. As a result,
institutions, teaching hospitals, equip-
healthcare organizations have come a
ment manufacturers, robotics companies)
long way in installing strategic planning
and therefore many heathcare organiza-
and management practices since their
tions' product development strategies take
cost-plus protective covering was ripped
a very narrow focus. Finally, contraction
away in the mid-1980s.
strategies are limited for some healthcare
organizations because services may be
Transferability mandated, mission required, or needed by
Practices from pathbreaking companies the communityfor example, emergency
outside ofhealthcare for "stage-four room services, OB/GYN services, or drug
strategic planning," however, may not addiction treatment.
transfer to healthcare. It is not that
increased rigor and sophistication of 2. Healthcare organizations have unique cul-
strategic planning practices (stage-four tures that influence the style of and participa-
strategic planning) is not an appropriate tion in strategic planning. For example,
goal for healthcare organizations or that physician managers often maintain a
the pathbreaking company's planning medical practice as well as conduct their
models do not provide some useful administrative responsibilities, making
insights, but rather that an entirely dif- strategic planning an "add-on" responsi-
ferent type of stage-four planning may bility. Thus, strategic planning processes
be requiredone that acknowledges must be streamlined. Excellence in a
healthcare's unique organizational and product line is often built around physi-
market characteristics. "Coarse grain" cian reputation (individual or team) and
(stage one) strategic planning practices not controlled directly by the strategic

34 FRONTIERS OF HEALTH SERVICES MANAGEMENT 23:2


planning institution. Physicians often Greater sophistication may lead to
operate as independent contractors with- improved performance, but organizations
out ties or much allegiance to the organi- must be careful as they invest more and
zation. Many healthcare organizations, more in strategic management processes.
especially hospitals, have semi- Established processes, over time, tend to
autonomous power centers throughout become ends in themselves. That stage-
the organization. These power centers four strategic planning in healthcare is
may remove objectivity and innovative dramatically different from stage-four
thinking in strategic planning. Finally, strategic planning in industries outside of
many healthcare organizations (especially health may be acceptable. Maybe stage-
hospitals) are hierarchical by nature, tradi- four healthcare strategic planners have
tion, and culture, and will probably remain borrowed all they can from other indus-
so, thus altering bottom-up planning and tries and must become pathbreaking
participation. themselves.
3. Healthcare has always been subject to con-
PLANNING IN AN ACADEMIC
siderable outside control. Beyond local,
state, and federal legislative control, one
of healthcare's customersphysicians
MEDICAL CENTER
Donna Sollenberger provides an illustra-
tive case of strategic planning in an acade-
n
drives the entire process. Physicians are
mic medical center (AMC) closely
ignored at the healthcare organizations'
peril; however, their wants/needs/desires
following the best practices processes out-
lined by Zuckerman. Although most
O
are not always what is best for the health-
healthcare organizations have faced sig-
care organization's other customers
nificant change in the past two decades,
(patients, govemment) or the healthcare
nowhere has change been more turbulent
organization itself In addition, payment
than in AMCs. Their very purpose and
systems are unique to the industry, with
nature have been questioned as their
outsiders such as Medicare, insurance com-
focus on the sickest patients and those
panies, and other third-party payers wield-
with the most unusual diseases and con-
ing considerable pricing and market power.
ditions threaten their continued existence.
4. Society and its values place special At the University of Wisconsin Hospital
demands on healthcare organizations. and Clinics (UWHC), the previous "stable
The concepts of healthcare as a right, leadership" appeared to have ignored the
access to care, quality of life or death, significant changes occurring in health-
who will pay for the cost of care, and care in general (and medical centers more
other social issues alter healthcare specifically) and seemed to offer little H
strategic planning. preparation for encountering the future.
Sollenberger began the strategic planning
Strategic Planning Simply Applied process with an understanding of charac-
Strategic planning should not be made teristics that are critical for success as well
more rigorous or complicated than it as reasons that strategic management fails.
absolutely has to bethe simpler the bet- She thus spent considerable time in
ter. Strategic planning is not an end in ensuring the organization's preplanning
itself but rather a means to better results. and structuring participation (two of

PETER M .G I N T E R A N D L I N D A E. S W A Y N E 35
Zuckerman's "best practices"). Effort was DIRECTIONAL STRATEGIES
expended to find the right consultant, but Strategic thinking and establishing vision
we believe that consultants are not always set the direction for UWHC. UWHC's
necessary or beneficial. Consultants may mission was a critical component of its
impose on an organization planning tem- strategic plan, and although a mission
plates that are not right for it, or present a existed, it was not shared with the reader.
strategic plan that has been implemented A "textbook" vision was developed by the
elsewhere rather than aiding a healthcare leadership group; was it shared and com-
organization to develop its own unique mented on by other internal and external
strategic plan. In addition, a great deal of groups.^ The market position statement
time is often spent "educating" consul- contradicts the vision statement: a
tants on the unique aspects and culture of "regional healthcare provider" is very dif-
the organization. ferent from one that is "foremost in Wis-
In attacking critical issues, greater consin serving as a statewide and national
focus on the external environment and leader." UWHC values are really first rate
the future was needed. UWHC focused in two ways: the content ofthe values
on internal problem solving rather than themselves and the acronym that makes
creating its future (an them easy to remember and thus opera-
k strategic plan is unique approach that may have tional for every employee.
for each organization in been appropriate given its UWHC identified five goals. No orga-
internal problems). nization can undertake and successfully
its environment with its UWHC's initial foray into
achieve a large number of goals (three to
resources, competencies, strategic planning was five goals are doable). The ten strategies
and capabilities. rnore of a problem-solving identified to achieve the five goals
exercise emphasizing cul- seemed to be additional goals (and were
ture change. The five subcommittees SO called in their descriptions); we had
seemed to be based on internally identi- some difficulty in aligning them to the
fied problems (the dire statistics five goals. The use of a model illustrating
reported) rather than on strategic think- the relationship ofthe strategic goals to
ing about the organization's future. the ten strategies would have been benefi-
Obviously, at the time the focus was war- cial. The question might be, "Did UWHC
ranted and necessary: without fixing the really develop a focused strategy and dif-
internal operations, UWHC could not ferentiate itself from the competition?"
expect to successfully compete in a
changed external environment. Some A SIMPLE AND SUCCESSFUL PLAN
information was gathered from outside UWHC appears to have successfully
"reactor panels" but we do not have any managed implementation and was able
information as to how the panels' data to manage strategically. UWHC devel-
were incorporated into the process. The oped a plan that was not relegated to a
external environment has significant shelf; managers reported quarterly on
impact on a healthcare organization's results and dashboards were created.
ability to be successful. Phase two ofthe This organization learned through its
planning process would prove to be original strategic planning process and
much more strategic. became more aware ofthe importance of

36 FRONTIERS OF HEALTH SERVICES MANAGEMENT 23:2


the extemal environment. The nine new reminds us that a strategic plan is unique
strategies, developed in the second round, for each organization in its environment
are stated in a much more patient-focused with its resoiirces, competencies, and capa-
and employee-focused manner than the bilities. Would the five pathbreaking
internally focused original strategies. processes have helped UWHC? Do they
Clearly, the leadership of UWHC has need to increase their rigor and sophistica-
found a process that works for them. The tion with five pathbreaking practices from
process may be different from what might outside of healthcare? We think they are
work for another organization, but it doing fine.

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PETER M. GINTER AND LINDA E. S W A Y N E 37