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Strategic Plan
- 1. Strategic Plan of Norwalk Hospital Simon Sansano University of Phoenix HCS-586 Healthcare Strategic Management Susan McCourt, MNA, MBA, CHE February 23, 2004
- 2. Agenda ♦ Strategic Planning Process ♦ Response to external forces ♦ Organizational structure ♦ Financial Plan
- 4. Response to External Forces SWOT / TOWS Matrix Strengths Weaknesses Opportunities S-O strategies W-O strategies Threats S-T strategies W-T strategies
- 5. Organizational Structure ♦ Personal skill mix ♦ Facilities
- 6. Financial Plan Actual Forecast Revenues: Gross revenue from services to patient $279,893 $313,682 Third party discounts 97,002 115,475 Net revenue from services to patients $182,891 $198,207 Other operating revenues 12,336 11,993 Total operating revenue $195,227 $210,200 Expenses: Actual Forecast Salaries and Wages 80,479 87,783 Employee benefits 24,978 26,495 Supplies and other expenses 61,496 70,921 Bad debts and free care 10,899 11,118 Depreciation 12,485 12,233 Interest 801 767 Total operating expenses 191,138 209,317 Gain (loss) from operations 4,089 883 Non-operating revenue 2,765 -482 Excess of revenue over expenses (profit) $6,854 $401 Norwalk Hospital Forecasted Income Statement (000's)
- 7. Questions
Editor's Notes
- NH strategic planning model should be integrated with its financial planning. NH cannot pursue strategies that it cannot finance. In the same way, it cannot afford to ignore strategic opportunities that it can help ensure its financial viability. This approach is designed to concentrate NH’s energy on a limited set of initiatives that will drive future performance. A “Balance-Scorecard” approach is used to evaluate operational and strategic issues; coupled with corporate finance-based capital allocation that is used to quantify the potential impact of projected increased satisfaction. The entire management team should be educated in corporate finance concepts to be successful in this process.
- Strengths One of NH's strength is found in its financial performance measured in the operating margin, reflecting profits from primarily patient care, and the total margin, reflecting profits from both operating revenues and non-operating revenues. NH’s operating margin was among the top ten highest in the State of CT. NH experienced positive operating margins and positive total margins. These provide greater financial stability, especially in the midst of operational difficulties. This is made possible by the large endowments or receipt of significant philanthropic contributions. Another strength is found in its liquidity measures, specifically in its days in accounts receivable. This measures the average collection period. NH's average days of revenue in accounts receivable is 39 compared to the State's standard of 55. Its collection practices have led to cash flow solutions and lesser short term financing. Weaknesses Looking at NH’s average census, the volume of maternity, newborn and pediatric is decreased. Renovation of the maternity unit is needed, and increased marketing efforts are necessary in order to attract additional patients. Another service line that needs attention is its rehabilitation center. Although the department has been accredited for three years it has not attracted patients from the surrounding areas of Norwalk. Opportunities Major improvements have come in the field of cancer pain, along with continuing improvement in, and implementation of, its hospital-wide pain management program. This opportunity created an Interdisciplinary Pain Management Task Force that plays a key role in the pain management services throughout the hospital. Its modern intervention pain management service has experience an increase in cases this past year and referrals from neighboring hospitals has increased. An opportunity to launch a program involving hospitalist clinician-educators, hospital-based physicians admitting and treating only inpatients has been implemented. This program continues to benefit physicians and patients alike. Several individual private practitioners and one major medical group have volunteered to admit all its patients to the hospitalist staff. Threats The familiar forces causing stress to Connecticut hospitals and the health care delivery system as a whole continue to include rising labor costs and insurance premiums, lower reimbursement rates, reduced investment returns, costs associated with new technology and aging population demographics. These factors along with a continually weakening economy create an extremely challenging environment for Connecticut’s hospitals in general. A significant cost pressure facing Connecticut hospitals is the shortage of nurses, which has resulted in increased use of agency personnel and overtime pay for nursing staff. In addition, reports of wage wars and generous sign-on bonuses are becoming more frequent. Health care is a labor-intensive business. As opportunities for young men and women outside of nursing have expanded, the number of new recruits entering the workforce has declined over the last two decades. This has resulted in a steadily aging nursing workforce. Like the rest of the nation, Connecticut also faces aging population demographics. According to U.S. Census data, Connecticut’s elderly population, those 65 and older, has increased by 5.1 percent since 1990. The median age for state residents rose from 34.4 years in 1990 to 37.4 years in 2000. This aging mirrored a national trend; the U.S. median age increased from 32.9 in 1990 to 35.3 in 2000 (US Census Bureau). Credit rating agencies such as Standard and Poor’s are citing rapidly rising insurance and pension funding costs as a significant challenge facing not-for-profit hospitals, health systems and senior living providers. The cost of malpractice, property and health insurance are rising well above the rate of inflation. Hospitals are facing increased costs of care as a result of advances in medical technologies and escalating pharmaceutical and supply costs. Ongoing upgrades in technology continue to be a challenge for hospitals. Many hospitals are choosing to lease new machines and equipment to allow them affordable access to new technology. Other hospitals are using older equipment beyond estimated useful lives, until the cost of repair or lack of available replacement parts force them to acquire new. S-O strategies pursue opportunities that are a good fit to the hospital’s strengths. W-O strategies overcome weaknesses to pursue opportunities. S-T strategies identify ways that the hospital can use its strengths to reduce its vulnerability to external threats. W-T strategies establish a defensive plan to prevent the hospital's weaknesses from making it highly susceptible to external threats. This will help NH to focus on its strengths, minimize weaknesses, and take the greatest possible advantage of opportunities available (Mind Tools).
- Norwalk Hospital’s (NH) care delivery model should be supported by their infrastructure and this is done by maximizing their staff competencies. It is the hospital’s delivery system must focus on the patient mix, and the acuity of patients involved. A multi-disciplinary support system should be in place, which includes numbers and types of personnel who are prepared and willing to collaborate with one another in a patient-focused environment. Its protocols and clinical care maps must be regularly reviewed, to see that patient needs are met in a timely, cost-effective manner. This is supported by a multi-disciplinary patient review in an ongoing advances in practice (Abrams, 2000). An assessment of needs should be performed to determine if the staff numbers, skill mix, and competency are sufficient for the care provided. Its staffing assignments should be based on the level of education and expertise, as well as patient severity and intensity of service provided (Abrams, 2000). The nursing administrator must regularly review the patient numbers, acuity, and case mix to ensure that the staff are sufficient in number, mix, and preparation to safely and appropriately care for the patients. A high level of staff preparation for all disciplines should be reviewed by an ongoing clinical education and competency program. Staff should be rewarded for demonstrated increases in clinical preparation, including completion of certification programs. Multi-disciplinary journal reviews should be held regularly, at times to facilitate staff attendance. In today's challenging healthcare environment, NH executives should carefully review and evaluate all expenditures. Just as patients often rely on a second medical opinion, NH can benefit by seeking an independent appraisal, or second opinion, regarding their building programs (Oerly, 2003). During the development of major expansion/renovation projects, concerns may arise over cost or design efficiency. Many times, when construction bids are received, hospital owners discover that the initial design plan exceeds the budget, or they may experience "cost creep" over time (Oerly, 2003). For some projects, architectural drawings prove to be less than optimal in terms of departmental adjacencies, aesthetics, or other factors. NH should note that the greatest opportunity to maximize value is during the design phase. When cost or design issues surface, the NH may benefit by having its building program reviewed by another design firm, general contractor, or other outside expert not associated with the original design plan. So NH needs to hire an independent evaluator to conduct during the process of development of its Master Facilities Plan, schematic drawings. This independent evaluation should prove beneficial because it will address issues such as efficiency design, impact on operations, sequencing of phases, cost of the project, and the time lines (Oerly, 2003).
- 1. Revenues generated from increased patient mix, including the expected in maternity, pediatric and neonatal patients (3 units of Norwalk) 2. Increased in third party discounts brought by aggressive marketing to the 4 adjacent counties around Norwalk 3. Increased in salary and wages are caused by hiring of additional health and non-health staff in the 3 units of Norwalk 4. Increased utilization of the 3 units will require additional supplies and expenses 5. Increased in profit will be reinvested to support both short and long term acquisition