1. Addressing Industry Trends
through
Active Strategic Planning
Cindy Wise
Vice President
Business Development
Virginia Rural Health Association Meeting
5. Why Active Strategic Planning
MORAL: To be sitting and doing nothing, you
must be sitting very, very high up
6. Road Map
What are the issues that are
directing how health care
is delivered in your
community?
What organizational
disciplines are required for
a hospital to successfully
plan and execute its
mission?
What should we monitor?
What tough decisions lie
ahead?
7. The New Political and Economic
Climate and the Implications for
Hospitals
8. The New Political Climate –
Designing New Delivery and Payment Models
Aggressive movement to EMR + EHR
Stimulus Funding Available
“Meaningful Use”
Value-Based Purchasing:
Episode based reimbursement (Bundling)
● One payment for the total health care
“episode”
● Shared/allocated by all providers
Pay For Performance initiatives
“Never Events” (Hospital-acquired conditions)
Chronic Care Management
Medical Homes
9. The New Political Climate –
Moving targets and new regulations
Impact of insurance requirements
Know your community
340B Program – CAH’s may apply
immediately
Medicare inpatient hospital payment
adjustment volume
Extended for 1 year
Criteria threshold up to 1600 Medicare
discharges
10. The New Political Climate –
Moving targets and new regulations
Extended Medicare flex grants for 1 more year
Payment adjustment for home health – thru Jan,
2017
3% add on
Medicaid expanded to 133% of federal poverty level
What’s the impact in your community?
Medicaid and Medicare phased in matching hospital
payment - 2014
11. The New Economic Climate –
Uncertain Patient Volumes
Percent of Hospitals Reporting a Moderate to Significant Decrease in
Patients Served, 2009 Calendar Year to Date versus Same Period Last Year
Moderate Decrease Significant Decrease
Elective
Procedures*
41% 18%
Inpatient
38% 17%
Admissions
*Elective refers to procedures that are scheduled in advance as
opposed to performed on an emergency basis.
Source: AHA. March 2009. Rapid Response Survey, The
Economic Crisis: Ongoing Monitoring of Impact on Hospitals.
12. The New Economic Climate –
Further Erosion of Net Patient Revenue
No Margin, No Mission
American Hospitals‟ Operating Margins Have Fallen in 2009
CY to Date vs. 2008
Moderate Decrease Significant Decrease
Operating
Margin
29% 28%
Total Margin 26% 39%
Source: The Economic Crisis, The Toll on the Patients and Communities
Hospitals Serve, American Hospital Association, April 27, 2009
13. The New Economic Climate –
Constrained Capital Funds
Pulse Survey: Respondents expect substantial capital
spending cuts if credit constraints continue
IT decision 77%
system
expenditures
Hold on all new
projects
Medical 79%
technology Substantial cutback
expenditures in expenditures
Some cutback in
New 72% expenditures
construction
expenditures
0% 20% 40% 60% 80% 100%
14. The New Economic Climate –
Changed Expense Management Fundamentals
Percent of Hospitals Making Changes in Response to
Economic Concerns since September 2008
Made Changes to Address 90%
Economic Challenges*
Cut Administrative 80%
Expenses
Reduced Staff 48%
Reduced Services 22%
Considering Merger 9%
Divested Assets 8%
Other 39%
*Percent of hospitals making at least one of above changes to
weather the economic storm.
Source: AHA. March 2009. Rapid Response Survey, The
Economic Crisis: Ongoing Monitoring of Impact on Hospitals.
15. The New Economic Climate –
Dynamic Hospital-Physician Relationship
Percent of Hospitals Reporting an Increase in the Degree to which
Physicians are Seeking Financial Support from Hospitals Since
Economic Conditions Began to Deteriorate in September 2008
Overall 65%
Physicians Seeking Increased Pay
for On-call or other Services 79%
Percent of Provided to Hospital
Above Citing Physicians Seeking Hospital
Type of
71%
Employment
Support
Sought Physicians Seeking to Sell Their
Practice
37%
Physicians Seeking to Partner on 22%
Equipment Purchases
Other 14%
Source: AHA. March 2009. Rapid Response Survey, The
Economic Crisis: Ongoing Monitoring of Impact on Hospitals.
16. Barriers to Collaboration Today
Top Physician Concerns…
Personal income
Malpractice costs
Work load
“Hassle factor” of today’s
medicine
…Compared to major goals
and concerns of hospitals:
Quality – evidence based and standardized care
Access – developing new markets/physician practices
Costs –improve cost effective care and management of
chronic care
Margin – to support the mission and recapitalize the
institution
Access to capital
16
18. Top Performing Hospitals…
Understand the underlying economics of all initiatives
Develop and adhere to implementation plans
Establish clear lines of accountability
Develop realistic budgets, manage to them and respond
to under-performance
Involve key physicians in planning, decision-making
and capital prioritization
Establish metrics and monitors to manage and evaluate
performance
Proactively assess and adjust to healthcare policy
changes (RAC, Value-Based Purchasing, Never Events,
Bundling)
19. Elements of Hospital Strategic Planning
Include…
“Organic” Growth
• Service Area Definition and Providers
• Growth and Demographics
• Multicultural Populations
Physician Opportunity
Competitive Opportunity
• Volume by Physician
• MD Location and Coverage • Market Share Trends
• Revenue by MD and Service Line • Competitor Share Analysis
• MD Needs • SWOT
• Splitter Detail
Geographic Opportunity
Payer Opportunity
• Market Position by Zip Code
• Market Position by Payor • Yield by Zip Code
• Market Position by Patient Age • Marketing Focus and Clustering
• Yield by Payor • Satellite Potential
• Medicare Advantage Profile • Development Opportunities
Service Line Opportunity
• Service Line Growth Trends
• Market Share Trends by Service Line
• Margin Impact
• Yield by Service Line and DRG
20. Know your hospital‟s strengths and weaknesses…
It is increasingly
Primary Service Area – Inpatient Market Share impossible for
General Medicine 32% community hospitals
to provide “full
Neurology 30%
service” care
Cardiac Services 29%
Core Service lines
General Surgery 25% should be profitable,
Vascular Services 24%
or at minimum,
break-even
Obstetrics 23%
Low volume service
Orthopedics 21% lines consume
Oncology/Hematology 20%
resources that can be
used to further
ENT 19%
strengthen core
Thoracic Surgery 16% services
0% 5% 10% 15% 20% 25% 30%
35% Look for strategic
partnerships
21. Understanding the Needs of Your Community
(“…the market never lies…”)
US Hwy 119
Wyoming Things to Know
WEST VIRGINIA
Why patients come
Pikeville Methodist Hospital
Pike
KENTUCKY VIRGINIA
Welch Community Hospital
to your hospital
US Hwy 52
Why patients go to
US Hwy 460
24620
other hospitals in
McDowell
your market
24850
24603
Why patients go
US Hwy 23
24614
Buchanan
24634
outside your market
Buchanan General Hospital
24657 for health care
24256 24631
24622 How your key
Jenkins Community Hospital
24627
US Hwy 460 service lines
24656
Dickenson Community Hospital
24220
compare to your
24646
24639 Tazewell competitors
Dickenson Clinch Valley Medical Center Physician referral
US Hwy 23 24239
US Hwy 19 patterns
Wise
23. Strategic Initiative Prioritization
Ease Of Implementation Sell Home Health
to a Local
Provider
Reorganize
The Revenue Establish a
Cycle Hospitalist
Program
Close a Strategic
Service Line
Organizational Impact
Top performing hospitals know the cost and the value of every
strategic initiative
Decisions are made only after fully understanding how the
organization will be impacted
(clinically, operationally, and financially)
30. In Summary…Go Forth and Become a
Top Performing Hospital!
Understand the underlying economics of all initiatives
Develop and adhere to implementation plans
Establish clear lines of accountability
Develop realistic budgets, manage to them and respond
to under-performance
Involve key physicians in planning, decision-making
and capital prioritization
Establish metrics and monitors to manage and evaluate
performance
Proactively assess and adjust to healthcare policy
changes (RAC, Value-Based Purchasing, Never Events,
Bundling)
