Strategic Planning: A Practical Primer for the Healthcare Provider: Part II

This article is the second of two parts.

External Evaluation—the Competitors

You need to identify your niche in the medical marketplace; this is what distinguishes you from all the competitors who are fighting for the same group of patients (i.e., the target market).(1) Your practice’s intent should be to attract those patients instead of allowing them to freely seek out your competitors; this is critical to your practice’s success. Simply put, you need to determine what the patients want. You then need to perform those internal practice activities that provide the bases for what the patients want, and you need to do so better than your competitors.

You will have to rely on marketing research to identify what your target patients want and how they decide whom to choose among various competitors. In Dr. Smith’s target market, for example, the potential patients for all four competitors come from occupants of the office buildings in the central business district; this is consistent with his mission statement described in Part I of this article. Let’s say that Smith hired a consultant to survey the potential patients to see what criteria they use when deciding where to address any medical concerns. The consultant identified three factors: easy access from the central business district; rapid diagnosis and correction of conditions; and minimization of return visits. Smith, who is familiar with the area around his clinic, identified three other medical clinics that might be able to satisfy those criteria: Brown’s, Jones’, and Williams’.

The task at hand is to make sure that Smith is able to provide at least one of the above three factors better than the other three clinics can. In other words, Smith wants to make sure he has a competitive advantage. Therefore, we need to evaluate each of Smith’s activities relative to the corresponding activities of the other three competitors. The initial intent is to see which activities Smith’s clinic performs better (i.e., its strengths) and where Smith’s clinic does not perform as well (i.e., its weaknesses) relative to his competitors’ performance. This comparison provides us with a common denominator against which we can make meaningful and valid comparisons.

We can now revisit Smith’s activities and see if, and where, he has a competitive advantage. Recall that the patients’ first decision criterion was convenience. After evaluating his location relative to those of the three competitors, Smith can see if more potential patients are within a three-block radius of his clinic than of the other clinics. Smith needs to come up with objective measures for defining “rapid diagnosis and correction of conditions,” the second criterion. The third criterion, minimum need for return visits, might require an objective evaluator to examine the need for return visits.

Due to space constraints, we have limited our coverage of competitive advantage here. To be really useful, you should evaluate all of your activities against very specific measurement criteria in order to see where you rank relative to your competitors or industry standard.(2) You may find other areas that are not necessarily linked to the competitive advantage but where you need to improve your practice, such as reducing costs.

Our focus now shifts to longer-term considerations. What else is going on around your company that you haven’t considered yet? How will those events change the way you are conducting the business in the long term?

Other External Considerations

Certain elements in the healthcare environment must be considered, because they will affect the general practitioner or primary care provider. One obvious element is the recently enacted Affordable Care Act (ACA). The near future will see testing of the ACA.(3) The ACA is not only about increasing healthcare coverage, but also about the way healthcare is delivered.(4) There are additional external elements to consider as well.

Technology is increasingly enabling care to be conducted over great distances between the patient and the doctor. Videoconferencing through webcams on laptops and mobile devices means that patients can interact with their medical providers over the Internet. Self-monitoring devices will make it easier for patients to monitor their own vital signs, monitor their blood glucose and cholesterol levels, and report their readings without having to physically make a visit to a healthcare provider.(5)

Structural changes will occur as consolidation of providers continues.

Patients will be encouraged to take better care of themselves (e.g., lose weight, quit smoking). Healthcare coaches provided by healthcare providers will be used to manage chronic medical problems.(4) Also there will be more emphasis on healthy living at the job site. Company-sponsored wellness programs are expected to increase.(3)

Structural changes will occur as consolidation of providers continues. Health systems and hospitals will continue to expand. Many medical groups, such as hospital health systems and physicians’ practices, will merge or be acquired.(6) Development of urgent care centers and the provision of basic medical needs (e.g., shots) at retail drug chains and “big box” stores is going to continue. Legislation attempting to expand the scope of practice by such medical providers as dentists, nurse practitioners, physician assistants, optometrists, and others has been watered down or killed in many state legislatures.(7)

This brief description of the healthcare external environment reflects the transformation of healthcare in the United States. In this fast-changing environment, the primary care physician will have to monitor the changes and make strategic adjustments.

Now let’s illustrate the impact of these environmental changes. Smith is not immune to changing regulations; these changes affect potential revenue and, therefore, profit. Smith is faced with two choices: (1) he can raise the prices for other services not directly affected by reimbursement rates; or (2) he can simply absorb cost increases and reduce his profit. In Smith’s marketing research report, he should have noted that “price/insurance” was not one of the major decision criteria on the part of potential patients. Therefore, Smith could raise prices to compensate for increased costs without losing too many patients. Of course, there is some price level at which the other criteria will start to play less of a role; this needs to be considered during the marketing research process.

The evaluation of the general environment is the least well defined area in strategic management.

In general, we refer to external factors that can have a positive impact on practices as opportunities and the negative ones as threats. Because these opportunities and threats affect all medical practices, your practice’s specific competitive advantage should allow you to benefit more than your competitors when all are faced with the same circumstances. Similarly, you should lose fewer patients than your competitors when all of you are faced with the same threat.

For instance, the aging population in general, together with the likelihood that people will work longer, affects general practitioners and primary care physicians. On the positive side (from Smith’s perspective), increased age also increases susceptibility to illness and injury. A clinic that provides appropriate services quickly and efficiently will enjoy a correspondingly higher demand than one without such efficiency. On the negative side, corporate downsizings have reduced the total population of potential patients in the target area. However, since Smith enjoys a higher demand than the competitors, he will most likely lose fewer patients than the other three.

The evaluation of the general environment is the least well defined area in strategic management. Doctors and office managers must exercise creativity and be insightful in order to notice changes. In fact, it would really help if doctors could predict the future. However, since that’s impossible, your next best bet is to stay alert to what’s going on around you by scanning the environment. By paying close attention to such media, you become more sensitive to changes. Although you will not be able to actually predict a change, you may be able to notice subtle changes before your competitors. You can then take action before anyone else and give yourself a competitive edge.

Putting It All Together in a Plan

It is now time to put these pieces together into a coherent and comprehensive strategic plan. The theme in any strategic plan is to fit all the pieces together. Ask yourself the following questions and then develop a to-do list of objectives that will set your company up for future success:

• Do I have sufficient resources to accomplish my current mission and achieve my future vision?

• Do I have sufficient strengths to ensure that I remain competitive?

• Do I have too many weaknesses such that they will overwhelm any advantages I may have?

• Are there enough opportunities and not too many threats such that I can achieve my future vision?

If you can answer “yes” to all of these questions, then your strategic management priority is to simply monitor the situation and note if anything changes. If you answer “no” to any of the questions, then you need to establish a detailed action list to correct the situation. Based on your understanding of where each of the pieces fit into the bigger picture, you can develop an action plan to correct the situation.

Reaching the Implementation Phase

Actually accomplishing the necessary tasks is the basis for the second phase of strategic management, the implementation phase. But until the necessary actions are identified, the plan can’t be carried out. It is easy to see that strategic management is a philosophy or way of thinking and not simply a quick fix, as most want.

All too often we hear about putting out the fires, crisis management, and being reactive versus proactive. We “know” that we should plan; it’s just too easy not to plan. Now that you have read this primer, we hope that you have a better understanding of the practical application of strategic management tools. Even more, we hope that you recognize how naturally strategic management fits with a commonsense perspective of running an ongoing business. Finally, combining an understanding that one should plan with the planning structure that strategic management provides, we hope that many will embrace the strategic management philosophy and enjoy a resulting positive influence on their bottom lines.

Bottom line: Strategic management is all about positioning your company relative to your competitors so that your performance will be better than theirs. This process is accomplished through discrete but interconnected steps where you identify resources and activities. You then compare your activities against your competitors’ activities to see whose are better; these become strengths for the owner. Your strengths that correspond to what the customers want become your competitive advantage. You then use your competitive advantage, in the face of changing environmental conditions, to out-perform your competitors.

References

1. Porter M. Competitive Strategy: Techniques for Analyzing Industries and Competitors. New York: Free Press; 1980.

2. Barney JB. Gaining and Sustaining Competitive Advantage. Reading, MA: Addison-Wesley; 1997.

3. KBM Group. Top 10 healthcare trends, 2014. KBM Health Services. http://content.kbmg.com/download/TOP_10_Healthcare_Trends_2014_Whitepaper.pdf .

4. DeVore S. The changing health care world: trends to watch in 2014. Health Affairs Blog. February 10, 2014. http://healthaffairs.org/blog/2014/02/10/the-changing-health-care-world-trends-to-watch-in-2014/ . Retrieved 7/10/2014.

5. Hewlett-Packard Development Company. Top 5 healthcare technology trends for 2014. www8.hp.com/us/en/campaigns/healthcare/articles/2014-tech-trends.html. Retrieved 7/10/2014.

6. Valentine S. Top 10 healthcare trends to watch in 2014. January 2014. www.thecamdengroup.com/thought-leadership/top-ten/10-healthcare-trends-to-watch-in-2014/

7. Sanner A. Newly insured to deepen primary case doctor gap. The Advocate Baton Rouge, LA. June 23, 2013. http://theadvocate.com/home/6323359-12 newly-insured-to-deepen-primary. Retrieved 6/23/2013.