Value-Adding Support Strategies

Chapter 9 Value-Adding Support Strategies

Why Value-Adding Support Strategies Are Important

As advanced by Michael Porter, the value chain may be used to identify and analyze the strategically relevant activities that create value and ultimately com- petitive advantage for an organization. Strategically relevant value-adding sup- port activities include the organization’s culture, organizational structure, and strategic resources (financial resources, human resources, information systems resources, and strategic technologies resources). In a similar manner to service delivery, the support strategies must be linked to demands of the overall strategy and the organization’s strengths and weaknesses. Developing strategies for the strategically relevant support activities is crucial because of the ways these activi- ties add value and differentiate the organization. The support activities may be less visible than service delivery activities, yet are profoundly important.

“The value chain disaggregates a firm into its strategically relevant activities in order to understand the behavior of costs and the existing and potential sources of differentiation.”

—MIchAel PorTer, STrATegy AuThor AnD ProfeSSor

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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Ideology or culture is at the center of determining the ability of an organization to support service delivery and the overall organizational strategy. The organiza- tion’s culture is not separate from the organization but inherent to it. In addition, an organization’s culture infuses life into the organization’s structure as well as into the strategic resources. If the organizational culture is adaptive, it can respond to the periodic changes that must be made in all elements of the value chain that enable the organization to remain relevant.

The organization’s structure is critical to accomplishing the strategy – structure should probably follow strategy. Whether the organization structure will be flat or tall; whether the organization will make decisions centrally or will decentralize deci- sion making, will be tied not only to the organization’s strategy but also to its culture. Therefore, the organization’s structure is dependent on the culture.

further, culture infuses life into the strategic resources – the strategically rel- evant support activities that make the service delivery and broader organizational strategies possible. Without the right people, adequate financial resources, a strate- gic information system, and appropriate technology, service delivery will be ham- pered and the overall strategy will not be accomplished. Pulling these strategic resources together is essential for successful implementation of the strategic plan.

Developing effective value-adding support strategies is aided by processes and guidelines that determine whether the support functions need to remain the same or change to meet the demands of the strategy and align with the organization’s strengths. Proper translation of the strategy, an adaptive culture, and the appro- priate strategic resources are necessary for a successful organizational strategy.

use the concepts in this chapter to develop effective value-adding support strategies for a health care organization!

learning objectives

After completing the chapter you will be able to: 1. Explain why the value-adding support strategies are important elements in the

implementation of strategy. 2. Align the value-adding support strategies to ensure they point the organization

toward achieving its mission, vision, and goals. 3. Link the results of internal analysis of the support activities to the implementa-

tion of value-adding support strategies. 4. Demonstrate how the culture, structure, and strategic resources of an organiza-

tion must be explicitly linked to directional, adaptive, market entry/exit, and competitive strategies, as well as the value-adding service delivery strategies.

5. Discuss how the value-adding support strategies may be used to create or solidify competitive advantages and strengthen weaknesses to overcome com- petitive disadvantages.

6. Explain how the value-adding support strategies provide guidance for the devel- opment of organizational objectives and action plans.

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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Chapter 9 Value-adding Support StrategieS 361

Strategic Management Competency After completing this chapter you will be able to create effective value-adding support strategies for a health care organization.

Implementing Support Strategies

As indicated in chapter 8, implementation strategies take a decidedly internal focus. effective and efficient operations make strategies work. Along with the pre-service, point-of-service, and after-service strategies, the value-adding support strategies should be developed and specified. Similar to the service delivery strategies, the value-adding support strategies are implementation strate- gies directed toward accomplishment of all the other strategies including the directional, adaptive, market entry/exit, competitive, and service delivery strategies.

unfortunately, as with service delivery strategies, value-adding support strate- gies may not succeed because of a lack of proper implementation. Three pillars of effective execution are necessary for successful implementation of strategies – direction, structure, and people.1 Direction involves stepping down the strategic plan to the specifics of getting things done. Structure is the organization of the processes necessary to accomplish the strategy and people means that the organi- zation must have the engaged individuals required to make strategy happen. for organizations to reach ambitious strategies, they must thoughtfully and purpose- fully manage the way the strategy is implemented.2

Similar to service delivery, the value chain provides a strategic thinking map of the support activities that create value for the organization and may be a source of competitive advantage or disadvantage. The value-adding support strategies are based on the elements of the lower portion of the value chain and are the means for accomplishing the decisions made in strategy formulation (see exhibit 9–1). once the support strategies are determined, more specific action plans may be developed (see chapter 10).

Decision Logic for the Value-Adding Support Strategies

once the service delivery strategies (the primary value-adding activities) are for- mulated, support strategies that provide the appropriate organizational context and resources to carry out the organization’s strategy are needed. As illustrated in exhibit 9–2, the support strategies are dependent primarily on the organiza- tion’s market entry/exit strategies (which achieve the adaptive strategies), com- petitive strategies (strategic posture and positioning), and the service delivery strategies. The success of these strategies may be dependent on the effectiveness of the organization’s culture, structure, or strategic resources. for example, an

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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362 StrAtegic mAnAgement of HeAltH cAre orgAnizAtionS

ExhIbIt 9–1 The Value Chain

PRE-SERVICE Market/Marketing Research Target Market Services Offered/Branding Pricing Distribution/Logistics Promotion

POINT-OF-SERVICE Clinical Operations

Quality Process Innovation

Marketing Patient Satisfaction

AFTER-SERVICE Follow-up

Clinical Marketing

Billing Follow-on

Clinical Marketing

ORGANIZATIONAL STRUCTURE Function Division Matrix

STRATEGIC RESOURCES Financial Human Information Technology

A dd

Va lu

e A

dd Va

lu e

S er

vi ce

D el

iv er

y S

up po

rt A

ct iv

iti es

ORGANIZATIONAL CULTURE Shared Assumptions Shared Values Behavioral Norms

Source: Adapted from Michael E. Porter, Competitive Advantage: Creating and Sustaining Superior Performance (New York: Free Press, 1985), p. 37.

acquisition or merger market entry strategy may require the combining of two very different organization cultures. Similarly the demands of a differentia- tion positioning strategy may require additional technical, human, or financial resources. Additionally, changes in the service delivery strategy will likely initiate culture and structure modifications.

Process for Developing Support Strategies

Just as a step-wise process was helpful in developing the broader strategies and service delivery strategies, a similar process for formulating the support strategies is presented in exhibit 9–3. for each of support activities – culture, structure, and strategic resources – the demands of the broader strategies (market entry/exit, competitive strategies, and service delivery strategies) must be matched to the results of the internal analysis to determine if the sup- port strategies need to be maintained or changed to accomplish the selected strategies. once the strategy is determined, guidance can be provided to the organizational units.

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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Chapter 9 Value-adding Support StrategieS 363

ExhIbIt 9–2 Decision Logic for Developing Support Strategies

Directional Strategies

Adaptive Strategies • Expansion of Scope • Reduction of Scope • Maintenance of Scope

Market Entry/Exit Strategies

• Purchase • Cooperation • Development • Market Exit

Competitive Strategies • Strategic Posture • Positioning

Implementation Strategies

• Organizational Culture • Organizational Structure • Strategic Resources

Implementation Strategies • Service Delivery Strategies

Implementation Strategies • Unit Action Plans

Unit-level Strategies

Organization-level Strategies

Corporate- and Divisional-level Strategies

Support Strategies

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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364 StrAtegic mAnAgement of HeAltH cAre orgAnizAtionS

Step 1: Identify the Support Requirements of the Strategy and Support Value-Adding Potential

The appropriate directional, adaptive, market entry/exit, and competitive strate- gies have been discussed in chapters 5 through 7. As illustrated in exhibit 9–2, the market entry/exit, competitive, and service delivery strategies place the great- est demands on the support strategies. The value-chain support strategies must aid in the accomplishment of these strategies. Although the requirements of the market entry/exit, competitive, and service delivery strategies will be unique to each particular situation and organization, general internal resource, competency, and capability requirements for the market entry/exit strategies were presented in exhibit 7–19, for the posture strategies in exhibit 7–22, and for the positioning strategies in exhibit 7–24. using these tables can stimulate strategic thinking for most any organization. for example, an internal venture market entry strategy

ExhIbIt 9–3 Process for Developing Support Strategies

Step 1 – Identify the Support Requirements of the Strategy and Support Value-Adding Potential

Step 2 – Compare the Strategy Requirements with the Results of the Support Activities Internal Analysis

Step 3 – Decide to Maintain or Change Organizational Culture

Step 4 – Decide to Maintain or Change Organizational Structure

Step 5 – Decide to Maintain or Change Strategic Resources

Step 6 – Provide Guidance to Organizational Units

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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Chapter 9 Value-adding Support StrategieS 365

will require financial resources, an entrepreneurial culture, and marketing exper- tise. A defender strategy will require development of a single core technology, cost efficiency, and management emphasis on centralized control and stability. further, a cost leadership strategy will require investments in efficiency, process engineering skills, focus on minimizing labor costs, and so on. finally, there may be additional requirements of the support activities depending upon the adopted service delivery strategies.

Importantly, strategic managers must think through how the support strat- egies are able to assist in carrying out the broader organizational strategies. unfortunately, no formula or template exists for determining strategy require- ments; each organization, service category, and service area has its own particular considerations. focused strategic thinking will be needed to work out a plan, then learning what works – and what does not – as the plan unfolds, will be essential.

Value-Adding Support Strategies Potential The lower portion of the value chain provides direction for the development of the value-adding support strategies and includes the organization’s culture, structure, and strategic resources. More specifically, the support strategies concern areas such as the behavioral norms, organization structure and flexibility, human resources, finance, information systems, and technology, and play a major role in the implementation of the organization’s overall strategy. each area adds value in the organization. Thus, strategies are required to maintain or enhance the organi- zation’s competitive advantages and to strengthen competitive disadvantages. Increasingly, health care managers are trying to implement evidence-based man- agement practices to improve the organization’s culture, structure, and strategic resources (see essentials for a Strategic Thinker 9–1, “What Is evidence-Based Management?”).

ESSEntIALS foR A StRAtEgIC thInkER 9–1

What is evidence-Based management?

Evidence-based management (EBMgt or EBM) is an emerging philosophy of management that employs current best management practices that have been tested in real-world organiza- tional settings and are supported by data docu- menting their effectiveness or efficiency. The approach involves hypothesis development and testing, documentation of results, and the syn- thesis of best management practices. Spurring this movement is the belief that when manag- ers act on better logic and the best available

evidence, their organizations will fare better than organizations not using best practices.1 Evidence-based management uses a systems approach to identify components of a manage- ment problem and to identify sound evidence supporting a solution. This approach can be particularly helpful when conducting external analysis during strategic planning. Both external and internal analyses require the collection and analysis of data, and can benefit from the incor- poration of best practices (including thinking

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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366 StrAtegic mAnAgement of HeAltH cAre orgAnizAtionS

through future implications of current trends, etc.). Once a part of the culture, managers can practice evidence-based management system- atically so that it becomes second nature.

Evidence-based management has its origins in evidence-based medicine. In an attempt to rely less on traditional, more subjective, practices, evidence-based medicine focuses on the devel- opment of medical best practices using data from well-designed empirical research concern- ing the outcomes of medical procedures, drugs, and practices. An emphasis on evidence-based medicine helped to generate the field of medical decision making and outcomes research.

Much of the activity of developing evidence of effective management begins with organiza- tional experiments and is a matter of developing management practices, putting those practices in place, measuring the practices’ effectiveness against objectives, and redesigning best prac- tices based on results. Thus, the evidence in evidence-based management  comes largely from scientific research, but internal business information and even professional experience can count as evidence as well.2

Management professors and authors, Jeffrey Pfeffer and Robert Sutton conclude:

As with medicine, management is and will

likely always be a craft that can be learned

only through practice and experience. Yet

we believe that managers (like doctors) can

practice their craft more effectively if they

are routinely guided by the best logic and

evidence – and if they relentlessly seek new

knowledge and insight, from both inside

and outside their companies, to keep updat-

ing their assumptions, knowledge, and

skills. We aren’t there yet, but we are getting

closer. The managers and companies that

come closest already enjoy a pronounced

competitive advantage.1

RefeRences

1. Jeffrey Pfeffer and Robert I. Sutton, “Evidence-

Based Management,” Harvard Business Review

84, no. 1 (2006), pp. 62–74, 133.

2. www.cebma.org/faq/evidence-based-

management (accessed July 1, 2017).

As with the service delivery strategies, value-adding support strategies must be consciously aligned. Strategic managers should take care to ensure that the support strategies are consistent and compatible with each other and that they contribute to the accomplishment of the organization’s overall strategy. Therefore, the support strategies for each area cannot be developed or evaluated in isolation. It is the strategic manager’s responsibility to make decisions concerning each support strategy and ensure that these elements are coordinated to help achieve the overall strategy of the organization. Strategic thinking, strategic planning, and managing strategic momentum are central to this process. A brief review of value- chain support strategies demonstrates their potential for achieving organizational goals and strategies.

organizational Culture Strategies Organizational culture is unique and exerts a powerful influence on how people function and act as a key factor in how well the organization performs. Studies have demonstrated that in addition to strategy, execution, and structure, the

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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Chapter 9 Value-adding Support StrategieS 367

proper culture is imperative for organizations that outperform their industry peers.3 Moreover, effective culture has been shown to vary significantly from industry to industry.4 Successful strategic managers understand the importance of organizational culture and that shaping organizational culture is an essential part of leadership.5 Therefore, strategic leaders implementing strategy must effectively integrate operational changes, as well as cultural changes, into the fabric of the organizations they lead.6 In the case of health care delivery, cultural factors such as excellence in health care delivery, ethical values, involvement, professional- ism, value for money, cost of care, commitment to quality, strategic thinking, plus diversity and inclusion are important determinants of the quality of care7 (see essentials for a Strategic Thinker, 9–2, “What Are Diversity and Inclusion?”).

ESSEntIALS foR A StRAtEgIC thInkER 9–2

What Are Diversity and inclusion?

Diversity and inclusion are often used inter- changeably, but these terms are not synonymous. Diversity is the breadth of lived experiences by people from different backgrounds. These differ- ent backgrounds may relate to identities such as race, ethnicity, age, gender, gender identity, sexual orientation, disability, social class, religion, political identity, and national origin. Whereas diversity rec- ognizes the differences among people, inclusion goes beyond recognition and focuses on valuing these differences. It is the intentional engagement of people from different backgrounds that fosters inclusion. As consultant, Vernā Myers, masterfully states: “Diversity is being invited to the party; inclu- sion is being asked to dance.”1

Diversity is typically measured by review- ing data on the number of people from differ- ent backgrounds within an organization. For example, organizations may review annual data regarding the recruitment, interviewing, and hiring of women and individuals from histori- cally underrepresented groups. These efforts to collect and monitor data are necessary; how- ever, diversity in numbers is just the first step. It is not sufficient to increase the numerical repre- sentation of people from different backgrounds,

without also developing an organizational cul- ture that values the lived experiences of every individual. The intentional engagement of peo- ple from diverse backgrounds is needed to create and cultivate an inclusive culture.

For diversity and inclusion, the adage “every organization is perfectly designed to get the results that it is getting” is poignant, yet real. A diverse and inclusive culture will not occur by happenstance. Organizations that make lit- tle to no progress in the areas of diversity and inclusion seek members who will acclimate to the existing culture and make a good “fit.” In contrast, organizations that make diversity and inclusion a priority seek a cultural environment that is welcoming to members from different backgrounds. For the latter, “fit” is no longer about whether the individual will conform to the current environment, but about how the individual will enrich the current environment. Initial assessments of whether an organiza- tional culture embodies diversity and inclusion may examine:

● Do the vision, mission and values of the organization embrace diversity and inclusion?

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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368 StrAtegic mAnAgement of HeAltH cAre orgAnizAtionS

In some situations culture may be more important than strategy, as an organiza- tion can copy a strategy, but replicating culture is much more difficult.8 Strategy implementation is most likely to be successful when the culture of the organi- zation is appreciated and considered. Indeed, culture should serve strategy.9 A cognitive culture, as well as an underlying emotional culture, are operating in organizations. The cognitive culture is made up of its stated intellectual values, norms, artifacts, and assumptions that serve as a guide for behavior and might include such values as customer focus, teamwork, and quality.10 The cognitive cultural values are typically promoted and documented in an organization’s strat- egy and provide meaningful behavioral guidance.

The cognitive culture is shaped by strategic managers largely through the directional strategies and the organizational systems, practices, and processes. The cognitive assumptions, values, and behavioral norms set the tone for how employees think and behave and persists over time even when the membership of the organization changes.11 Cognitive assumptions include a common understand- ing of “who we are” (mission) and “what we are trying to accomplish” (vision and strategic goals) and the belief in the values of the organization. Cognitive values represent the understanding of “the way we do things” and reflect the organiza- tion’s shared values. The cognitive behavioral expectations or behavioral norms are common understandings among the members of a group or organization concern- ing appropriate ways to act and interact.

The emotional culture is reflected in the shared values, norms, artifacts, and shared assumptions and reflect how people feel in the workplace; it is manifest as emo- tions such as happiness, sadness, fear, joy, caring, indifference, and so on.12 People in organizations are socialized by the organization through the cognitive culture,

● Do the organization’s structure, function, and processes denote a diverse and inclu- sive culture?

● Does the organization foster a sense of belonging for each individual?

The responsibility for ensuring a diverse and inclusive culture belongs to each member of the organization – not just to those individuals who are the focus of targeted diversity efforts (e.g. women, minority groups). Leaders must lead to create a culture in which diversity and inclusion are ingrained in the foundation of the organization. Diversity without inclusion or inclusion without diversity will not work. Both diversity and inclusion are critical for meaningful change to ensure all people and

their unique identities and contributions are recognized and valued.2

RefeRences

1. Vernā Myers, The Vernā Myers Company.

Baltimore, MD. http://vernamyers.com/

(accessed May 2017).

2. L. Sherbin, and R. Rashid, “Diversity

Doesn’t Stick without Inclusion.” Harvard

Business Review (2017). https://hbr.

org/2017/02/diversity-doesnt-stick-without-

inclusion?referral=03759&cm_vc=rr_item_

page.bottom.

Source: April P. Carson, PhD, MSPH, FAHA, Associate Professor

and Director of Office of Diversity, Equity and Inclusion, School of

Public Health, University of Alabama at Birmingham.

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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Chapter 9 Value-adding Support StrategieS 369

but also have a self with capacities for self-reflection and purposeful action.13 Most leaders are focused on the cognitive culture; however, the emotional culture influ- ences commitment, decision making, teamwork, burnout, turnover, absenteeism, and work quality.14 People’s emotions are drivers of organizational processes.15 for instance, in health care the emotional culture may deliver a callous and indif- ferent care rather than compassionate care that would support the strategy.

The attitudes and behaviors of management of the organization largely set the tone for the emotional culture. A positive attitude and optimism demonstrated by management can go a long way in creating a positive emotional culture. In addi- tion, encouraging creativity and innovation, joy and fun, and instilling pride in quality work further shape a positive emotional culture and tend to be contagious in organizations. furthermore, a caring and kind emotional culture will foster organizational loyalty.

Strategic managers must focus on both the cognitive and emotional cultures to successfully shape and create an adaptive organizational culture. The cur- rent culture may already be supportive of strategic efforts and, thus, there is no requirement to dramatically change the culture. In this case, maintaining cognitive culture and nurturing the emotional culture may be all that is neces- sary. on the other hand, the cognitive or emotional culture may not support required strategic changes. If this situation occurs, the implementation process may require a change in and management of the stated values of the cognitive culture, and active management of the emotional culture, to encourage people to experience the emotions valued by the organization. Although culture change is difficult, it is often an important factor in moving the organization toward realizing its vision.

organizational Structure Strategies Similar to culture, the organizational structure must facilitate rather than impede the implementation of the overall strategy. “Whenever the execu- tives responsible for the firm fail to create the offices and structure necessary to bring together effectively the several administrative offices into a unified whole, they fail to carry out one of their most basic economic roles.”16 The relationship among strategy, structure, and performance continues to be a topic of great interest and receives much attention.17 A long-standing, although not universally accepted, tradition in strategy research, known as configuration theory, argues that in specific cases (e.g. industries, locations, and so on) certain organizational structures are more effective in accomplishing the mission than others.18 This view has been confirmed in a number of settings and reinforces configuration theory.19

once the directional, market entry/exit, competitive, and service delivery strat- egies have been developed, management must determine what organizational structure will best facilitate the strategy. This strategic thinking activity matches the requirements of strategy with the advantages and disadvantages of various organizational structural options. In addition, it should be acknowledged that an organization’s current organizational structure might limit the strategic options or at least their initiation in the short run. over time, the structure can be changed to

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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370 StrAtegic mAnAgement of HeAltH cAre orgAnizAtionS

meet the needs of the proposed strategy. At some point, the strategist must decide if the present structure should be maintained or changed. This decision must be carefully made to facilitate the accomplishment of the long-term strategy and not merely capitalize on a few profitable activities in the short term.20

organizational hierarchy remains the basic structure of most large organiza- tions.21 organizations, whether loosely coupled, networked, or divisionalized, are no more than modifications of the same basic design and hierarchies remain the best available mechanism for doing complex work.22 There are three funda- mental organizational hierarchical designs that form the basic building blocks for organizations:

1. functional structure. 2. Divisional structure (strategic business or service units). 3. Matrix structure.

Functional Structure A functional structure is an organization structure based on the primary activities or processes required for producing the product/service of the organization. functional structures organize activities around the mission- critical activities or processes of the organization and are the most prevalent structures for single product/service and narrowly focused organizations. A func- tional structure might include departments such as clinical operations, marketing, finance, information systems, and so on. however, activities will vary from one organization to another. often parts of an organization are structured around pro- cesses. for example, in health care organizations, clinical operations are mission critical and the clinical function may be at the center of a functional structure. The clinic may then be organized around separate clinical processes such as registra- tion, testing, examination, lab, and so on.

A functional structure builds a high degree of specialization and expertise within the functions or processes and can foster efficiency, particularly when tasks are routine and repetitive (such as in clinics). Moreover, in this type of organi- zational structure, control of strategic decisions is highly centralized. however, functional structures sometimes foster “silo thinking,” slowing down decision making and inhibiting horizontal communication. As a result, it becomes a major task of strategic management to keep functional managers focused on the broader mission and the organization’s vision (beyond their own functions) and to ensure coordination and communication across the functions. exhibit 9–4 illustrates a functional organizational structure for clinical operations (organized around processes) and summarizes the advantages and disadvantages of functional structures.

Divisional Structure A divisional structure is developed on the basis of the organization’s products/services, geographic markets, or customers (semi- autonomous business or service units). Divisional structures are common in organizations that have grown through diversification, vertical integration, and aggressive market or product development. As organizations grow and become

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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Chapter 9 Value-adding Support StrategieS 371

more diverse, divisional structures are used to break the organization down into more manageable and focused parts. Therefore, a divisional structure creates several smaller, more focused, semi-autonomous strategic business/service units (SBus/SSus).

Structures with geographic divisions allow each division to tailor strategy and differentiate products/services based on the unique needs or characteristics of the geographic area or market. local responsiveness will usually result in enhanced performance because communication and coordination with a target market will be improved. When organizations have multiple unique products/services, a divisional structure that places organizational emphasis on these products/ser- vices may be most appropriate. This structure gives product division managers authority and responsibility to formulate and implement a product/service strat- egy. In addition, the structure allows functional areas to specialize around each product/service, thus increasing coordination and communication. Divisions based on products/services increase the focus on products, markets, and quick response to change.

Divisional structures are not without problems. Divisional structures make it difficult to maintain a consistent image or reputation, add layers of management because of duplicate services and functions, and require carefully developed policy guidelines for the SBu/SSu. In addition, divisional structures may create competition for resources among the divisions. exhibit 9–5 illustrates an organi- zational structure with product divisions (organized geographically) and summa- rizes the advantages and disadvantages of divisional structures.

ExhIbIt 9–4 Functional Structure Combined with Process Structure

CEO

Maintenance; Housekeeping

Information Systems

Finance & Accounting

Clinical Operations

Human Resources

Marketing Functional Structure

Functional Structure

Medicine Surgery Obstetrics Pediatrics Clinical

Services

Post-Op Recovery

Surgical Procedure

Anesthesia Prep & Adm.

Pre-Op Preparation

Process Structure

Functional Structure Strategic Advantages

• Builds a high degree of specialization • Fosters efficiency • Centralizes control and decision making • Develops functional expertise

Functional Structure Strategic Disadvantages

• Fosters “silo thinking” − narrow specialization • Slows down decision making • Makes horizontal communication difficult • Makes coordination difficult • Limits the development of general managers

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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372 StrAtegic mAnAgement of HeAltH cAre orgAnizAtionS

Matrix Structure A matrix structure is an organization structure based on the organization’s projects or programs where centralized functional specialists interact with and provide services to project or program teams. A matrix structure may be most appropriate when organizations have numerous products or projects that draw on common functional expertise. The fundamental rationale underly- ing a matrix structure is to organize around problems to be solved rather than functions or products or geography. Matrix organizations develop expertise and allow product areas or projects to use that expertise as needed. Therefore, in this structure, functional specialists may work on a number of different projects and with a number of project managers over time. Matrix structures foster creativity and innovation in the organization; therefore, the structure is particularly effective for rapid product development and can accommodate a wide variety of product or project activities.

Matrix structures are difficult to manage – no one disputes that fact. The struc- ture violates the “unity of command” (a person reports to only one boss) principle and, as a result, employees are often confused on priorities and “who is the boss.” Therefore, this type of structure requires a great deal of coordination and commu- nication, plus some degree of negotiation and shared responsibility between pro- ject managers and functional managers. exhibit 9–6 illustrates a matrix structure, summarizing the advantages and disadvantages.

ExhIbIt 9–5 Divisional Structure – Product with Geographic Divisions

CEO

Professional Services

Product Structure

Eastern Division

Southern Division

Western Division

Geographic Structure

Divisional Structure Strategic Advantages

• Forces decision making down the organization

• Allows different strategies among divisions • Fosters improved local responsiveness • Places emphasis on the geographic region

or product/service • Improves functional coordination within

the division • Identifies responsibility and accountability • Develops general managers

Divisional Structure Strategic Disadvantages

• Makes it difficult to maintain a consistent image/reputation

• Adds layers of management • Duplicates services and functions • Requires carefully developed policies and

decision-making guidelines • Creates competition for resources

Medical Management

Affiliated Services

HospitalsFoundationInsurance

Corporate Services

• Legal • Planning • Marketing • Administrative Services

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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Chapter 9 Value-adding Support StrategieS 373

Combination Structures and Teams Determining the most effective basic structure to carry out the strategy is critical for all organizations; however, health care organizations are rarely organized using just a single structural building block. rather, health care organizations commonly find it necessary to create combination structures to mix and often supplement the basic design. Combination structures use more than one type of organizing approach. for example, functional organizations are often supplemented with cross-functional teams to improve coordination and communication. furthermore, geographic divisions may be organized around functions or products. Product divisions may have geographic divisions as well as func- tional components. organizational structure should enable the strategy; managers should select the most appropriate set of organizational structure building blocks.

Although the organizational structure building blocks set the basic design of the organization, seldom are they adequate for carrying out the strategy and work of the organization. Therefore, most organizations modify their basic structure

ExhIbIt 9–6 Matrix Structure

CEO

Maintenance; Housekeeping

Information Systems

Finance & Accounting

LegalHuman Resources

MarketingClinical

Clinical Services

Matrix Structure Strategic Advantages

• Develops functional expertise • Allows for a variety of product/project developments • Allows for the efficient use of functional expertise • Encourages rapid product development • Fosters creativity and innovation

Medicine

Surgery

Obstetrics

Pediatrics

Matrix Structure Strategic Disadvantages

• Causes difficulties in management • Violates the unity of command principle • Creates coordination and communications problems • Requires negotiation and shared responsibility • Allows for confusion on priorities

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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with some type of coordinating structures. These coordinating structures are sometimes referred to as the collateral organization – a system of teams, task forces, committees, and ad hoc groups that supplement the basic organization structure and are used to bring different perspectives to the table for discussion and resolu- tion. no organization can function for long without an effective collateral organi- zation.23 collateral structures include:

Project and product teams created to undertake well-focused projects (typically short term) or to develop new products.

Cross-functional task forces created to bring together specialists from several functional areas and address threats or opportunities. Typically, task forces take on a major project such as reorganization or the building of new facilities.

Venture teams created outside the normal organizational structure, they are not bound by the normal “rules” of the organization. Because they develop new products or processes, the creation of venture teams is sometimes called “intrapreneuring.”

Re-engineering teams created to evaluate and reconfigure an organizational process (such as service delivery). Such teams are asked to disregard the current way of doing things and to redesign a process from scratch.

Executive and standing committees created to make organization-wide deci- sions. executive and standing committees provide wide representation for key decisions and facilitate communication of the organization’s direction and strat- egy implementation.

greater diversity in the composition and function of teams is occurring than in the past. for example, team members may be dispersed in different locations, interact only electronically, and membership adjustments may be quite dra- matic.24 Therefore, it is important that both traditional teams and virtual teams have strong cultures motivated by a clear and motivating direction, the right mix of members, support from the organization’s leadership, and a sense of identity – common understandings concerning the mission and values of the team.25 Where a sense of identity and common understandings exists, self-managed teams may be utilized. Self-managed teams eliminate organizational hierarchy; leader- ship, authority, accountability, goal setting, and decision making are dispersed throughout the team. Self-managed teams are often called holacracies, pods, cir- cles, or organic organizations, and foster flexibility, adaptability, engagement, and productivity.26

Strategic Resources Strategies effective development and use of key organizational resources are critical in car- rying out the selected strategies. Strategic resources (resources, competencies, and capabilities) include financial, human, information systems, and technological assets of the organization.

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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Chapter 9 Value-adding Support StrategieS 375

Financial Resources The financial resources of the organization are evalu- ated during internal analysis and contribute to strategy formulation. Therefore, to this point the financial resources have provided a framework for developing a realistic strategy. once the strategy has been selected, finance becomes a way to implement the strategy. All organizational strategies have financial implications and most will require an assessment of needed capital and a method to access cap- ital. In addition, strategies require an understanding of the relationship between the organization’s business model, reimbursement methods, and the mission.27 expansion, reduction, or maintenance of scope adaptive strategies will require a financial implementation strategy.

expansion and maintenance of scope strategies frequently make it necessary for health care organizations to enter the capital market or make arrangements to borrow money from one or more financial institutions. expansion of scope, such as market development, may be realized through acquisition of a competitor (horizontal integration) and involve hundreds of millions of dollars. In addition, expansion carried out through cooperation strategies may require additional financial resources. Joint ventures are often financed by attracting other individu- als, such as physicians, to invest in promising ideas or equipment along with the hospital. Similarly, maintenance of scope strategies directed toward enhancement of facilities, equipment, quality of services, and so on will often require new capital and operating funds. An organization may have to acquire new property and relocate in its efforts to change the image held by physicians who might join its staff and the patients who might use its facilities. new technology may be demanded as well for this change in image or for significant improvement of services.

reduction of scope strategies require equally challenging financial decision making. Divestiture, liquidation, harvesting, and, in some cases, retrenchment all convert financial resources, at least temporarily, into cash or near cash assets. An inflow of cash forces strategic managers to consider alternatives for the funds to ensure that they are appropriately invested until they are needed for other uses. reduction of scope requires careful re-evaluation and possible redirection of financial resources. for example, a hospital experiencing financial distress, after careful analysis, might decide that its emergency room is too expensive to continue to operate in view of limited demand by the community. The high level of specialized staffing for around-the-clock operations is a financial burden that cannot be justified economically. The decision to close the emergency room would temporarily free financial resources that could be allocated to more profitable areas and relieve some of the cost pressure on the hospital.

In developing financial strategies to carry out the organization’s overall strat- egy, two issues typically predominate – increasing financial resources (equity and debt capital acquisition in addition to fund raising) and better management of the organization’s current financial resources including cash flow management, budgeting, and financial planning. financial leasing as a financing alternative is examined in essentials for a Strategic Thinker 9–3, “What is financial leasing?” In addition, analysis of accounting and financial issues, as well as interpretation and analysis of balance sheet and income statement issues, are reviewed in this textbook in resource 2 – health care organization Accounting, finance, and Performance Analysis.

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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ESSEntIALS foR A StRAtEgIC thInkER 9–3

What is financial leasing?

The delivery of health care is typically capital- intensive with extensive investments in equip- ment and real estate. Capital intensity motivates health care organizations to seek access to all forms of financing. In addition to equity and debt financing, it is a common practice for health care organizations to enter into lease arrangements for facilities and equipment.1 In other words, health care organizations use leases to finance assets that would otherwise be financed by equity or debt. A lease is “an agreement convey- ing the right to use property, plant, or equipment (land and/or depreciable assets) usually for a stated period of time.”2 In a lease arrangement, the organization with the right to use an asset is known as the “lessee” and the organization actually owning the asset is the “lessor.” Long-life assets present two forms of risk: (1) ownership risk – obsolescence or default on debt and (2) operating risk – inefficient or ineffective use of the asset resulting in financial losses. In buy-and- use, the buyer is exposed to both ownership and operating risks. Lease arrangements, on the other hand, separate the risks such that the les- see bears only the operating risk and the lessor bears the ownership risk.3

Leasing is often an attractive financing alternative for a health care organization to: (1) avoid technological obsolescence – with fre- quent changes in technology, lessees are able to upgrade as needed; (2) improve maintenance – lessors usually include expert maintenance with a lease and incur the cost of training and equipping maintenance personnel; (3) off-set project-life uncertainty – leases often include cancellation clauses useful for lessees with uncertainty about the length of time an asset

will be needed, lessors accept such clauses because they are in a good position to remarket the asset; (4) maintain credit availability – it is often possible for a lessee to obtain larger amounts of financing for a longer period of time in a lease financing versus a loan financing for an asset; and (5) preserve liquidity – by leasing an organization avoids a potential large cash outlay frequently required in a purchase.4,5

Some health care organizations have used long-term leases as a form of “off-balance sheet financing,” a situation where the value of the lease is not reported on the balance sheet, thus, the organization gains access to high-value assets without having to record a debt (long- term leases are reported in the debt portion of the balance sheet).6 The use of off-balance sheet finances permits organizations to portray their financial health as being better than it is in reality – through a lower debt ratio. In 2019, new accounting rules are to be implemented that significantly curtail the practice of off-balance sheet financing.7 Under these accounting rules, the value of the leases must be placed on the balance sheet. The impact of this change for health care organizations is that some organi- zations may be reporting more debt on their balance sheets making future debt financing costlier. For the most part, cash flow will be unaf- fected by the change in requirement since lease payments will be treated in much the same way as interest payments.8

RefeRences

1. M. Berman, “New Lease Accounting and Health

Care: the FASB’s New Standard for Lease

Accounting Will Bring Significant Change

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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Chapter 9 Value-adding Support StrategieS 377

Human Resources Successfully implemented strategy is inextricably con- nected with having committed, high-performing employees.28 It takes strong leadership and a positive organizational culture to keep employees motivated and productive. Motivated employees are the key to any strategy; however, human resource requirements of the selected strategies will vary considerably depending on whether the organization is expanding, reducing, or maintaining scope. for example, expansion strategies, such as related diversification, will make it neces- sary to recruit new personnel with skills and talents similar to those already in the organization. on the other hand, unrelated diversification or backward/forward vertical integration will create the need for human resources with skills and tal- ents quite different from those presently employed. The necessity of recruiting, hiring, and leading individuals with different skills and talents is a major reason that these strategies are “riskier” than related diversification. Any one of these strategies requires the merger of organizational cultures, presenting yet another human resources challenge.

Diversification and integration are two very different strategic choices, but they require similar types of organizational and human resources management responses. When diversification or integration is selected as a strategic alternative, organizational size and diversity may increase, along with the demand for more specialized human resources management services.

Although the problems are difficult and demanding, expansion is always more fun to manage than maturity and decline. During maturity, the emphasis is on efficiency. human resources management practices must be constantly refined and improved to ensure that things are done in the best way at the least

to Real Estate and Contract Transactions for

Healthcare Organizations,” Healthcare Financial

Management 70, no. 5 (2016), pp. 78–84.

2. Financial Accounting Standards Board.

“Statement of Financial Accounting Standards

No. 13, Accounting for Leases,” (1976).

Retrieved from: www.fasb.org/resources/

ccurl/62/358/fas13.pdf.

3. A. Gavazza, “Asset Liquidity and Financial

Contracts: Evidence from Aircraft Leases,”

Journal of Financial Economics 95, no. 1 (2010),

pp. 62–84.

4. L. C., Gapenski and G. H. Pink, Understanding

Healthcare Financial Management (Washington,

DC: Health Administration Press, 2015).

5. William N. Zelman, Michael J. McCue, Alan

R. Millikan, and Noah D. Glick, Financial

Management of Health Care Organizations: An

Introduction to Fundamental Tools, Concepts,

and Applications (New York: John Wiley & Sons,

2009).

6. J. C. Murray, “Off-Balance-Sheet Financing:

Synthetic Leases,” Real Property, Probate and

Trust Journal (1997), pp. 193–253.

7. Financial Accounting Standards Board “FASB

Accounting Standards Update, No. 2016–02,

Leases (Topic 842) 2016. www.fasb.org/jsp/

FASB/Document_C/DocumentPage?cid=11761

67901010&acceptedDisclaimer=true.

8. A. D. Gross, G. R. Huston, and J. M. Huston,

“The Path of Lease Resistance: How Changes to

Lease Accounting Treatment May Impact Your

Business” Business Horizons 57, no. 6 (2014), pp.

759–765.

Source: Andrew C. Rucks, PhD, School of Public Health, University

of Alabama at Birmingham.

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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cost. however, organizations do not always successfully manage maturity, hence markets erode and even disappear. Therefore, the strategic health care manager needs to understand how to manage organizational and human resources during market contraction.

reduction of scope involves different human resources management skills. Incentives must be devised to encourage employees to find other jobs or to retire earlier than anticipated. for some, layoffs may be necessary, and the organization will be forced to determine its responsibility in assisting displaced employees to find alternative employment opportunities. At times, health care organizations may assist employees by retraining them for different tasks that will be needed as reduction of scope takes place.

In chapter 6, several reduction strategies, such as divestiture and liquidation, were discussed. Although terms such as “divestiture” and “liquidation” imply financial actions, they have important human resource implications in the form of restructuring and reorganizing, early retirements, layoffs, and so on.

The benefits of systematically managing the human resources dimension under expansion and reduction strategies are somewhat obvious. The need for carefully managing maintenance of scope strategies is equally important, if not as obvi- ous. Maintenance strategies almost always require training and development activities. enhancement strategies, through total quality management programs, involve significant commitments to continuous learning on the part of the indi- vidual and the organization. Status quo requires the challenging task of keeping people motivated in the face of career plateaus.

When an organization reaches a point in its life cycle where it is no longer growing, it must work extremely hard to keep from contracting. Strategic decision makers may adopt a conservative strategy, such as managing the steady state or status quo. As was noted in chapter 6, the assumption underlying this strategy is that the expansion phase of the organization’s evolution is over, maturity has been achieved, and acceptable market shares have been attained. The organiza- tion attempts to replace personnel with employees of similar skills and training, and works to keep existing personnel up-to-date and technologically prepared to perform their jobs at high levels of effectiveness.

Maintaining scope can present an opportunity to enhance current levels of operation. This stage of organizational development can be thought of as a tempo- rary “breather,” allowing preparation to commence for the next period of growth. or, decision makers may simply think of maintaining scope in a dynamic sense and recognize that they must work hard just to hold their current position. In this case, they may choose to enhance their facilities, improve the quality of their services, increase the speed with which they respond to patients and make deci- sions, and create new and better ways of doing things. human resource strategies are important to support any attempt at enhancement because ultimately it is the employees that must promote quality, innovate, and work faster if things are to improve.29

Information Resources Information systems (IS) are an essential competi- tive resource for health care organizations and are critical in supporting strategic decision making, administrative operations, and patient care in an increasingly information-intensive industry. Although much attention has been focused on

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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Chapter 9 Value-adding Support StrategieS 379

the competitive nature of sophisticated information technology, health informa- tion systems are no less important in the public sector.30 Information systems in health care may be divided into four general categories: clinical, management, strategic decision support, and electronic networking and e-health applications.31 competitive advantage may be created in each of these areas, and strategic man- agers should therefore play a key decision-making role in defining and shaping these systems. Such systems draw on both internal data from clinical and admin- istrative systems in the organization and external data on community health, market demography, and activities of competitors.32 To meet strategic objectives and develop high-priority applications, the health care organization must make decisions about hardware configurations (architecture), network communica- tions, degree of centralization or decentralization of computing facilities, and types of computer software required to support the network.33 one type of health information system, the electronic health record, may be used effectively to cre- ate competitive advantage (see essentials for a Strategic Thinker 9–4, “What Is an electronic health record?”).

ESSEntIALS foR A StRAtEgIC thInkER 9–4

What is an electronic Health record?

The electronic health record (EHR) is a digital version of a patient’s medical chart and other important information designed to improve care communication and coordination.1 EHRs are designed to be a secure information platform where patients, providers, and other stakehold- ers are able to: (1) post and retrieve relevant data; (2) access evidenced-based decision support tools; and (3) streamline activities to improve care processes. In the United States, efforts in the ambulatory and inpatient environments to implement EHRs that meet these design aims have been underway for many years.2

When EHRs were first developed in the early 1990s, they were primarily used to document clinical encounters by an individual provider. Despite this limited scope, the EHR’s potential benefits were quickly recognized by the Institute of Medicine (IOM) that issued a report calling for a “paperless” care environment within ten years.3 In particular, the IOM realized that through pro- gressive innovations, the EHR would become a

technology platform linking a wide variety of hardware and clinical data sources. The EHR’s potential to promote care quality improvement and operational efficiency was slowed by pro- viders’ concerns about the system’s costs and potential disruptions to workflows.

Providers’ slow uptake of EHRs may have continued except for passage of the Health Information Technology for Economic and Clinical Health Act in 2009.4 The law stipulated that most doctor’s offices and hospitals should implement progressively more sophisticated EHR technologies in stages. The Meaningful Use program, as it came to be known, acceler- ated EHR adoption in both the ambulatory and inpatient settings. Nearly every U.S. hospital has at least a basic EHR capable of capturing clinical data from providers. Moreover, the benefits to care quality and improved efficiency associated with EHR use are beginning to become appar- ent. As a result, many U.S. health systems are implementing EHR platforms with increased

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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capabilities as a means of creating a sustained competitive advantage.

Early adopters of EHR platforms have a first- mover advantage that is difficult for others to overcome in the near-term. The reason for the advantage is that EHRs require lower-level, basic functionalities be in place before higher order clinical applications can be effectively integrated into the system.5 Hence, EHR platforms follow a path dependent model of technology innova- tion and diffusion with early adopters able to stay ahead of the competition. In addition, EHR’s technological advantages enable hospitals to deliver higher quality care and avoid unneces- sary costs. Because EHR platforms become more robust as the network of providers and systems feeding into it grows, the potential competitive advantage increases as well. Moreover, having a robust EHR provides the information needed to meet reporting requirements contained in many of the rewards and incentive programs being created by insurers.

Public and private insurers are creating new reimbursement plans designed to increase care quality while simultaneously reducing costs. Value-based purchasing or VBP plans rely heav- ily on doctors and hospitals tracking care pro- cesses and health outcomes. The amount of care-process details needed to achieve reward thresholds of most VBP plans, necessitates the use of advanced EHR capabilities. Therefore, having a fully-functioning EHR will gradually

transform from a competitive advantage to a business sustainability requirement – as has happened with technological advances in many other sectors throughout history.

RefeRences

1. HealthIT.gov. 2013. www.healthit.gov/provid-

ers-professionals/faqs/what-electronic-health-

record-ehr (accessed March 5, 2013). Available

at: www.healthit.gov/providers-professionals/

faqs/what-electronic-health-record-ehr.

2. J. R. Vest, J. Yoon, and B. H. Bossak, “Changes to

the Electronic Health Records Market in Light

of Health Information Technology Certification

and Meaningful Use,” Journal of the American

Medical Informatics Association 20, no. 2, (2013),

pp. 227–232.

3. Institute of Medicine. The Computer-Based

Patient Record: An Essential Technology for

Health Care (Washington, DC: National

Academy Press, 1991).

4. D. Blumenthal, “Launching HITECH,” New

England Journal of Medicine 362 (2010),

pp. 382–385.

5. E. W. Ford, N. Menachemi, T. R. Huerta, and F.

Yu, “Hospital IT Adoption Strategies Associated

with Implementation Success: Implications

for Achieving Meaningful Use,” Journal of

Healthcare Management 55, no. 3 (2010),

pp. 175–188; discussion 188–189.

Source: Eric W. Ford, PhD, MPH, Professor, School of Public

Health, University of Alabama at Birmingham.

A strategic information system (SIS), sometimes referred to as a decision support system, takes vast quantities of unorganized data and converts them into useful information to enable managers to make better decisions. Such information sys- tems involve organizing the data, selecting the models that will be used to analyze the data, and interpreting the output; nevertheless, it is not sufficient simply to provide the reports to the strategist. Sometimes there is a need to interpret and clarify the data relative to the assumptions that were used. Because decision sup- port systems attempt to investigate future activities, the assumptions are criti- cal. The organization that can design a SIS that is pertinent, relatively accurate, and timely will have developed a competitive advantage. “Inappropriate use

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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Chapter 9 Value-adding Support StrategieS 381

and interpretation of decision support models can be dangerous, but appropriate use of these models can be a powerful tool in the hands of an informed decision maker.”34 geographic Information Systems (gISs) are increasingly being used in health care to provide decision support (see essentials for a Strategic Thinker 9–5, “What Is a geographic Information System?”).

ESSEntIALS foR A StRAtEgIC thInkER 9–5

What is a geographic information System?

A geographic information system (GIS) is com- puter software used for the collection, storage, management, analysis, and visualization of data. That data has associated location information such as latitude and longitude or a physical address that can be translated into geographic coordinates and mapped to a physical location. Maps created using GIS help individuals and organizations integrate, aggregate, and inter- pret data elements by organizing related data and using location as the unifying common denominator.

Using maps to display health care data can aid in understanding and interpreting patterns, trends, and interrelationships of complex data. For example, GIS data can be used to track the influence of vaccination policy on the distribu- tion of disease, identify high-risk populations with special health care needs, track the effects of health care resources on health outcomes, as well as monitor diseases or track medical mistakes across organizations. In addition, GIS makes it possible to aggregate and track infor- mation at the individual patient level within an individual health care institution, a health care system, or across a community, state, or region through information contained in electronic health records (EHRs).

GIS has been evolving and its use in health care has been expanding as its applications have become better understood. For example, GIS is now being used by health care professionals

to manage supply chain networks, identify new service locations, understand specific popula- tion health needs, understand the health care access needs of different patient populations, track assets within an organization, and track health service utilization.

Combining and layering datasets can yield even more information. For example, a data layer of hospital locations that contains each hospital’s capacity and trauma level combined with a data layer of the state’s highways plus a layer of popu- lation density, results in a map that paints a more robust picture of the health care landscape. Additional analysis using spatial statistics (sta- tistics that incorporate the spatial relationships between data) creates an even more detailed picture identifying counties in need of addi- tional hospital resources (quantifying that need based on drive times and incorporating predic- tive modeling of projected population growth).

Similarly, GIS is being used to add context and meaning by adding a geospatial component to current in-house datasets. For example, the Northern California Kaiser Permanente health system has used the spatial statistical capabili- ties of GIS and vaccination data from members’ EHRs to identify significant clusters or “hotspots” of children considered to be underimmunized for childhood illnesses, which can be associated with increased risk to the insurer’s members and the community at large. By identifying these areas, public health officials and health care

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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providers can efficiently target additional educa- tional efforts and interventions in the locations most impacted.1

RefeRence

1. Kaiser Permanente. “Geographic Clusters

of Under-immunization Identified in

Northern California,” ScienceDaily (January

19, 2015). www.sciencedaily.com/

releases/2015/01/150119083251.htm (accessed

April 27, 2017).

Source: Ariann Nassal, MFA, Evaluation and Assessment

Unit, School of Public Health, University of Alabama at

Birmingham.

Administrative information systems support financial information systems, human resources systems, payroll, billing, purchasing, materials and facilities management, outpatient clinic scheduling, office automation, and so on (other than direct patient care). clinical information systems support patient care and include computerized patient records systems, automated medical instrumen- tation, patient monitoring systems, nursing information systems, laboratory information systems, pharmacy information systems, clinical decision support systems, and information systems that support clinical research and education. Most information systems in the health care system focus on the financial and administrative aspects of the practice of medicine and much less on the clinical decision making.35 however, clinical information systems are growing in impor- tance, creating significant competitive advantage through increased efficiency and effectiveness in patient care. Basic clinical information systems provide a “dictionary” of health problems for clinicians or display background information on specific patients. More sophisticated systems, often referred to as expert or knowledge-based systems, can actively assist clinicians in the decision-making process.36 Such functions include:

● Assistance with diagnosing a patient’s condition. ● Assistance in determining proper drug dosage. ● reminders to administer preventive services to patients at specific

times. ● Assistance in carrying out diagnostic or therapeutic procedures, such as

recommending specific treatments, reminders to perform procedures, alerts regarding potential adverse events, feedback based on previous orders, and prompts for testing or treatment options.37

In today’s information-intense environment, seamless integration and infor- mation sharing are becoming increasingly important. Most health care organiza- tions interchange electronic data within their own organizations as well as with other organizations for insurance billing and claims processing, accessing clinical information from regional and national databases, online purchasing, and com- munications between affiliated providers.38 Telemedicine is a part of such sys- tems and has the potential to create additional competitive advantage for health care organizations. newer technologies include the use of mobile technologies

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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Chapter 9 Value-adding Support StrategieS 383

for improving pharmacy utilization.39 Perhaps equally important is the fact that although there are still some resisters, most of the evaluations of the use of health information systems have been positive.40

Strategic Technologies The technologies selected by the organization are dictated by the chosen strategies. Broadly, strategic technologies concern the type of facilities, type and sophistication of equipment, and management of technology employed within the organization. each of these activities is critical to the success- ful implementation of the organization’s strategy.

Facilities is the broad term used to delineate the physical environment of the health care organization. It is the “shell” in which health care is delivered. It gen- erally includes such diverse areas as design and construction of new facilities and renovation of older facilities, key equipment, clinical engineering, environmental services, safety and security, materials management, and food service. each com- ponent affects the health care organization’s ability to implement its strategy.

facilities management is an area of increasing concern to strategic managers of health care organizations for a variety of reasons. one of the most important is changing technology that has fostered tremendous growth in the number and kind of alternative delivery systems requiring different strategies for success. free- standing outpatient clinics, ambulatory (same-day) surgery centers, diagnostic and imaging centers, and others, are challenging traditional inpatient health care delivery. To survive, hospitals have expanded vertically and horizontally to diversify into these new delivery systems; however, each type is subject to different regulatory guidelines as well as entirely different design needs for buildings – a challenge for the facilities manager.

A variety of components should be considered in the design of a health care facility: medical technology, the full range of medical procedures from routine exams to complicated life-saving activities, medical staff, sanitation, prevention of injury, economics, patients, and visitors. from the patients’ perspective, the facil- ity includes “curb appeal,” ease of access to the main entrance, ease of parking, ease of wayfinding (finding the department, room, diagnostic area, or other area where the patient is expected), comfort, and convenience. Designing the facility with the human experience in mind recognizes that people’s perceptions of health care are multidimensional; the facility helps them to define the care they receive. Sending a “we care” message cannot stop with the staff but must be designed into the facility itself.41

When the health care organization decides on a high-tech, high-touch, or some other strategy, the facility provides the first impression. The design, layout, color scheme, and so on should reflect the desired image to improve the implementa- tion of the strategy. “unlike the quality of medical care, health facility design is something that can readily be understood and judged, for better or worse, by the public.”42

closely associated with facilities is the choice of the type and sophistication of equipment and effective management of technology; these are integral parts of strategic management and should be approached in a systematic way. Because health care technology changes rapidly, is costly, and often requires changes in the facility, it must be assessed and planned for carefully to reach its greatest potential. Physicians generally want the latest technology – using the “latest”

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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384 StrAtegic mAnAgement of HeAltH cAre orgAnizAtionS

equipment or newest procedure earns prestige with colleagues and patients and may save more lives or prevent discomfort. The decision concerning the use of the latest technology must fit with the strategy (differentiation based on high- technology image).

Another consideration concerning technology is determining how rapidly a new technology will supplant an older one. new technologies that are not dependent on co-innovations and new infrastructure will be adopted much faster than new technologies that require new supporting infrastructure complements.43 Where there is substantial commitment to an old technology or the supporting infrastructure can be improved, change to a new technology might come very slowly.44 Therefore, adopting a new technology too soon may create a competitive disadvantage just as adopting too late might.

Technology decisions involve technology assessment, planning, acquisition, and management.45 Strategists advocate that a committee assess requests for new and emerging technology alongside the capital budget requests for new and replacement technology. The committee should report to senior management and should set mission-based, strategic priorities for new, emerging, and replace- ment technologies. Many hospitals do not incorporate into the budget the costs of redesign and “space” for new technology; nor do they investigate ways to reduce maintenance, insurance, and outside service contract costs. The planning process has to take into account what the competition is planning to acquire in terms of new and emerging technology as well as assessing the services offered by competitors.

clinical engineering (sometimes called biomedical engineering) is a relatively new area in most health care organizations. Its responsibilities include: applying engineering technology to diagnostic and treatment devices used by health care facilities through testing, maintaining, and repairing equipment; training; consul- tation with clinical staff concerning the capabilities, efficiencies, and accuracy of the equipment; environmental testing; and incident and recall investigations that involve diagnostic or treatment equipment. The number and sophistication of technologies within health care institutions has increased significantly over time. Because of the expertise required for such a large variety of equipment, some health care organizations use outside service contracts for some or all of their technological equipment.

Step 2: Compare the Strategy Requirements with the Results of the Support Activities Internal Analysis

each value chain support area was evaluated in situational analysis (chapter 4) and the conclusions were used in strategy formulation. As with the value-adding service delivery strategies, the results of the internal analysis identify the competi- tively relevant strengths and weaknesses for the support activities. Depending on the results of this comparison, the support areas may need to be maintained or changed to carry out the selected strategy.

A strategic thinking map depicting this rationale in the form of a table is shown in exhibit 9–7. The table organizes strategic thinking about what elements of the support strategies may need to be maintained or changed to meet the needs of the selected strategies.

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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Chapter 9 Value-adding Support StrategieS 385

Step 3: Decide to Maintain or Change organizational Culture

Mission, vision, values, and strategic goals (discussed in chapter 5) provide an explicit linkage between strategy and culture. Just as these directional strate- gies were a major input to the selection of the adaptive, market entry/exit, and competitive strategies, they play a major role in shaping the appropriate organi- zational culture. how the organization defines itself, what it wants to be, how it accomplishes its tasks, and what it wants to achieve, shape the culture of the organization. The directional strategies can be powerful forces in maintaining or changing the culture. Similarly, management’s attitudes, style, and behaviors shape the organizational culture and play a major part in creating a positive and adaptive culture.

Strategic managers must decide whether the organizational culture can help achieve the strategy. Therefore, they must assess what cognitive and emotional assumptions, values, and behavioral norms are necessary to most effectively carry out the strategy. Attributes of the current assumptions, values, and behavioral norms must be compared with the assumptions, values, and behavioral norms required by the strategy. for example, if a market development strategy is being pursued, strategic managers may have to maintain the current culture; for new entrepreneurial ventures or product development, however, the culture may have to change. As discussed in chapter 6, strategies that involve acquisitions, merg- ers, and alliances usually have organizational culture implications. Incompatible cultures may contribute to failure of the strategy.

ExhIbIt 9–7 Strategic Thinking Map for Developing Value-Adding Support Strategies

Value-Adding support strategies

Results of Internal Analysis

Requirements of selected strategies

comparison of strategy Requirements and Internal Analysis

Maintain or change

Organizational Culture Shared Assumptions Shared Values Behavioral Norms

Organizational Structure Functional Divisional Matrix

Strategic Resources Financial Human Resources Information Systems Technology

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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386 StrAtegic mAnAgement of HeAltH cAre orgAnizAtionS

During the situational analysis of the strategic management process, the mis- sion, vision, values, and strategic goals (the directional strategies) were evaluated. The leader must assess whether these directional strategies are still appropriate and are actually reflected in the culture of the organization. results of this assess- ment will determine whether the leader needs to create implementation strategies to maintain or change organizational culture. In addition, the current management style should be assessed to determine whether it is supportive of the strategy.

In addition to the comparison of the requirements of the overall strategy to cur- rent culture, results of the internal analysis itself may suggest action. The internal analysis specifies whether the organization’s culture is a strength or weakness and whether it might create a competitive advantage or disadvantage. Therefore, the results of the internal analysis must also be considered in the decision to maintain or change the culture. The culture of an organization will greatly influence the extent to which individuals are willing to share decision making, how open indi- viduals are to ideas from patients, and the quality of cooperation among diverse organizational units.46

Maintain Organizational Culture Despite a good match between the attributes of the current culture and requirements of the strategy, the work of man- agement is not complete. Maintaining culture often requires a great deal of hard work. In internal analysis, if aspects of culture are evaluated as strengths having high value (h), being rare (y), easy or difficult to develop (e or D), and sustainable (y) – resulting in hyey or hyDy – maintaining culture is particularly important because culture can be a source of short-term or long-term competitive advan- tage. culture can be a powerful weapon in recruiting, efficiency, and innovation. Allowing this strength to deteriorate will lead to competitive disadvantage, par- ticularly when it is common (not rare) among competitors.

Therefore, in maintaining culture, managers should:

● communicate often the mission, vision, values, and goals – verbally and in writing.

● Behave in ways that are consistent with the values and vision – first through their personal behavior, and then through new hires, promotions, and rewards.

● review and discuss the values and behavioral norms periodically. ● ensure that organizational roles, responsibilities, and relationships are

supportive of the culture. ● explicitly communicate which emotions will help the organization be

successful. ● continue to cultivate desirable emotions.47

Change Organizational Culture changing organizational culture can be difficult and requires a great deal of planning, time, and energy. Strategists Michael Beer and russell eisenstat noted that “[w]e’ve become convinced that

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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Chapter 9 Value-adding Support StrategieS 387

the most powerful way for leaders to realign their organization is to publicly con- front the unvarnished truth about the barriers blocking strategy implementation. Typically, this realignment involves looking closely at the roles and decision rights of various parts of the business, as well as changing the behavior of people at all levels.”48 further, a reworking of the fundamental practices required by matching the current culture with the requirements of the strategy will lead to new values, behaviors, and standards to reinforce the new direction.

When culture is viewed as a weakness (from internal analysis) or the require- ments of the strategy call for a different culture, culture-change strategies should be initiated. In cases where ineffective culture is assessed as a common weakness, competitors may be moving to build their own organizational culture to create competitive advantage; therefore, culture-change actions should be initiated. When effective culture is a weakness, the weakness is not common among competitors, and is difficult to develop (hnDy and hnDn), change strategies should be initi- ated, particularly where competitors may act and achieve a significant competitive advantage. The most serious situation, of course, is where an organization has a weak culture and other organizations have effective cultures (weak culture is not common), and it is difficult to develop a new culture (hnDy and hnDn) resulting in a significant competitive disadvantage. Strategic managers who want to create culture change should focus their energies on a few critical activities:

● clearly define the desired values and an inspiring direction. ● redesign the organization’s roles, responsibilities, and relationships to

support the strategy. ● Discuss and codify behavioral norms. ● live by the values from the very beginning. ● clarify the vision and indicate what changes are necessary to achieve the

vision. People need a clear sense of where the organization is going and where they should be headed.

● use simple, powerful, and consistent language. ● Model the kinds of behaviors and practices that management wants

infused into the organization through actions. “Walking the talk” gives credibility to the words and provides examples to others in the organiza- tion of what behavior is expected.

● empower other people to start acting in ways that are consistent with the desired values, and to implement new behaviors and practices. Part of empowering others is removing barriers within the organization that are in the way of the desired behavior.

● look for some quick but sustainable successes. Short-term successes are critical to provide the change effort with some credibility, keep people motivated, and demonstrate positive results to the organization.

● Demonstrate patience and persistence. Major culture change takes a long time – years not months – and the willingness to persist in the face of obstacles and setbacks is critical.49

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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● explicitly communicate which emotions will help the organization be successful.

● cultivate desirable emotions.50

Step 4: Decide to Maintain or Change the organization Structure

Strategic managers should strive to keep their structures (and processes) as sim- ple as possible and trim every vestige of unnecessary bureaucracy – for example, extra layers of management.51 fundamentally, the structural decision is one of prioritizing standardization versus flexibility and selecting the basic structure that best achieves the required priority. Therefore, strategic managers must evalu- ate the advantages and disadvantages of each of the structural building blocks and match them with the requirements of the strategy. for example, a different structure may be required to carry out a defender/cost leadership competitive strategy than that for a prospector/differentiation strategy. Defender strategies require a high degree of structural standardization to create cost efficiencies while prospector strategies require a great deal of structural flexibility to develop new technologies and innovative products and services. The strategic thinking map shown in exhibit 9–8 provides guidance concerning the most appropriate organizational structure based on the strategy requirements of standardization or flexibility.

Maintain the Structure If there is a good match between the characteristics of the current organizational structure and the requirements of the strategy, then the present basic structure should be maintained, although additional coordinat- ing mechanisms may be required. It is not often that organizational structure alone will create long-term competitive advantage; however, structure is a key implementation area (especially when coupled with an effective culture). When it is viewed as a competitively relevant strength, efforts should be made to keep it effective – whether or not it is rare among competitors. In maintaining the present structure, management should:

● evaluate the present level of communication and coordination and discuss needed additional communication channels and coordinating mechanisms.

● evaluate the present structure to ensure that there are opportunities for innovation where appropriate.

● evaluate the management team to ensure that the leadership skills match their positions.

● Inventory the present skills to ensure that they are matched to the structure and strategy.

Change the Structure If the comparison of the present structure and require- ments of the strategy suggest a need to change the basic organizational structure, then management must develop a plan and move very carefully. Ineffective or

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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Chapter 9 Value-adding Support StrategieS 389

inappropriate organizational structure can debilitate the organization’s strategy – such as might be the case with too many organizational layers, thus delaying deci- sion making – but by itself structure is not generally seen as a significant long-term competitive disadvantage. however, where the organizational structure is viewed as a competitive disadvantage, action must be taken. reorganization represents a significant change for employees and is often viewed as threatening. research suggests that reorganizations can cause greater stress and anxiety over possible layoffs that may decrease productivity. To help managers think through reorgani- zation, a re-engineering approach may be taken. re-engineering reconsiders and

ExhIbIt 9–8 Strategy Requirements and Organizational Structure

strategy Requirements functional High standardization Divisional

Matrix High flexibility

High level of coordination X

High level of standardization X

Area/functional expertise X

Main goal of efficiency X

High level of control X

Develop general managers X X

High degree of operating autonomy X

Decentralized decision making geared to the market

X

High need to customize product or services to market

X

Consistent image X

Need local coordination X

Many projects using similar technologies X

Need high level of creativity and innovation X X

Need high level of stability X

Need to develop new technologies X

Need to be a cost leader X

Need to have service diversity X

Large organization X

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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390 StrAtegic mAnAgement of HeAltH cAre orgAnizAtionS

changes how tasks connect to each other to produce more efficient overall systems of work.52 Therefore, when changing the structure, management should:

● follow a rigorous disciplined process with clear objectives for added value. ● Develop a flow chart of the total process, including its interfaces with other

value chain activities. ● Simplify first, eliminating tasks and steps where possible and analyzing

how to streamline the performance of what remains. ● Determine which parts can be automated (usually those that are repetitive,

time consuming, and require little thought or decision). ● Introduce advanced technologies that can be upgraded to achieve next-

generation capability and provide a basis for further productivity gains in the future.

● evaluate each activity to determine whether it is strategy critical (strategy- critical activities are candidates for benchmarking to achieve best-in-industry performance status).

● Weigh the pros and cons of outsourcing activities that are non-critical or that contribute little to the organizational capabilities and core competencies.

● compare the advantages and disadvantages of the organizational building blocks regarding standardization and flexibility.

● Design a structure for performing the activities that remain, then reorgan- ize the personnel and groups who perform these activities into the new structure.53

changing the organizational structure can be a difficult task and may require some new thinking and new approaches to old problems. re-engineering efforts that have been undertaken by health care organizations indicate that the use of integrating mechanisms, such as codifying the process, and the use of internal teams and committees during implementation appear to be most effective.54 In addition, as they undertake restructuring, strategic managers need to evaluate what competitive benefits are actually accruing to ensure that managers are not just reorganizing to be like everyone else, but for improved outcomes – they must understand how re-engineering affects the organization’s competitive position.55

Step 5: Decide to Maintain or Change Strategic Resources

Strategic resources are particularly important in implementing strategy. essentially an organization must have the financial resources, human resources, information systems, and technology to carry out the strategy. Although these factors were, no doubt, considered in the adoption of the broader strategies, external and com- petitive changes constantly challenge strategic resources. for example, changes in health care policy may place new demands on the organization’s technology

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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Chapter 9 Value-adding Support StrategieS 391

in terms of tracking quality, or the competition may build new state-of-the-art facilities. Initiating a response requires new financial resources and substantial changes in equipment and facilities. Strategic resources are a key building block in implementing strategy.

Maintain Strategic Resources If there is a match between the present level of strategic resources and the requirements of the strategy, then efforts should be made to maintain the financial, human, information, and technology resources. These areas may represent key competitive advantages or disadvantages for an organization. care should be taken to maintain those areas that are valued by cus- tomers and are a strength of the organization. In maintaining strategic resources the leader should do the following:

Financial ● evaluate whether current financial resources are being used efficiently. ● Determine whether the liquidity is appropriate for meeting ongoing

expenses. ● Seek ways to increase profitability without sacrificing other mission-critical

factors. ● Assess the current level of leverage to determine if there is an appropriate

level of risk. ● Determine whether asset activity can be improved. ● Assess cash-flow management. ● consider investment opportunities for idle cash.

Human Resources ● Develop training programs to maintain the current human expertise and

capabilities. ● create a talent identification/development program. ● Develop a management succession plan. ● Develop a job market network.

Information Systems ● Assess information systems growth needs. ● Develop information systems plans for operations and upgrades. ● hire staff or an outside agency with capabilities to manage Big Data if

being generated currently or necessary to be competitive.

Technologies ● Make sure there is a plan for facilities and equipment maintenance. ● Develop a facilities and equipment replacement schedule.

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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392 StrAtegic mAnAgement of HeAltH cAre orgAnizAtionS

● Periodically review the operating procedures, policies, and rules to keep them “leAn.”

● review environmental services activities and procedures. ● evaluate current security procedures. ● evaluate food service activities. ● evaluate operation and maintenance procedures.

Change Strategic Resources If there is a poor match between the present level of strategic resources and the requirements of the strategy, the goal should be to change the financial and human resources, information systems, and stra- tegic technologies to meet the needs of the strategy. As with the service delivery strategies and other support strategies, the organization must be particularly sensitive to situations where it is easy to build a strength (its own or the competi- tion’s) because the competition may create a short-term competitive advantage. for example, evidence suggests that the early adoption of technology is often driven by technological competition where competitive rivalry is high (thus the need to eliminate competitive disadvantage). on the other hand, late adoption of technology may be more a result of revenue considerations (the threat of losing revenue).56

changing the type or nature of the financial and human resources, information systems, or facilities and equipment can be a difficult and long-term project. To change these strategic resources, the leader should do the following:

Financial ● Assess whether the current revenue can finance the change. ● Investigate the opportunities to finance the change through the issuance of

stock and the infusion of additional equity. ● Investigate the opportunities to finance the change through bonds, mortgages,

bank loans, fund raising, or philanthropy.

Human Resources ● Assess job markets to determine the availability of individuals possessing

the new required skills. ● Begin recruiting for new skills. ● Develop training programs to retrain individuals with skills no longer

needed.

Information Systems ● consider outsourcing needed changes in information systems. ● Assess the impact of needed changes on the current information systems. ● Assess needs of information systems in pre-service, point-of-service, and

after-service activities.

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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Chapter 9 Value-adding Support StrategieS 393

Technologies ● Determine the probable rate of new technology adoption. ● Identify the exact specifications of the need for facilities, equipment, or

processes, including space needs. ● Perform cost analysis on the required changes. ● Develop timelines for changing the technologies. ● Investigate the financing alternatives for the required changes. ● Investigate any new required skills or experience to operate or maintain the

new facilities or equipment. ● Specify any new required processes or ways of doing things. ● Initiate the facilities, equipment, and technology management renewal.

Step 6: Provide guidance to organizational Units There are many ways to add value in organizations. The value-adding sup- port strategies provide a powerful means to change the organization and create competitive advantage, especially because some of the value-adding support activities are less visible to those outside the organization, making the competitive advantage much more difficult to imitate or duplicate. Decisions concerning the organization’s culture, structure, and resources are strategic in nature and should be made by strategic thinkers.57 The effectiveness of the organization’s overall strategy may be influenced or even determined by the effectiveness of these implementation strategies. exhibit 9–9 shows a completed strategic thinking map that compares the results of an internal analysis, the selected strategy require- ments, and proposed value-adding support strategies for a skilled nursing facility. This map extends and further articulates the strategic thinking maps developed in strategy formulation and the development of the value-adding service delivery strategy. In addition, as with the service delivery strategies, guidance for manag- ing the strategic momentum is provided so that unit managers may develop effec- tive action plans that are tied directly to the organization’s strategy.

Strategic Momentum: Support Strategies

The actual management of the support strategies includes the managerial pro- cesses, procedures, style, and technologies of the organization and is an inherent part of the organization and the way it operates. Strategic thinking and strategy evaluation should be regarded as normal and necessary parts of what the organi- zation and its managers do. Through the setting of objectives, the performance appraisal process, the compensation program, and so on, managers’ actions are coordinated toward agreed-on organizational objectives. Strategic thinking and strategic evaluation become part of the operating procedures and culture (shared values) of the organization. Additional questions to aid strategic managers in managing the support strategies and evaluating their progress and appropriate- ness are presented in exhibit 9–10.

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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Chapter 9 Value-adding Support StrategieS 395

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Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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396 StrAtegic mAnAgement of HeAltH cAre orgAnizAtionS

Chapter Summary

The value chain activities provide the basis for strategy implementation. After the value-adding service delivery strategies have been developed, the value-adding support strategies should be formulated. The value-adding support strategies are important in implementing the overall strategy and include organizational culture, organizational structure, and strategic resources. These strategies work together with the service delivery strategies to effectively implement the organization’s strategy.

The organizational culture permeates the organization and is defined in terms of the shared assumptions, shared values, and accepted behavioral norms. Strategic managers must decide whether the organization’s culture will contribute to the accomplishment of the strategy or must change over time. Therefore, the current assumptions, values, and norms must be compared with the requirement of the selected strategy.

The organizational structure should help to implement the strategy. The funda- mental building blocks of organizational structure are the functional, divisional, and matrix designs. each structure has its advantages and disadvantages, and the decision concerning which structure is best to carry out the strategy is based on the need for standardization versus flexibility. Where a high degree of stand- ardization is required, functional structures are desirable. Where a high level of flexibility is required because of diversity of product or markets, or where markets are rapidly changing, divisional or matrix structures may work best. Most organi- zations use a combination of designs supplemented with coordinating structures such as project teams and cross-functional task forces.

ExhIbIt 9–10 Strategic Thinking Map for Evaluating Support Strategies

1. Is the organization’s culture appropriate for the overall strategy? 2. Are the organization’s values reflected in the service delivery? 3. Are the behavioral norms appropriate for the strategy? 4. Are the management processes (the way we do things) appropriate for the strategy? 5. Does the organizational structure help to facilitate the overall strategy? 6. Is there a balance between standardization and flexibility? 7. Are additional coordinating or collateral structures required? 8. Does the organization have the financial resources to carry out the strategy? 9. Does the organization have the appropriate human resources, skills, policies, and

procedures for the strategy? 10. Is the management talent appropriate? 11. Do the information systems help to facilitate the strategy? 12. Are the facilities and equipment up to date and appropriate to carry out the overall

strategy?

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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Chapter 9 Value-adding Support StrategieS 397

An organization’s strategic resources are critical for most strategies. Adequate resources allow for a number of strategic alternatives, whereas having few strate- gic resources inhibits strategy implementation. Strategic resources include finan- cial, human, information, and technological resources. People are always key and different strategies require different human talents. responsibility for recruiting and developing the best human resources for the strategy falls to leadership. Strategic information systems and decision support systems can create competi- tive advantage for organizations through improved customer service and more efficient and effective service delivery. The selection of the strategic technologies is a decision of the strategic leader and is central to strategy implementation. Strategic technologies include the type of facilities and the type and sophistication of equipment. The strategic technologies decisions set the physical context and level of sophistication for service delivery and affect everything from the organi- zation’s image to patient satisfaction.

As with the service delivery strategies, the results of the internal analysis for each of the support activities in the value chain must be compared with the requirements of the strategy selected in the strategic management process. results of that comparison indicate whether there needs to be a strategy that maintains the current status of the support activity or a strategy that changes the support area. Value-adding support strategies typically maintain current strengths or build new ones, or correct weaknesses in the support activities. for each of the value-adding support areas, actions for maintaining or changing the area are rec- ommended as a way to initiate strategic thinking.

An example of value-adding support strategies developed through a com- parison of the results of an internal analysis and the requirements of the selected strategies for each are presented to extend strategic thinking. chapter 10 demon- strates how individual organizational units must set objectives and develop action plans based on the value-adding service delivery strategies and support strategies selected to achieve directional and adaptive strategies.

Practical Lessons for health Care Strategic thinkers

1. culture, structure, and strategic resources should probably follow strategy; however, the reality is that often strategy follows culture, structure, and the resources of the organization. often what we do is dependent on what we are able to do with the organization’s current culture, structure, and strate- gic resources.

2. often it is necessary to change the culture, structure, and strategic resources to successfully compete. These types of changes may take years – time an organization may not have. When the gap between the requirements of the strategy and the results of the internal analysis is too great, strategic managers may have to rethink the strategy itself.

3. Do not underestimate the critical importance of the support services in implementing strategy.

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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398 StrAtegic mAnAgement of HeAltH cAre orgAnizAtionS

THE LANGuAGE OF STRATEGIC MANAGEMENT: KEy TERMS AND CONCEPTS

Behavioral norms cognitive Assumptions cognitive culture cognitive Values collateral organization combination Structure Decision Support System

Direction Divisional Structure emotional culture facilities functional Structure Matrix Structure organizational culture

Shared Assumptions Shared Values Strategic Information System (SIS) Strategic resources Strategic Technologies Structure Value-Adding Support Strategies

Questions for Class Discussion

1. What part does internal analysis play in the development of value-adding support strategies? What part does strategy formulation play?

2. how do the value-adding support strategies create the “context” for strategy implementation?

3. What is organizational culture? how does it implement strategy?

4. What are the basic building blocks of structure? What are the advantages and disad- vantages of each?

5. In what circumstances might a high level of standardization be required? A high level of flexibility?

6. Which do you think changes first, strategy or structure? After formulating your answer and making your case, argue the opposite position.

7. What are the primary differences in the financial strategies needed for expansion, reduction, and maintenance of scope?

8. What are the primary differences in the human resources strategies needed for expan- sion, reduction, and maintenance of scope? Which type of adaptive strategy is most dif- ficult to implement from a human resources perspective? Why?

9. how can information systems be used to develop competitive advantage?

10. What changes are information systems bringing to health care?

11. Why is facilities management an increasing concern for strategic management?

12. how do facilities affect a health care organization’s strategy?

13. how can the technology/equipment decisions create competitive advantage?

14. how might future internal analyses be affected by the value-adding support strategies?

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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Chapter 9 Value-adding Support StrategieS 399

notes 1. gary getz and Joe lee, “Why your Strategy Isn’t

Working,” Business Strategy Series 12, no. 6 (2011), pp. 303–307.

2. Ibid., p. 303. 3. nitin nohria, William Joyce, and Bruce roberson,

“What really Works,” Harvard Business Review 81, no. 7 (2003), p. 47.

4. Bindu gupta, “A comparative Study of organizational Strategy and culture across Industry,” Benchmarking 18, no. 4 (2011), pp. 510–528 and larry yarbrough, neil A. Morgan, and Douglas Vorhies, “The Impact of Product Market Strategy – organizational culture fit on Business Performance,” Academy of Marketing Science 39, no. 4 (2011), pp. 555–573.

5. John Kotter, A Force for Change: How Leadership Differs from Management (new york: The free Press, 1999).

6. gerald r. ledlow and M. nicholas coppola, Leadership for Health Professionals (Burlington, MA: Jones & Bartlett learning, 2014), p. 80.

7. Marie carney, “Influence of organizational culture on Quality healthcare Delivery,” International Journal of Health Care Quality Assurance 24, no. 7 (2011), pp. 523–533.

8. rené carayol, “Why culture Beats Strategy every Time,” Director 66, no. 4 (2013), p. 26.

9. John D. hanson and Steven A. Melnyk, “culture eats Strategy .  .  . and how to Deal with It,” Supply Chain Management Review 18, no. 4 (2014), p. 26.

10. Sigal Barsade and olivia A. o’neill, “Manage your emotional culture,” Harvard Business Review 94, no. 1/2 (2016) p. 60.

11. Ibid. 12. Ibid. 13. Maxim Voronov and Klaus Weber, “The heart of

Institutions: emotional competence and Institutional Actorhood,” Academy of Management Review 41, no. 3 (2016), p. 456.

14. Barsade and o’neill, “Manage your emotional culture,” p. 60.

15. Voronov and Weber, “The heart of Institutions,” p. 456. 16. Alfred c. chandler, Strategy and Structure (cambridge,

MA: MIT Press, 1962), p. 16. 17. Thomas g. Marx, “The Impacts of Business Strategy

on organizational Structure,” Journal of Management History 22, no. 3 (2016), pp. 249–268.

18. T. c. reeves, W. J. Duncan, and P. M. ginter, “Strategic configurations in health Service organizations,” Journal of Business Research 56, no. 3 (2003), pp. 31–43.

19. nir Menachemi, Valerie A. yeager, W. Jack Duncan, charles r. Katholi, and Peter M. ginter, “A Taxonomy of State Public health Preparedness units: An empirical examination of organization Structure,” Public Health Management and Practice 18, no. 3 (2010), pp. 250–258 and W. J. Duncan, P. M. ginter, A. c. rucks, M. S.

Wingate, and l. c. Mccormick, “organizing emergency Preparedness within the united States Public health Departments,” Public Health 121, no. 4 (2007), pp. 241–251.

20. Dale e. Zand, “Strategic renewal: how An organization realigned with Structure and Strategy,” Strategy & Leadership 37, no. 3 (2009), pp. 23–28.

21. harold J. leavitt, “Why hierarchies Thrive,” Harvard Business Review 81, no. 3 (2003), p. 98.

22. Ibid., p. 102. See also Andrew B. Whitford, “unitary, Divisional, and Matrix forms as Political governance Systems,” Journal of Management Governance 10, no. 2 (2006), pp. 435–454.

23. John r. griffith and Kenneth r. White, The Well-Managed Healthcare Organization, 5th edn (chicago, Il: health Administration Press, 2002), p. 163; M. c. Moldeveanu and robert M. Bauer, “on the relationship between organizational complexity and organizational Structuration,” Organization Science 15, no. 1 (2004), pp. 98–119.

24. Martine hass and Mark Mortensen, “The Secrets of great Teamwork,” Harvard Business Review 94, no. 6 (2016), pp. 70–90.

25. ethan Bernstein, John Bunch, niko canner, and Michael lee, “Beyond the holacracy hype,” Harvard Business Review 94, no. 7/8 (2016), pp. 38–49.

26. Stephen heidari-robinson and Suzanne heywood, “getting reorgs right,” Harvard Business Review 94, no. 11 (2016), p. 86.

27. Per nikotaj Bukh and christian nielsen, “understanding the health care Business Model: The financial Analysts Point of View,” Journal of Health Care Finance 37, no. 2 (2010), pp. 8–27.

28. Joseph f. Michlitsch, “high-Performing, loyal employees: The real Way to Implement Strategy,” Strategy & Leadership 28, no. 6 (2000), pp. 28–33; Barry A. colbert, “The complex resource-Based View: Implications for Theory and Practice in Strategic human resource Management,” Academy of Management Review 29, no. 3 (2004), pp. 341–358.

29. Bryan Dieter and Doug gentile, “Improving clinical Practices can Boost the Bottom line,” Healthcare Financial Management 47, no. 9 (1993), pp. 38–40; lynda gratton and catherine Truss, “The Three-Dimensional People Strategy: Putting human resources Policies into Action,” Academy of Management Executive 17, no. 3 (2003), pp. 74–86.

30. John f. crilly, robert h. Keffe, and fred Volpe, “use of electronic Technologies to Promote community and Personal health for Individuals unconnected to health care Systems,” American Journal of Public Health 101, no. 7 (2011), pp. 1163–1167.

31. gerald l. glandon, Detlev h. Smaltz, and Donna J. Slovensky, in Austin and Boxerman’s Information Systems

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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for Health Services Administration, 7th edn (chicago, Il: health Administration Press, 2003) and Alan h. Williams and richard A. cookson, “equity–efficiency Trade-offs in health Technology Assessment,” International Journal of Technological Assessment in Health Care 22, no. 1 (2006), pp. 1–9.

32. Ibid. See also Johanna gummerus, “e-Services as resources in customer Value creation: A Service logic Approach,” Managing Service Quality 20, no. 5 (2010), pp. 425–434.

33. Ibid. 34. homer h. Schmitz, “Decision Support: A Strategic

Weapon,” in Marion J. Ball, Judith V. Douglas, robert I. o’Desky, and James W. Albright (eds), Health Information Management Systems (new york: Springer-Verlag, 1991), p. 47; Paul Morton, “using critical realism to explain Strategic Information Systems Planning,” Journal of Information Technology Theory and Application 8, no. 1 (2006), pp. 1–20.

35. holly J. Wong, “The Diffusion of Decision Support Systems in healthcare: Are We There yet?” Journal of Healthcare Management 45, no. 4 (2000), pp. 240–249.

36. Ibid. 37. office of Technology Assessment, Bringing Health Care

Online: The Role of Information Technologies (Washington, Dc: u.S. government Printing office, 1995).

38. glandon, Smaltz, and Slovensky, Information Systems. 39. robert oscar, “Smart choices: using Mobile Technology

to Improve Pharmacy utilization,” Employee Benefit Review 67, no. 12 (2013), pp. 25–27.

40. Melinda Beeuwkes Buntin, Matthew f. Burke, Michael hoaglin, and David Blumenthal, “The Benefits of health Information Technology: A review of relevant literature Shows Predominantly Positive results,” Health Affairs 30, no. 3 (2011), pp. 464–467.

41. Janet r. carpman and Myron A. grant, Design That Cares: Planning Health Facilities for Patients and Visitors, 2nd edn (chicago, Il: American hospital Publishing, 1993).

42. Ibid., p. 19. 43. ron Adner and rahul Kapoor, “right Tech, Wrong

Time,” Harvard Business Review 94, no 11 (2016), pp. 60–67.

44. Ibid. 45. David A. Berkowitz and Melanie M. Swan, “Technology

Decision Making,” Health Progress 74, no. 1 (1993), pp. 42–47.

46. Barsade and o’neill, “Manage your emotional culture,” p. 60.

47. Ibid. 48. Michael Beer and russell eisenstat, “how to have an

honest conversation about your Business Strategy,” Harvard Business Review 82, no. 2 (2004), p. 85.

49. James M. higgins and craig McAllister, “If you Want Strategic change, Don’t forget to change your culture,” Journal of Culture Change 4, no. 1 (2004), pp. 63–74.

50. Barsade and o’neill, “Manage your emotional culture,” p. 60.

51. nohria, Joyce, and roberson, “What really Works,” p. 49 and Bruce A. Waters and Shahid n. Bhuian, “complexity Absorption and Performance: A Structural Analysis of Acute-care hospitals,” Journal of Management 30, no. 1 (2004), pp. 97–122.

52. Stephen l. Walston and richard J. Bogue, “The effects of reengineering: fad or competitive factor?” Journal of Healthcare Management 44, no. 6 (1999), pp. 456–474.

53. Judy Wade, “how to Make reengineering really Work,” Harvard Business Review 71, no. 6 (1993), pp. 119–131.

54. Stephen lee Walston, lawton robert Burns, and John r. Kimberly, “Does reengineering really Work? An examination of the context and outcomes of hospital reengineering Initiatives,” Health Services Research 34, no. 6 (2000), pp. 1363–1388.

55. Ibid. 56. leonard h. friedman and James B. goes, “The Timing

of Medical Technology Acquisition: Strategic Decision Making in Turbulent environments,” Journal of Healthcare Management 45, no. 5 (2000), pp. 317–330.

57. eva M. Pertusa-ortega, Jose f. Molina-Azorin, and enrique claver-cortés, “competitive Strategy, Structure and firm Performance: A comparison of the resource-Based View and the contingency Approach,” Management Decision 48, no. 8 (2010), pp. 1282–1303.

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:57:09.

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Why Value-Adding Service Delivery Strategies Are Important

As concluded by Jack Welch, an organization’s ability to learn and take action quickly is a leadership and management capability that may, in itself, create an advantage for organizations. The primary value for customers is created in service delivery – without an effective product or service strategy that satisfies customers over time, there are no customers. Service delivery is the “face” of the health care organization – the point of intersection between the customer and the organization.

Chapter 8 Value-Adding Service Delivery Strategies

“An organization’s ability to learn, and translate that learning into action rapidly, is the ultimate competitive advantage.”

—JAck Welch, AMericAn buSineSS execuTive AnD AuThor

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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314 StrAtegic mAnAgement of HeAltH cAre orgAnizAtionS

Three things must happen to have effective service delivery. First, service delivery managers must translate the broader organization-wide strategies into sound implementation plans. The service delivery function is largely responsible for achieving the organization’s strategy and, in doing so, providing a level of value to customers. A poor alignment of the service delivery strategy to the over- all strategy, or poor implementation of the service delivery strategy, will render the organization’s overall strategy ineffectual. The value-adding service delivery strategies are the means to accomplish organizational ends.

Second, clear, unambiguous service delivery strategies must be developed and managed, reflecting what the organization is able to do. An over-ambi- tious service delivery strategy that outstrips the organization’s resources, competencies, or capabilities is useless. Service delivery strategies draw on the organization’s strengths, although on occasion they may be attempting to negate a weakness.

Third, it is the organization’s ability to learn (or re-learn) that may make the biggest difference. Strategies do not always work as planned and most of the time managers learn by doing. Strategic managers must be willing to forego service delivery strategies that are not working and learn from them. A strategy that draws upon the organization’s strengths, fixes weaknesses, and encourages learn- ing along the way creates momentum for the organization.

use the concepts in this chapter to develop effective value-adding service deliv- ery strategies!

learning objectives

After completing the chapter you will be able to: 1. Explain how the service delivery portion of the value chain is key in the imple-

mentation of strategy. 2. Discuss the service delivery strategies. 3. Describe the decision logic for developing implementation strategies. 4. Link the results of internal analysis and the development of service delivery

implementation strategies. 5. Explain how the pre-service, point-of-service, and after-service strategies of an

organization are the means to achieve directional, adaptive, market entry/exit, and competitive strategies.

6. Demonstrate how competitive advantage may be created inside the organiza- tion through implementation of the service delivery strategies.

7. Explain how the service delivery strategies may be used to strengthen competi- tive advantages and improve competitive disadvantages.

Strategic Management Competency After completing this chapter you will be able to create effective service delivery strategies for a health care organization.

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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Chapter 8 Value-adding SerViCe deliVery StrategieS 315

Implementation Strategies

once consensus has been reached regarding the directional, adaptive, market entry/exit, and competitive strategies, planning for implementation strategies commences. Further strategic thinking is required to determine how to achieve the goals previously decided during strategy formulation. A leader can announce a strategy, but that strategy will only be realized if it is in line with the pattern of resource allocation decisions made at every level of the organization.1 Without a clear process for implementation, considerable overlap and confusion regarding specific guidelines for translating strategies into management practice remain. As introduced in chapter 1 (refer to exhibit 1–1), the implementation strategies include two different sets of value-adding strategies: value-adding service deliv- ery strategies and value-adding support strategies. in addition, planning strategy implementation includes setting organizational unit objectives, developing plans, assigning responsibilities, and agreeing on budgets that, in concert, translate the organization’s overall strategy into specific action plans.

Strategies Based on the Value Chain chapter 4 presented strategic thinking maps for evaluating the strengths and weaknesses of the organization. This approach focused on evaluating those components of the organization that create value and, ultimately, competitive advantage – the value chain (see exhibit 8–1). recall that the upper portion of the

ExhIBIt 8–1 The Value Chain

PRE-SERVICE Market/Marketing Research Target Market Services Offered/Branding Pricing Distribution/Logistics Promotion

POINT-OF-SERVICE Clinical Operations

Quality Process Innovation

Marketing Patient Satisfaction

AFTER-SERVICE Follow-up

Clinical Marketing

Billing Follow-on

Clinical Marketing

ORGANIZATIONAL STRUCTURE Function Division Matrix

STRATEGIC RESOURCES Financial Human Information Technology

A dd

Va lu

e A

dd Va

lu e

S er

vi ce

D el

iv er

y S

up po

rt A

ct iv

iti es

ORGANIZATIONAL CULTURE Shared Assumptions Shared Values Behavioral Norms

Source: Adapted from Michael E. Porter, Competitive Advantage: Creating and Sustaining Superior Performance (New York: Free Press, 1985), p. 37.

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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316 StrAtegic mAnAgement of HeAltH cAre orgAnizAtionS

value chain focuses explicitly on the primary activities of the organization – the delivery of services. The lower portion of the value chain contains the value- adding support activities that include the organization’s culture, structure, and strategic resources. The components depicted in the value chain are the principal means of creating value for the organization and developing competitive advan- tages.2 These activities are major elements of strategy implementation and are shaped by strategic thinking and strategic planning.

remember that service delivery strategies and support strategies are not separate but, rather, interact and complement each other. The organization’s culture, structure, and strategic resources are an inherent part of the pre-service, point-of-service, and after-service activities. Thus, a change in the culture of the organization – human competencies – is reflected in service delivery. Further, an enhanced information system – a resource – can benefit all aspects of service delivery as well as other strategic resources. Focusing on adding value and results in health has been a theme for a number of years and the essentials for a Strategic Thinker 8–1, “What is value-based reimbursement?” examines reimbursement models to encourage moving from volume to value. This chapter examines the service delivery strategies and the process for developing service delivery imple- mentation strategies. chapter 9 discusses the support strategies and the associ- ated process for developing support implementation strategies.

ESSEntIAlS for A StrAtEgIC thInkEr 8–1

What is Value-Based reimbursement?

Value-based reimbursement is a health insurance system that pays providers based on the value of care they deliver rather than on the number of visits and tests they order – thus paying for value rather than volume. Value is typically determined by the overall health of a defined population. This payment system is designed to spur the development of care systems oriented toward outcomes rather than activity.

Under traditional fee for service (FFS) mod- els, providers are reimbursed for activity – treatments, procedures, hospitalizations, visits, encounters, consultations, and so on. Therefore, total reimbursement rises as the number of activities increases. At issue in FFS is whether the economic incentives encourage overtreatment.

Capitation is a well-known alternative reim- bursement method, itself controversial. Under a capitated system, providers receive a set, peri- odic payment for each patient in a popula- tion. The sum of the payments received by the providers to care for this population produces a pool of revenue. All activity to render care is a cost. At issue in capitation is whether it encourages undertreatment, since the eco- nomic incentives are to perform less activity to avoid expenses and increase income.

Both of these models rely on economic incentives, assuming a direct correspondence between ordering care and the economic bene- fit of doing so. Thus gaining more or less income influences decision behavior (such as when a surgeon prescribes surgery, or an internist

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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Chapter 8 Value-adding SerViCe deliVery StrategieS 317

orders a follow-up exam) that enables them to directly and personally gain from that order. Equally true is that much economic activity occurs within health care that is ordered without prospect of personal economic gain. Examples include: an emergency physician admitting a patient to the hospital or ordering a follow-up test; a primary care physician prescribing a drug; an internist referring to a specialist or admitting a patient to the hospital. All the same, each of these actions becomes the basis for payment. They increase the total cost of health care. Payers – insurers, government, and consumers – are paying for the volume of activity.

Some value-based reimbursement resem- bles capitation because it is population-based rather than activity-based; however, this type of reimbursement differs from capitation chiefly because of incentives to attain specific popula- tion health measures. Such measures might include A1C (a marker for diabetes), blood pres- sure, cholesterol, and body mass index (BMI, a measure of obesity). If the population, as a whole, reaches the performance targets addi- tional payments are earned.

Other value-based models “bundle” an array of related treatments and procedures into a single, flat-rate payment. An example is joint replacement that involves several providers and

suppliers; a bundled payment goes to one entity that divides it among those who participated in the care. By organizing the reimbursement in this fashion, the goal is that the model of care will follow in alignment and become more efficient, standardized, evidence-based, and consistent.

Essential for the strategist is to: (1) have a belief about whether and how economic flows shape – or do not shape – behavior of people and organizations; (2) recognize that in the past, the rewards were for doing more under FFS and less under capitation; (3) understand that under value-based systems, the rewards – it is hoped – are for doing those things that add value, for example, reduce morbidity in the population; (4) acknowledge that value- based systems depart significantly from past systems – they are unprecedented and largely unproven and arguably the largest change to health care reimbursement ever attempted; and (5) strategists must know the markets in which they operate. Right now, all of these systems – fee for service, capitation, and value-based – operate in the market, making it enormously complicated.

Source: Christopher E. Press, MBA, FACHE, Assistant Professor

(adjunct), Rollins School of Public Health, Emory University and

Partner, Morgan Healthcare Consulting, LLC.

Decision logic for the Value-Adding Service Delivery Strategies

A planning logic for developing implementation strategies is illustrated in exhibit 8–2. Market entry/exit and competitive strategies provide the most direct input into the development of the implementation strategies. The value-adding service delivery strategies specify the pre-service activities, point-of-service con- figurations and processes, and after-service activities required by the strategies developed during strategy formulation. These strategies must be coordinated and consistent.

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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318 StrAtegic mAnAgement of HeAltH cAre orgAnizAtionS

ExhIBIt 8–2 Decision Logic for Developing Value-Adding Service Delivery Strategies

Directional Strategies

Adaptive Strategies • Expansion of Scope • Reduction of Scope • Maintenance of Scope

Market Entry/Exit Strategies

• Purchase • Cooperation • Development • Market Exit

Competitive Strategies • Strategic Posture • Positioning

Implementation Strategies • Support Strategies

Implementation Strategies • Unit Action Plans

Unit-level Strategies

Organization-level Strategies

Corporate- and Divisional-level Strategies

Implementation Strategies

• Pre-Service • Point-of-Service • After-Service

Service Delivery Strategies

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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Chapter 8 Value-adding SerViCe deliVery StrategieS 319

The value-adding support strategies create and shape the working environment and behavioral norms, reporting relationships and structure, as well as informa- tion flows, financial needs, and human resource requirements for carrying out the selected strategies. organizations that do not have the appropriate culture, structure, or strategic resources cannot implement effective plans. Finally, unit action plans link the individual organizational units to the overall strategy. units are typically functional, such as operations (e.g. surgical units, Alzheimer’s units, well-baby care), marketing, finance, human resources, and so on.

The value-adding service delivery strategies must be developed first, followed by the support strategies and unit action plans. The value-adding service delivery strategies are planned first because service delivery is the central activity of the organization and is the principal way of delivering value to the customer. The support strategies and action plans must facilitate the accomplishment of the ser- vice delivery strategies.

Process for Developing Service Delivery Strategies

A six-step process for developing service delivery strategies based on the decision logic for the development of value-adding strategies is presented in exhibit 8–3. For each component of service delivery – pre-service, point-of-service, and after- service – the demands of the selected strategies must be determined and matched to the strengths and weaknesses (competitive advantages and disadvantages) of the organization identified in internal analysis to determine whether the service delivery needs to be changed to accomplish the selected strategies.

As shown in exhibit 8–3, the final step in the process for the service deliv- ery strategies is providing guidance to the organizational units. Although steps 1–5 are critically important, time-intensive, and demanding, the success of the strategies hinges on the guidance delivered by leadership. The directions given can bolster and motivate employees, or render them frustrated, confused, and unenthusiastic regarding any proposed changes. For best results, leaders need to carefully consider the content of their guidance, their plan for delivery, and how to work through possible opposition.

Step 1: Identify the Service Delivery requirements of the Strategy and Service Delivery Value-Adding Potential

each of the strategic decisions (directional, adaptive, market entry/exit, and com- petitive) made to this point moves the organization closer to accomplishing its mission and vision and at the same time makes special demands on the organiza- tion that require explicit action. The requirements of directional, adaptive, market entry/exit, and competitive strategies have been discussed in chapters 5 through 7. The general resource, competency, and capability requirements of the market entry/exit strategies are presented in exhibit 7–19, the requirements for the pos- ture competitive strategies are outlined in exhibit 7–22, and the requirements for the positioning competitive strategies are shown in exhibit 7–24; however, each situation will be different and the demands on service delivery will be unique

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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320 StrAtegic mAnAgement of HeAltH cAre orgAnizAtionS

ExhIBIt 8–3 Process for Developing Service Delivery Strategies

Step 1 – Identify the Service Delivery Requirements of the Strategy and Service Delivery Value-Adding Potential

Step 2 – Compare the Strategy Requirements with the Results of the Service Delivery Internal Analysis

Step 3 – Decide to Maintain or Change Pre-Service

Step 4 – Decide to Maintain or Change Point-of-Service

Step 5 – Decide to Maintain or Change After-Service

Step 6 – Provide Guidance to Organizational Units

to that situation. For example, strategic managers may assess that a merger will initiate a new model of service delivery. Prospecting for new areas of growth may require additional market research and a differentiation strategy may require an emphasis on building point-of-service quality and reputation.

Strategic thinking – awareness, anticipation, analysis, interpretation, synthesis, and reflection – will be required to customize service delivery to the demands of the strategy. Strategic leaders may be required to reinvent service delivery to align with strategy or incremental changes may be required to maintain competitiveness.

the Value-Adding Service Delivery Strategies Potential value-adding service delivery strategies are critical to the success of the organi- zation because they are the principal methods for carrying out the strategy and creating value. Therefore, explicit strategies must be developed for each type. The

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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Chapter 8 Value-adding SerViCe deliVery StrategieS 321

components must be coordinated and work in concert. it is the role of strategic managers responsible for developing and managing the strategic plan to ensure the compatibility of pre-service, point-of-service, and after-service strategies. A review of the value-adding service delivery strategies demonstrates their poten- tial for contribution to the organization’s broader strategies and goals.

Pre-Service Delivery Strategies Pre-service is a key area in the value chain where value can be created for the customer/patient before the service is actually delivered. Pre-service activities include marketing, target marketing, branding, pricing, distribution/logistics, and promotion. A pre-service strategy entails the planning and activities that enable the organization to determine its customers and the services that will be offered to them as they enter the system. Marketing is central in developing pre- service strategies. Pre-service marketing involves market and marketing research that enables the organization to determine the appropriate customer (target market), design services that will satisfy that customer, build recognition for the service through branding, price the service at a level that is acceptable to the cus- tomer while allowing the organization to survive, and offer the service where the customer wants it or is able to obtain it.

Market and Marketing Research Market research is data gathering about the marketplace (potential customers) including demographics, geographics, psycho- graphics, and benefits sought, that is combined with segmentation to identify the organization’s best customer. Market research aids in identifying the target market (the market or market segment believed to be an organization’s best customers and around which all marketing activities focus) and must be done in conjunction with identifying the services the organization will deliver. For example, a group of physicians in a medical clinic has internal resources, competencies, and capabili- ties to provide care. if all the physicians are board certified in plastic surgery, the group could decide to provide comprehensive care including reconstructive and cosmetic surgery, or the physicians could decide to focus only on cosmetic sur- gery “to the stars” with extreme confidentiality in a remote but very comfortable location. The target market has to want or need the services and the organization must have or develop or purchase the appropriate resources, competencies, and capabilities to provide the services.

beyond information concerning potential customers, marketing research pro- vides information concerning desired attributes for the product or service, appro- priate price, the most convenient place desired by customers to obtain the product or service, and type of promotional activity to best inform potential customers (the four Ps of marketing: product, price, place, and promotion). Therefore, once the internal assessment has highlighted the organization’s competitively relevant strengths and weaknesses, the external analysis has identified the issues in the marketplace, and the organization has identified the strategies it wants to pursue, pre-service strategies attempt to identify the specific target market and define the services to be offered. Marketing research may uncover a ready market of potential customers for alternative types of services, for example, telehealth and telemonitoring (see essentials for a Strategic Thinker 8–2, “What Are Telehealth and Telemonitoring?”).

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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ESSEntIAlS for A StrAtEgIC thInkEr 8–2

What Are telehealth and telemonitoring?

The Centers for Medicare and Medicaid Services define telehealth as remote health care deliv- ery via monitoring. Telehealth is specifically defined as phone monitoring of the implemen- tation of scheduled and prescribed encounters. Telemonitoring relates to the collection and trans- mission of vital signs and clinical data through electronic information-processing technologies. Quality improvement organizations have been particularly supportive of home health agencies in implementing telehealth tools to reduce acute care and hospitalization. Using these techniques, a health care provider is able to stay in contact with patients, monitor via telephone the extent to which recommendations are being followed, and track compliance rates. These techniques support the assumption that proactively reach- ing out to patients with chronic diseases will encourage them to change unhealthy behaviors and adopt more healthy lifestyles.

In many cases patients make poor decisions about their personal health because of a lack of information. The ability to accurately access a patient’s condition via telemonitoring makes it possible to intervene when appropriate and provide equally important education regarding healthy living in a manner that is more conveni- ent for both patient and provider.

Research has shown that the primary advan- tage of telemonitoring is the increased patient compliance. Often, changes in a patient’s con- dition can be detected at or before the onset of a serious event in much the same way as nurses monitor patients in an inpatient set- ting. Of course, real-time monitoring of data, direct patient feedback, and high levels of provider/patient interaction depend on digital

proficiency on the part of both parties as well as effective multimodal communication.

Home patient monitoring assumes two things: (1) the rise of the responsible patient who can self-manage her/his long-term medical condition and (2) availability of mobile devices as effective go-betweens for clinicians and patients. For example, telemonitoring of con- gestive heart failure patients has been shown to be successful in reducing hospitalizations and trips to the emergency department.

Telemonitoring enables patients to have more choices about how and when to react to changes in medical conditions before a genu- ine emergency occurs. Regardless of where a patient may be, wireless monitoring supports a more mobile lifestyle. Providers have made effective use of digital monitoring in home health by reducing the frequency of nursing visits, thereby reducing the cost of home health care. Because health care costs are growing so rapidly, the telehealth equipment market is growing as well. Many experts see great promise in the ability of telehealth to decrease the cost of health care delivery and possibly improve quality as compliance rates increase. There is little debate that telemonitoring has improved and will continue to improve the quality of life for a large numbers of patients world-wide.

RefeRence

“Research and Markets: Tele-Health Monitoring:

Market Shares, Strategies, and Forecasts

Worldwide, 2011–2017,” Telemedicine Business

Week (June 29, 2011), pp. 82–83.

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Chapter 8 Value-adding SerViCe deliVery StrategieS 323

Identifying the Health Care Customer – Target Market research has shown that as customers participate more actively in the purchasing experience, their positivity increases, and as positivity increases so does the perception of service quality.3 in health care, however, two major issues are noteworthy. First, many patients, as consumers, have been reluctant to participate in the purchasing decision; they want to rely on their doctor to tell them what is wrong and what to do to fix it. Second, and more challenging for health care marketers, is the sheer number of very diverse customers to satisfy – physicians, health care consumers (patients) and their friends and families, other health care organizations, third- party payers, and more. in addition, there are multiple service categories that consumers may utilize over their lifetime – long-term care, emergency medicine, oncology, dermatology, pediatrics, and so on – that determine who potential customers will be. Furthermore, within these specializations are consumers with varying degrees of health and wellness resulting in differing needs, wants, and desires.

Segmentation is the process of identifying groups within a market and deter- mining the distinct characteristics of the various groups to select one or more as the target market – that segment of the population that the organization will focus its efforts to satisfy. Several groups may be targeted, but each one requires different marketing activities to achieve customer satisfaction. in addition, for health care sometimes a choice does not exist, as when a person shows up at an emergency room, the law requires that he or she be treated and the patient may be unconscious and taken to the nearest er (which might not be the preferred one). exhibit 8–4 illustrates the many customers for a hospital and the segments a phy- sician (one of the hospital’s customers) may consider. The process of segmentation for a general medical practice service category would be more challenging than

ExhIBIt 8–4 Determining the Health Care Customer

Physicians

Patients

Hospital

Medicare/ Medicaid

Chronic Condition

Acute Condition Athletes

Males

Females

Children

ElderlyPoor

Insured

Third-Party Payers – Businesses

Third-Party Payers – Insurance Companies

Employees

Donors

Volunteers

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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for an oncology (cancer) practice, which is more specialized; however, many seg- ments can be identified among cancer patients – those with leukemia, skin cancer, lung cancer, and so on. Specialization of the hospital, nursing home, or physician’s practice could be a first step in the segmentation process, but other demographic, psychographic, and geographic factors must be considered as well.

Physicians are a major target for marketing efforts because they recommend other health care providers for their patients. estimates are that physicians control 80 percent of health care costs, as they prescribe pharmaceuticals and medical equipment, and determine hospitalization, diagnostic, and surgical procedures. Physicians are an important customer base for hospitals because almost all patients are admitted by physicians who have staff privileges at the hospital. if physicians choose not to admit patients to a given hospital, the hospital will have no patients.

The patients themselves are customers. however, the buyer–seller relation- ship of traditional exchange processes has to be modified in much of health care because the patient has a professional dependency on the doctor. Many patients and their families have limited knowledge of medical terminology, or the com- plexity of medical diagnosis or care, nor can they accurately evaluate the medical care provided. An excellent oncologist may provide outstanding care to a lung cancer patient who smoked three packs of cigarettes a day. When the patient dies many family members want to blame the physician or the hospital, not their loved one. The same difficulty arises for obstetricians (physicians who deliver babies). excellent care may have been provided, but a mother who smoked heavily or engaged in drug use may increase birth defects.

At one time, patients would never have questioned their doctor’s choice of hos- pital. Today, a patient’s choice is more frequently determined by health insurance. in a study of pregnant women (who have enough time to actually plan for a hos- pital admission), 98 percent said a very important factor in choosing a hospital was acceptance of her health insurance. A hospital that was “recommended by my doc- tor” had 64 percent agreement of being very important and a hospital that received high ratings for its “quality of maternity care” received 59 percent agreement.4 A 2017 study found that 73.2 percent of pregnant women chose their obstetrician/ midwife first before their choice of hospital, and over half (55% percent) did not believe their choice of hospital would affect their likelihood of having a cesarean section. in addition, most respondents understood that quality of care varied across hospitals; however, only about a third felt that specific quality measures (maternal birth trauma rates, obstetrical infection rate, neonatal trauma rate, epi- siotomy, and hospital infection rate) were medium/high priority. At issue appears to be that women view the quality of their prenatal care as more important, not quality metrics reported at the hospital level; they do not believe that a hospital’s quality scores influence the care they will receive. “Presentations of hospital qual- ity data should more clearly convey how hospital-level characteristics can affect women’s experiences including the fact that their chosen obstetrician/midwife may not deliver their baby.”5

A plethora of quality scores have been generated for hospitals including The Joint commission that accredits in part on the basis of performance on measures of quality; centers for Medicare and Medicaid (cMS) that uses 123 different metrics to produce “hospital compare” for the public to access; the national committee for Quality Assurance (ncQA) that offers heDiS (healthcare effectiveness Data

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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and information Set) scores; the national Quality Forum (nQF); the Agency for healthcare research and Quality (AhrQ) that serves as a clearinghouse for qual- ity measures; utilization review Accreditation commission (urAc); plus several not-for-profit and for-profit organizations including The leapfrog Group (set up by business organizations and consultants with the goal to save lives by reduc- ing medical errors, injuries, accidents, and infections ranking hospitals on the basis of safety); Truven health Analytics’ Top 100 hospitals (part of ibM Watson health) to rank health systems based on inpatient outcomes, process of care, extended outcomes, efficiency, and patient experience; healthgrades’ Top 100 hospitals claiming these hospitals have a 27 percent lower risk of patients dying than patients in other hospitals not making the list (23 states did not place a single hospital on its Top 100 hospitals list in 2017); and US News & World Report’s listing of top hospitals by 16 specialties, such as cardiology, cancer, gynecology, geriatrics, etc. while its honor roll recognizes the top 20 hospitals with the most rankings in the various specialties (the Mayo clinic was at the top, nationally ranked in 15 of 16 adult specialties and eight of ten pediatric specialties).

The university of Michigan’s center for healthcare research & Transformation developed a research brief that concluded: “hospital rankings, ostensibly designed to enlighten health care consumers, have morphed into a confusing array of met- rics and methodologies that are now largely ignored outside of hospitals’ execu- tive suites and doctors’ lounges.” nine prominent rankings were studied and in 2012, 37 percent of hospitals were ranked on one of the nine hospital ranking systems. in 2015, 53 percent of Michigan hospitals received a high rank on one of nine hospital ranking systems, but only 22.5 percent received a high rank on at least two ranking systems.6

Third-party payers (insurance companies and employers) are also customers. These companies must be satisfied that the health care provider is efficiently treat- ing patients or they will use their substantial financial influence to dictate that patients go elsewhere. considerable insight concerning third-party payers can be gained through quality monitoring organizations.

The national committee for Quality Assurance (ncQA) is an independent, not-for-profit organization started by a number of large employers in 1991 with a mission to “improve health care quality everywhere.” ncQA defines quality health care as “the extent to which patients get the care they need in a manner that most effectively protects their health.” Three different methods are used to assess quality: (1) voluntary accreditation (currently about 43 percent of the u.S. popula- tion is covered by accredited health plans); (2) healthcare effectiveness Data and information Set (heDiS), a tool used to measure performance in key areas such as immunizations and mammograms; and (3) A comprehensive member satisfac- tion survey. ncQA maintains an up-to-date website available to consumers and employers to determine whether they want to use a specific plan. because of ncQA’s success in the private sector it has expanded to the public sector as well – Medicaid and Medicare heDiS are being used in various states, as well as “dual eligible” consumers (those covered under both Medicare and Medicaid) in 2017.7 The rate of change in health care is rapid and, therefore, health care employees must be ready to adopt new ways of doing things even if they feel threatened by the change. often changing conditions require that value and quality have to be viewed in entirely new ways.

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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To Brand or Not to Brand Services A brand is a name created for a prod- uct, service, or idea. it provides identification and a guarantee of a certain con- sistent quality. A brand is intangible – it is simply a set of promises. it implies trust, consistency, and a defined set of expectations.8 A brand is a means to set customers’ expectations (assurances of quality) and reduce their risks. A brand name can be protected through legal registration; then no other organization in the same industry can use it or something close to it (although how close is often challenged in court). A brand has other dimensions that differentiate it in some way from other products designed to satisfy the same need.9 Those dimensions may include packaging, service, advertising, customer advice, financing, delivery arrangements, warehousing, the customer’s feelings and perceptions about the product attributes and how it performs, and the brand name (how it makes them feel, what it stands for, and how they feel about the company that produces/sells the brand).

The strongest brands have a unique position in the mind of buyers. Mayo clinic, MD Anderson, and Johns hopkins are examples of brands that have value for customers. every person who has contact with a patient at these clinics represents the brand. if housekeeping is poorly performed, it hurts the brand; if admitting is repetitious and slow, it hurts the brand; if clinical care is done less thoroughly than customers expect, it hurts the brand. Thus, it is critical that every member of the organization realizes that the brand is owned and should be man- aged by every single employee.

To develop a good branding strategy, answers to three questions have to be understood: 1. Why do consumers choose one brand over another? 2. how does our brand stack up against competition? 3. What possibilities exist for potential brand growth and expansion?

customers evaluate every service experience by dividing perceived quality by price to arrive at a sense of value. it may not be a perfect method, or very accu- rate, but it is real as far as that consumer is concerned. For services, the brand is more important than for tangible products; especially because if performance falls short, the service brand’s image and positioning deteriorate rapidly.10

Much branding activity in health care has centered on promoting and creat- ing identities for health care systems. however, customers are not interested in abstract systems, but rather the physicians and nurses who care for them in a hos- pital that they are familiar with and perhaps have preferred for decades. Although preference for a new brand can be built over time, in most cases it is less expensive and more effective to leverage and extend the existing brand name.

A brand may be used to develop brand equity, a different construct than brand familiarity (i know the brand), or brand loyalty (i buy only this brand), or com- mitment (i support this brand). brand equity is a perceptual predisposition to support a brand based on stored knowledge; it represents the biased behavior a consumer has for a branded product versus an unbranded equivalent. A con- sumer may think highly of the Mayo clinic, may speak about its quality, but may never visit it; however, having heard and read about its philosophy, its great work over its long history, and admiring it as an organization, that consumer has an image in mind that leads to high brand equity.11

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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Marketers cannot simply create brand equity; it is earned through the market- ing mix variables. Product, price, place, and promotion are the basic building blocks of brand equity and are under a company’s control, enabling marketers to grow brand equity through marketing activities.

brand image includes perceptions related to the object and brand attitude is an evaluation of the object.12 creating/managing positive brand attitude is one of the brand associations that synergistically creates brand image. “brand associa- tions should be conveyed consistently across all marketing and communication efforts if the desired image is to be realized.”13 research has shown that different brand images significantly affect the brand equity measures of purchase inten- tions and willingness to pay premium prices.14 in one study, perceived quality was the major contributor to brand equity; however, brand quality alone will not contribute substantially to brand equity without an appealing brand image.15

using original, creative, and different advertising strategies, health care organizations can develop greater brand awareness and positive perceptions of their brands – or can damage the brand. The ceo who approved his hos- pital’s advertising agency recommended tagline of “We cheat Death!” lost his job. individuals’ attitudes toward the advertisements play a key role in brand awareness, influencing perceived quality, and brand associations.16

Monetary promotions (reduced prices, price discounts, coupons) have a nega- tive influence on perceived quality as they appear to draw focus to internal refer- ence prices and create a negative influence on perceived quality of the brand. on the other hand, non-monetary promotions (gifts, premiums) help develop brand equity.17

To increase brand equity, the organization should build brand awareness as a means to anchor various associations the consumer has about a brand. brand associations, acquired through the firm’s marketing mix activities or product use, contribute to and ultimately define the brand’s image to the customer. Then, to increase loyalty, managers should focus on associations. Associations that are unique, strong, and favorable should create a positive brand image which when processed by consumers will bias consumer brand behavior toward brand equity.18

brand equity entails favorable predispositions that may or may not neces- sarily result in repeat buying behavior (or any buying behavior).19 A perfectly healthy recreational athlete may not visit renowned orthopedic surgeon Dr. James Andrews but be well aware of his reputation for repairing injuries for professional athletes. Dr. Andrews has brand equity developed through the recreational athlete and many others who would want Dr. Andrews to do their surgery if they needed it. The athlete may review advertisements and absorb the content of articles writ- ten about the successful surgeries performed by Dr. Andrews on high-profile col- lege and professional athletes. brand equity is being built.

Another benefit of brand equity occurs when a health care organization has service failure. The brand equity effect is identified as a prevailing advantage that spans the entire failure and recovery sequence. customers exposed to a failure incident appear to be more satisfied and more willing to repurchase high-equity brands than low-equity brands.20 This is an important finding because it indicates that the advantages of high brand equity theoretically can apply to all failures, not just those for which recovery is attempted. in health care, patients do not always complain when they perceive a service failure and the organization does not

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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realize that it should be engaging in service failure recovery actions. Patients who have high brand equity for the physician, nurse, clinic, or hospital may “counter- argue” negative information about a favored brand believing that the failure is a departure from the norm and unlikely to recur.

Although high-equity brands have an overall advantage throughout the failure situation, customers view high-equity brand failures as particularly disappoint- ing; thus satisfaction and behavioral intentions for high-equity brands decline at a faster rate (immediately after the time of failure), but the disappointment can be reversed with carefully planned recovery strategies. in health care that includes: quick acknowledgment of the failure, a sincere apology, and restitution of some sort. Although death is often viewed by the family as a service failure, better education from a caring physician about a disease or condition and involvement of the family in the care decisions may aid in understanding that all living things die at some point.

Pre-Service Pricing Decisions Some say that health care in the united States is delivered behind “secure walls of a fortress where information on pricing is kept out of public view.”21 Pricing health care is extremely difficult because it is a service that consumers would rather not have to purchase. consumer perceptions of “high price equals high quality and low price means low quality” and “you get what you pay for” operate in health care, yet most consumers do not have the ability to judge quality. in addition, consumers rarely know upfront pricing and payment must be made regardless of outcomes; together, these factors make price and quality comparisons difficult. Further, in many instances third-party payers separate consumers from the actual costs of care. Finally, health care providers have a great deal of difficulty determining their costs and then deciding on a price given the variability of the human condition. Does each appendectomy cost the same for the hospital or the surgeon? Given the numerous complications that may occur, the answer is generally “no, costs are not the same,” yet how many patients actually have complications?

The prospective payment system (PPS or fee-for-service) was easy for provid- ers to implement; however it ballooned u.S. health care spending. The cost-plus- based system has proven to be no better. The value-based system is unknown. competitive negotiations with third-party payers looking for lower prices have led some health care providers to prices that are too low, thereby threatening the provider’s long-term viability; many hospitals have closed. Government reduc- tions in payments for Medicare and Medicaid patients have resulted in reimburse- ments that are frequently below the cost of providing care. Thus, some providers have opted not to serve Medicare or Medicaid patients.

in health care, low-price strategies must be selected carefully because few peo- ple want to think that they are receiving “cheap” care (because of the association between “cheap” and “poor quality”). Although cost leadership strategies are generally associated with having low costs that can be translated into low prices, a high-price strategy can effectively position an organization as a high-quality health care provider; however, the consumer must perceive that the benefits (esthetically pleasing surroundings, attentive care, latest technology, and so on) are worth the high price.

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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based on the services offered, the ability of the consumer to pay, and the cost to deliver the service, the health care organization determines a price. no magic for- mulas exist to determine prices and some government mandates (about serving every patient that shows up at the emergency room door regardless of the ability to pay, for example) make pricing an even more challenging task.

one way that prices have been lowered for patients, employers, and insurers, is the site of care. rather than high-acuity institutional settings, patients are mov- ing from inpatient hospital departments to outpatient hospital departments, from hospital-based to free-standing surgery centers, from free-standing centers to physicians’ offices, and from the physician’s office to the patient’s home.

A new component of health insurance design being used in california is refer- ence pricing that motivates the patient to select low-price and low-acuity care set- tings.22 reference pricing is an attempt to change the system by restructuring the incentives (referred to as “choice architecture”). The combination of low consumer price-sensitivity (resulting from generous insurance coverage) and high provider power (resulting from market consolidation) has weakened the pricing clout of managed care plans.23 As patients are being required to pay a greater portion of their health care costs, reference pricing attempts to return some of the choice to patients. employers or insurers establish a maximum contribution toward pay- ment for a service, product, or episode of care, selecting some midpoint in the distribution of prices in each local market.24 Then employees have a choice. if they choose a physician or health care institution that charges less than the refer- ence price, they receive full coverage (after meeting their co-pay requirements). if they choose a provider that is higher than the reference price they have to pay the difference. Patients who need to use a high-priced provider because of specific medical conditions or live in remote geographical areas are typically exempted.25

reference pricing has been applied to joint replacement, colonoscopy, cataract surgery, and testing (laboratory and imaging). it works for services where quality is relatively standardized (such as diagnostic imaging) or can be relatively easily com- pared (as in joint replacement). employers and insurers understand that it is unrea- sonable to expect patients to select providers based on price when quality is variable and unmeasured, or when the patient does not have the knowledge to evaluate complex treatments because of disease severity. The approach requires that infor- mation be available to consumers. The california Public employees’ retirement System (calPerS) provides a list of low-price, high-quality hospitals for enrollees.26

reference pricing is possible for a wide variety of health care needs, but not all of them. one study identified those health care procedures that are most suit- able for reference pricing as: non-emergency procedures that are scheduled in advance, that take place in markets with multiple providers, and for which some quality metrics are available to patients.27 included in their definition were 73 high-volume inpatient services (based on Medicare diagnosis-related groups) and 90 percent of the most common services. They estimated that these shoppable ser- vices and procedures accounted for one-third of total spending for the non-elderly commercially insured population and could reduce spending for this population by approximately 8 percent.

Another approach to more manageable prices for patients is direct primary care – a service where customers have access to a variety of unlimited services

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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for a “modest” flat fee rather than being billed à la carte for every office visit and test. Direct primary care offices generally do not accept insurance and patients can consult with their doctor or nurse practitioner as often as they want; the average fee is $77.38 per month.28 That can be contrasted with “concierge” medical prac- tices at an average of $182.76 per month (but the concierge practices generally do bill insurance for their services). The concierge model is more to ensure access as the practice limits patient loads to ensure adequate time and availability for each patient.

Seattle-based Qliance, a pioneer in the direct primary care model (founded in 2007), charged $100 per month and claimed Qliance patients had medical claims that were 20 percent lower than other patients because they went to the emergency room less often, were hospitalized less frequently, and saw fewer specialists.29 Some health care experts were concerned that the business model encouraged the “worried well” to visit more often than needed. Those experts might have been right; as of June 15, 2017, Qliance announced it was closing five locations in the Seattle area. According to the ceo, “the general market is reluc- tant to pay what it takes for primary care to flourish.” one location remains open to provide occupational health for Seattle fire-fighters.

Pre-Service Distribution/Logistics The location of the health care provider will impact the number of people who seek its services. A location that is attractive because of its proximity to patients’ homes and work is a valuable asset, especially if other health care providers cannot duplicate the location. because people do not want to travel great distances for most health care, demographic studies of popu- lation are an important part of choosing a location for a facility. Satellite offices and hospital branches have become increasingly important as busy patients value convenience. Although satellite offices/hospitals do not typically cut costs for the organization, they do cut costs for the patient, which can lead to an increased market share and improved efficiency for the health care provider.

Some hospitals are finding it worthwhile to establish education centers in shop- ping malls. other health care organizations have established limited primary care facilities in grocery stores. Furthermore, many hospitals have established urgent care centers in multiple locations throughout a city; extended hours and a known “brand” name from the local hospital are appealing to consumers. urgent care facilities have been used to draw people away from using the hospital emergency room, a costly place to deliver primary care. According to the American Academy of urgent care Medicine, although the number of hospitals and emergency rooms have been decreasing over the past decade, the number of emergency room visits has increased significantly. it was estimated that between 14 to 27 percent of er visits could be handled in urgent care centers or retail clinics at a cost savings of about $4.4 billion. in response, by 2016 over 9,000 walk-in, stand-alone urgent care centers operated in the united States with 50 to 100 new clinics opening every year.30

Mobile units are another method of achieving the optimum in health care delivery. long practiced by the red cross to gain more blood donations, other institutions have increased movable equipment to be closer to patients (such as mobile mammography units to increase women’s use of this excellent but expen- sive tool).31

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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Pre-Service Promotion Promotion includes: advertising; public relations events (baby birthday parties, health fairs, cancer survivor celebrations, and so on); personal selling; sales promotion (contests, participation in trade shows, and others); and direct marketing (websites, direct mail, social media marketing, and so on). The promotional elements work in combination to be able to communicate a message to various consumers and stakeholders of health care organizations. For example, hospitals have learned that increased amounts of advertising alone will not fill more beds, and that great advertising might set customer expectations higher than the organization can deliver. Advertising works best when there is an identified product or service that meets consumers’ needs. branding helps consumers to know the service to seek and reminds them where they can obtain health care when they have a need for it.

Personal selling has been used more extensively in health care as various organizations compete to be the provider of choice in managed care plans and physicians are recruited to hospital systems. Direct marketing through social media provides another touch point for consumers to interact with a health care provider and each other to share experiences – good and bad. Many potential consumers will check for “reviews” and find them a credible tool for information, especially millennials who have in 2017 surpassed baby-boomers in numbers and some of whom are beginning to have children. having a baby is often the first time a woman has chosen her own physician and hospital; experiences are shared with family and friends, often on social media.

WebMD is the most popular website for consumers to gather health care infor- mation (80 million unique monthly visitors), followed by the national institutes of health (55 million unique monthly visitors). Yahoo health ranks third (50.5 million unique visitors), the Mayo clinic ranks fourth (30 million unique visitors), and Medicinenet ranks fifth (25.5 million unique visitors).32

Physicians are using websites as well. Most MDs do not use a search engine (i.e. Google), but prefer targeted sites. uptodate (www.uptodate.com) is used by 10.8 percent of MD study participants, Medscape (www.medscape.com) used by 8.4 percent, WebMD (www.webmd.com) used by 5.5 percent, MDconsult (www. mdconsult.com) used by 4.7 percent, and emedicine (www.emedicine.com) used by 2.9 percent. More than one quarter (27.3%) of the physicians surveyed indi- cated their on-site preferred source of medical information was research databases that provided access to medical journal publications. Specifically, 19.7 percent use Pubmed (www.pubmed.org), 3.9 percent use ovid, and 3.7 percent use Medline as their primary web source for online medical information gathering. A minority of physicians identified various sites dedicated to their specialized area, with no site representing more than 2.9 percent of the sample. Finally, a small percentage (3.1%) used medical website portals such as Mercmedicus (www.mercmedicus. com) as their preferred means to gather medical information.33

Point-of-Service Delivery Strategies Point-of-service is a key area in the value chain where the service is actually delivered and value can be created for the customer/patient through clinical operations and marketing. Point-of-service strategy is a transformational process

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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that incorporates an organization’s resources, competencies, and capabilities – its assets – into value-adding service delivery.

health care was a cottage industry for centuries. Specialization and cost pres- sures have taken health care from being totally customized for the individual patient in his or her home to an attempt to treat patients more similarly so as to develop economies of scale. Placing people in hospitals, outcomes measures, for- mularies, and so on, focus on treating patients more alike – the industrialization of health care. Most Americans and their physicians do not like it. Moreover, the system has become so complex and technical that it is difficult for providers to communicate effectively with patients. The best service delivery differs for each organization depending on its broader strategies.

Clinical Operations The appropriate model of health care delivery is based to a great degree on the care required. if health care were divided into three sectors – acute illnesses with quick recovery, significant illnesses (chronic but manageable), and catastrophic illnesses – each accounts for approximately one- third of the health care dollar in America. however, the latter two represent 10 percent of the population. in other words, 90 percent of the population represents short-term treatable illnesses where the volume is high, but costs are low per episode and copayments and deductibles have a measurable impact. Technology can improve efficiencies in this sector. For significant and catastrophic illnesses, health care providers can increase efficiencies through understanding the choice of processes and selecting the one most suitable for patients’ care (mass customi- zation).34 clinical pathways have been used to create operational efficiencies as well as to increase the quality of care (see essentials for a Strategic Thinker 8–3, “What Are clinical Pathways?”).

ESSEntIAlS for A StrAtEgIC thInkEr 8–3

What Are clinical Pathways?

Health care organizations are increasingly being asked (sometimes required) to reduce costs and simultaneously increase quality. For almost two decades, clinical pathways have been used as a tool for optimizing health care resources and enhancing quality of care. Clinical pathway analysis applies critical-path methods used in industrial process control to clinical processes. These methods can lead to optimal interdisci- plinary patient care. Clinical pathways involve all health care professionals – physicians, nurses, social workers, pharmacists, and so on. A clinical

pathway can be thought of as a visualization of the patient’s health care process and a mul- tifaceted, resource-intensive process, involving all concerned parties. Because health care is a knowledge-intensive industry, any attempt to reduce costs and increase quality will require effective knowledge management across a diversity of disciplines, interdisciplinary team- work, and management of the culture.

The sharing and integrating of the knowl- edge and skills of diverse professionals are important to the implementation of successful

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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Chapter 8 Value-adding SerViCe deliVery StrategieS 333

health care processes using clinical pathways. Knowledge management is a business concept that can facilitate the application of clinical path- ways because it relates to an organization’s abil- ity to acquire and disseminate new and existing knowledge. One theory of knowledge manage- ment that relates well to health care is the “com- munity of practice.” Communities of practice galvanize knowledge sharing and adaptation to change and are defined as groups of people bound together by shared experience and a pas- sion for joint enterprise. It is a cross-functional group brought together to capture and spread ideas and know-how. The disadvantage of communities of practice is that the knowledge shared is often informal in nature. Clinical path- ways are developed informally through the cooperative efforts of physicians, nurses, and other professionals to improve the quality of services delivered and value of the patient, yet formally captured pathways are designed using clinical guidelines based on evidence-based management and visualized knowledge.

Additionally, pathways benefit from effective interdisciplinary teamwork that brings different professional points of view to bear on a patient’s problem(s); however, simply combining points of view may not be sufficient to ensure integra- tive knowledge. Integrative knowledge sharing among knowledge workers is a capability critical for the application of new knowledge to health care phenomena and may be the basis for com- petitive advantage.

One of the major barriers to effective team- work in health care is poor communication

among diverse health care professionals. Physicians and nurses have major differences in cultures and experiences. Physicians stop in periodically to see patients in the hospital, whereas nurses maintain quantitative and quali- tative data about the patient on a consistent basis. Physicians are trained to take control and issue orders; nurses to carry out orders; however, nurses can point out those qualita- tive factors observed (patient is depressed) that may interfere with recovery. Miscommunication is especially likely to arise in emergency situ- ations where events are unpredictable and a high level of cooperation among professionals is mandatory.

For effective clinical pathways, health care professionals have to understand and appreci- ate differences in cultures and the results these differences have on the attitudes of colleagues. Most culture is based on context-specific knowl- edge unique to each profession. Sharing of different knowledge is important for the con- tinuous implementation of knowledge man- agement in health care organizations. Clinical pathways promote communication among health care professionals because they express clearly that tacit knowledge is a part of all health care processes.

RefeRence

Tomoyoshi Yamazaki, Mitsuru Ikeda, and Katsuhiro

Umemoto, “Enhancement of Healthcare

Quality Using Clinical-Pathways Activities,” VINE

41, no. 1 (2011), pp. 63–71.

other value-adding clinical operations activities often concern mass customiza- tion, quality of operations, and process innovation. Mass customization is the modi- fication of the attributes or characteristics of a widely available product or service to better meet the particular needs of individual customers. Mass customization may be the way to capture the customer-friendly benefits of long-term physi- cian–patient relationships, plus the cost-careful benefits of capitation, to increase

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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the chances of organizational survival in today’s health care market. it can be accomplished by a “series of modular approaches to prevention and care, highly articulated, and well supported by information technology”35 (see exhibit 8–5).

ExhIBIt 8–5 Increasing Quality through Mass Customization

Renewal

Networking

Mass Customization Co-con�guration

Craft

Development

Linking Process

Enhancement

Integration

Development Mass Production

Development

Renewal

SCIENCEART

Modularization

Source: Reprinted from C. P. McLaughlin and A. D. Kaluzny, Defining Quality Improvement, Continuous Quality Improvement in Health Care, 3rd edn (Sudbury, MA: Jones and Bartlett Publishers, 2006), p. 17. Reprinted with permission www.jbpub.com.

Mass customization is a pathway that is best suited to the production of satisfied health care customers at low or reasonable relative costs. best practices are more widely shared today and many are known to the health care organiza- tion from the collection of data within its own operations. The best practices are applied by a configuror (the health care professional) to meet the needs of the individual patient. Mass customization represents a process that simulates craft (the art of medicine), but is also science-based. once scientific information about a health care process accumulates, it moves from the craft stage to “enhancement” where the process is studied and refined further to shift to mass customization. once the approach is codified and volume is high (and patients will accept the level of impersonal delivery), then the organization can develop a series of modu- lar approaches that breaks up the work into units that are interchangeable on demand. however, at a practical level, “it takes hard science to legitimatize the conformance of providers to make such a system work.”36 co-configuration is optimal because the patient is linked into the network and customer intelligence is accessed as readily as the physician’s (configuror’s).

Pathways represent the best known way to treat the patient; however, the path still has to be applied to the individual patient’s background, medical history, health status, and so on.37 recognizing that people are different, this “synchroni- zation of the implementation of the modules” or co-configuration, must be deter- mined by the providers.38

Mass customization requires that a sufficient number of people have the same disease or diagnosis. For example, Medco health Solutions (which was acquired by express Scripts holding company in 2012) effectively created mass

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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Chapter 8 Value-adding SerViCe deliVery StrategieS 335

customization through segmentation based on pharmacy benefit plans for private and public employers. The mass customization “digs down” another level to differentiate clinical needs among people in a single disease category (diabetes) that is large enough to warrant separate contact but not too small to present an administrative burden. in these cases true customization is not cost justified, but “one-size fits all’ programs are not effective either. Mass customization falls some- where in between and prevents therapy gaps within categories, such as the gap between diabetics who have only a few health problems and those who require frequent medical attention.39

Maintaining and incrementally improving the quality of clinical operations can be a source of competitive advantage for a health care organization. Trust in the health care system has diminished because of reports in the media about managed care’s failures as well as the institute of Medicine’s study indicating that as many as 98,000 deaths per year are because of medical errors (the third leading cause of death in the united States).40 research in The BMJ highlighted the fact that cause of death is based on icD codes and no such code exists for medical error. Thus, medical error is not going to make it to the centers for Disease control and Prevention’s list of the most common causes of death in the united States that guides national research priorities for the year.41 The greatest opportunity a health care organization has to rebuild confidence is the day-to-day interaction between caregivers and patients.42 every person in a health care organization has some responsibility for its image.

historically, hospitals have concentrated on meeting the expectations of physi- cians; more recently, third-party payers have become a concern. in the past, the structure of the health care system enabled it to circumvent a customer orientation that most other segments in the services industry have had to adopt.43 various external changes are creating the need for health care to be more responsive to the wants, needs, expectations, and requirements of patients for information, convenience, and personal control.44 recently, attempts have been made to rank health care organizations on the basis of clinical quality. however, rankings are difficult because there is a lack of agreement over the assumptions underlying the ranking attributes, and some of the implications may be misleading. continuous Quality improvement (cQi) programs have been utilized extensively in health care organizations for greater patient outcomes (see essentials for a Strategic Thinker 8–4, “What is continuous improvement?”).

ESSEntIAlS for A StrAtEgIC thInkEr 8–4

What is continuous improvement?

Continuous improvement (continuous quality improvement or CQI or kaizen in Japanese) refers to a process and ongoing effort to achieve bet- ter results through incremental changes that enhance efficiency. Continuous improvement

was essentially the starting point in health care for what later broadened into the “Quality Movement” and eventually spawned other patient safety initiatives. However, some initial uncertainty in both industry and health care

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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concerned the exact meaning and implications of the term “quality.” For example, some of the early quality improvement academic centers, such as the University of Tennessee’s Institute for Productivity Through Quality and Wisconsin’s Center for Quality and Productivity Improvement, emphasized the efficiency/productivity aspects of quality improvement rather than a more holis- tic approach that is emphasized today.

A milestone event in health care quality improvement initiatives took place in 1990 with the publication of Curing Health Care: New Strategies for Quality Improvement.1 The senior author was Donald Berwick, a physician who is now regarded as the chief advocate of health care quality. The book reviewed the theory and rationale for CQI and presented the methods by which systematic improvements could be realized. The template for improvement was the scientific method, presented as the Plan–Do– Check–Act cycle or some variant. Data-based decision making was de rigueur and various tools were adopted or created for the gathering and analysis of data, such as the Pareto dia- gram, the cause and effect diagram, and control charts. The book’s goal was to demonstrate the applicability of “industrial” quality methods to health care, and included several detailed, suc- cessful case studies.

As a health care example, consider a medi- cal procedure that requires a twelve-hour fast, yet 20 percent of patients neglect to fast. The time spent by both the provider and the patient in scheduling and preparing for the appoint- ment has been wasted, and the process must be repeated. If better patient communications could reduce the percentage of people failing to

fast, providers would spend less time on “rework and scrap,” thus becoming more productive.

A second example concerns central line-asso- ciated bloodstream infections (CLABI). These infections are not uncommon, especially in the ICUs of a hospital. CLABIs have a significant mor- tality risk (15–20 percent), are expensive to treat, and add several days to the patient’s length of stay (LOS). Fortunately, improvement projects were undertaken by Peter Pronovost (Johns Hopkins) and Richard Shannon (University of Pennsylvania) that drastically reduced the infec- tion rate. These process accomplishments were realized without increased ICU staffing or capital investments, and have been successfully repli- cated by other hospitals.

The quality of care and patient safety will, no doubt, continue to be important issues in all health care settings for the foreseeable future. There continues to be more focus on preven- tion strategies and care improvement using evi- dence-based guidelines by health care decision makers at all levels. These strategies are impor- tant because “[a]s medical science and technol- ogy have advanced at a rapid pace, the health care delivery system has floundered in its ability to provide consistently high quality care to all.”2

RefeRences

1. Donald M. Berwick, A. Blanton Godfrey,

and Jane Roessner, Curing Health Care (San

Francisco, CA: Jossey-Bass, 1990).

2. www.who.int/management/quality/assurance/

QualityCare_B.Def.pdf (accessed July 2017).

Source: Joseph G. Van Matre, Professor, Collat School of Business,

University of Alabama at Birmingham.

The national committee for Quality Assurance (ncQA) developed by large employers provides the heDiS database (introduced earlier in the chapter) to compare individual managed care health plans. The intent was to create a data- base that the participants (consumers or employers) could use to compare the

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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Chapter 8 Value-adding SerViCe deliVery StrategieS 337

performance of their health plans against other health plans on a consistently measured set of criteria to then be reported to consumers.

neither the Joint commission (Jc) nor the heDiS data can be correlated with Consumer Report satisfaction studies. The fact that mammograms are done (a heDiS measure) does not mean women are happy with the way they are done (a measure of patient satisfaction). health care providers are more responsive to patients at lakeland regional Medical center, a large multiservice facility in Florida. lakeland regional discovered during a planning retreat that the time allocated to coordination and scheduling of procedures was almost the same as the time spent in providing services. red tape and increasingly specialized jobs made relatively simple procedures seem overly complex to the patients. in addi- tion, customers had to repeat the same information to a variety of staff. A patient might come into contact with as many as 60 different employees.45 The quality of clinical care received by patients was not perceived to be as good as it actually was because of the way care was delivered (see exhibit 8–6).

ExhIBIt 8–6 Key Questions for Determining Patient- and Family- Oriented Care

Trustees, administrators, and medical and nursing leaders should ask themselves the following key questions to determine whether their organization’s environment places patients and families first:

● Do the hospital’s vision, mission, and philosophy of care statements reflect the principles of family-centered care?

● Are the vision, mission, and philosophy communicated clearly throughout the hospital, to patients and families as well as others in the community?

● Do patients and families serve as advisers to the hospital? In what ways are the patients and families involved in the orientation and education of employees? In the design planning process?

● Are hospital policies, programs, and staff practices consistent with the view that families are allies and important to patient well-being?

● What systems are in place to ensure that patients and families have access to complete, unbiased, and useful information?

● Does the hospital’s human resources system support the practice of family-centered care? ● In academic medical centers, how do the education programs prepare students and pro-

fessionals in training for family-centered practice?

Source: Institute for Family-Centered Care, Bethesda, Maryland.

labor-intensive services are difficult to automate, but not impossible. For example, blood pressure checks have been automated. Additionally, a finger stick for routine blood work could be done by a machine; but would the public accept a machine instead of a nurse? in a different but important service industry, many bankers held on to their beliefs that consumers would want to talk to a real person when cashing checks or depositing money; however, those banks that were the first to automate with teller machines have been very profitable. Similar results may be achieved in health care.

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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Just focusing on quality or marketing alone may not be enough – a real emphasis on clinical process innovation may be required to achieve significant competitive advantage. robert A. McDonald, retired chairman, President, and ceo of Procter and Gamble, stated: “Promotions may win quarters, innovation wins decades.”46 Clinical process innovation (or cPi) is defined as “the generation, acceptance, and implementation of new ideas, tools, and/or support systems aimed at improving clinical processes and, ultimately, patient care.”47 it differs from continuous quality improvement (cQi) in that cQi focuses on improving existing clinical processes for performance improvement. cPi is a contextual and critical appraisal of current clinical processes to identify opportunities for more effectively providing care. As Michael hammer, author and management consult- ant, explains:

operational innovation should not be confused with operational improve- ment or operational excellence. Those terms refer to achieving high perfor- mance via existing modes of operation … operational innovation means coming up with entirely new ways of filling orders, developing products, providing customer service, or doing any other activity that an enterprise performs.48

in recent years a considerable amount of interest has developed in operational innovation in the clinical setting. A body of research has investigated the relation- ship between innovation and quality, improvements related to information tech- nology innovations, and a variety of other areas.49

A more radical form of innovation in clinical services is disruptive inno- vation.50 Disruptive innovations do not target process improvement but are ideas and actions that disrupt the status quo and are so fundamental they displace market leaders by creating new markets and value networks. For example, per- sonal interaction between provider and patient has long been the conventional medical care model. in recent years asynchronous interactions made possible by technologically advanced information systems has made telemedicine and e-health potentially disruptive approaches to health care51 (see essentials for a Strategic Thinker 6–5, “What are Disruptive innovations?”).

it is important for providers to recognize that consumers who want more control over their health care will seek it through consumer advocacy groups, increased competition, and unprecedented access to information. if customers do not receive the care they want, they will change to another provider. Physicians have to be willing to listen to patients talk about other treatments and how alter- native therapies might blend with more traditional medicine to improve health.52 consumers who use alternative therapies are typically middle- to upper-class, well-educated people with good jobs and money to spend on whatever they believe to be important for their health care.53

Marketing Physicians are an integral part of the health care system. As such, hospitals and health systems have tried a variety of models to incorporate physi- cians into the new systems. Perhaps that is because of a lack of focus on the physi- cian–patient relationship. As a patient satisfaction survey concluded: “A renewed patient focus is not only the best way to serve our customers and patients, it is also

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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Chapter 8 Value-adding SerViCe deliVery StrategieS 339

a business imperative for any organization that wishes to survive into the next era of health care.”54 examples of strategies in which physicians and health sys- tems can work together to achieve patient goals include redesigning service lines around enhancing the patient experience rather than around financial aspects of delivery of care; multispecialty physician care teams based on consumers’ needs; physician outreach programs to determine ways that physicians believe patient care can better be delivered; increasing physician–patient communications since physicians are frustrated by the lack of time they can spend with patients; and agreeing on measurements for success.

health care providers must understand their current situation in the market. how well are they satisfying the various customers they currently serve? Are competitors better at meeting customer needs? What new needs will occur in the near future that should be in the planning stages today? Frequently, the necessary information is not available, and marketing research must be conducted to under- stand patient satisfaction, medical staff satisfaction, competitive offerings, and so on. Therefore, it is necessary to collect data from patients and staff who do not use (or occasionally use) the facility as well as current users.

After-Service Strategies After-service is a key area in the value chain where value can be added for the cus- tomer/patient through follow-up (both clinical and marketing) after the service has been delivered. They are sometimes referred to as “back-office strategies” and are often the final impression (contact) that a customer has with the health care organization.

Follow-Up Activities Follow-up is a process of checking with the consumer/ patient concerning the quality, effectiveness, and satisfaction with the point-of- service encounter. For example, follow-up might be calling to inquire after the health of a child who was seen in the er; such nurturing attention would spot- light a pediatrician as “caring and concerned” and endear him or her to any par- ent. calling after outpatient surgery to ask if everything is going as expected or whether additional prescriptions are needed is simply good clinical follow-up (and can save pain, complications, and an unscheduled office visit). Follow-up calls say to customers “we care” and may avoid unnecessary anxiety.

Marketing follow-up activities include patient satisfaction studies to determine from a patient’s perspective how he or she was treated. All health care providers should be doing follow-up surveys with their customers. The feedback gathered offers greater insight if responses are conducted several days after the health care encounter as bias may occur with on-site collection of data.

Patient Satisfaction Strategy Maps (PSSM) can be used for strategic planning and implementation as well as for measuring patient satisfaction by a variety of health care providers from independent physician practices to large hospitals.55 PSSM is a framework that links overall patient satisfaction to its antecedents and outcomes (see exhibit 8–7). Satisfied customers may become loyal customers who are more likely to re-patronize and recommend the organization; are less likely to switch (despite inducements from competitors); buy more, and more often;

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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ExhIBIt 8–7 Patient Satisfaction Strategy Map

Income: $50,000+ Age: 45+ Male

Routine checkup Follow-up recurring condition .13

.09 (.096)

.01 (.901)

.14 (.007)

.02 (.705)

Quality of Care

Physician Interaction

Access to Care

Customer

Recommend

Switch

Complain to Of�ce Manager

Staff

.50

Complain to Family & Friends

Overall Satisfaction

Health Status

Waiting Room

Satisfaction with Health

Quality of Life

.25

.70

1.03

.20

.06

.17

.03

.12

.11

.09

.35

as well as try new products/services. over time, an organization with relatively more satisfied customers experiences a cycle of positive financial performance as the organization lowers its cost to acquire new customers and positive word-of- mouth is shared.56

Survey-based measures of patient satisfaction have been associated with key outcomes.57 A 2014 study by the veteran’s Administration analyzed care at 913 clinics; the 77 clinics in the top decile exhibited significantly higher patient satis- faction, lower hospitalization rates for ambulatory care-sensitive conditions, and lower er use. Another 2014 hospital study found higher patient satisfaction to be associated with lower mortality rates for patients undergoing surgical proce- dures.58 in a 2015 study, patient satisfaction was associated with shorter lengths of stay following major surgery, lower readmission rates, and lower mortality rates.59 Finally in a 2016 study, patients with acute coronary syndrome that had higher patient satisfaction were associated with a lower risk of cardiac er visits and cardiac hospitalization.

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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Chapter 8 Value-adding SerViCe deliVery StrategieS 341

These studies strongly support the conclusion that patient satisfaction ratings are associated with key consequences: quality of care, clinical outcomes, and malpractice risk. reassuringly, these beneficial consequences of patient satis- faction have been established in large-scale studies encompassing thousands of patients and providers assessing different conditions, across different insti- tutions and hospital systems, and using varied and different measures of patient satisfaction.60

rather than ad hoc studies, PSSM uses a structured survey that provides reli- able, valid, and comparable data across service units, enabling patient satisfaction to be a useful metric for evaluating and assessing downstream consequences such as quality of care, clinical outcomes, and malpractice risk.61 PSSM breaks down the various strategic areas and attributes that comprise a patient’s overall satisfac- tion. using a primary care practice to illustrate, PSSM generates insights concern- ing the specific strategic areas that drive patient satisfaction. The general logic of PSSM, as shown in exhibit 8–8, highlights patient satisfaction as the focus because its downstream consequences include a patient’s likelihood of recommending, switching, or complaining behavior. The antecedents (upstream) of patient satis- faction are organized into five strategic areas: quality of care, physician interac- tion, staff, access to care, and waiting room.62

ExhIBIt 8–8 Importance–Performance Analysis for a Primary Care Medical Practice

8.3

8.1

7.9

7.7

7.5 0.1 0.2 0.3

Access to Care Quality of Care

Physician Interaction

⭐

⭐⭐

Staff⭐

Waiting Room⭐

Importance

Pe rf

o rm

an ce

0.4 0.5 0.60

8.5

Source: Vikas Mittal and C. Frennea, “Customer Satisfaction: A Strategic Review and Guidelines for Managers,” MSI Fast Forward Series, Marketing Science Institute, Cambridge, MA, 2010.

The magnitude of the strategic area with the highest association with overall patient satisfaction is referred to as the importance weight; importance weights help prioritize strategic areas for further action.63 The area with the highest importance weight for this primary care practice is quality of care at .50 (top left in exhibit 8-7). The performance level for each strategic area is determined from

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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342 StrAtegic mAnAgement of HeAltH cAre orgAnizAtionS

patient satisfaction scores, rated from 10 = extremely satisfied to 0 = extremely dissatisfied on the specific attributes that comprise quality of care. located on a grid that positions quality of care in the high performance, high importance quadrant in exhibit 8–8, it represents a competitive advantage that needs to be maintained.64 on the other hand, waiting room has lower performance but is not considered very important by patients and is an area simply to be monitored.

Weighted by performance and importance, the ten individual items evaluated by patients that constitute quality of care include from highest ranked to lowest ranked: (1) explanation of condition, (2) Quality of advice, (3) Treatment expla- nation, (4) Prescription explanation, (5) Assistant’s quality of care, (6) correct diagnosis, (7) exam thoroughness, (8) Treatment thoroughness, (9) Performed all needed tests, and (10) Time spent with the patient.65 The practice should focus on the top three as improving them will likely improve the patient’s perception of quality care. Training physicians concerning lay language to explain the condi- tion or establishing protocols that can be covered with the patient may improve the perception of quality care. exam thoroughness or treatment thoroughness are much less likely levers for improving quality of care.66

once the analysis has been performed for each attribute of the five categories on the left of the Patient Satisfaction Strategy Map (see exhibit 8–7), the items on the right side of the model are able to be determined. of key strategic importance are those who recommend (word-of-mouth – WoM) and share information – in essence aiding the physician clinic’s marketing efforts. if a patient is interested in switching, he or she might be retained with service recovery activities to avoid the last two positions on the right side of the model. complaining to the office manager still might be able to be turned around; however, complaining to family and friends is difficult to overcome (negative WoM is powerful).67

PSSM is comprehensive and integrated; enables a narrowed strategic focus; is flexible and adaptive to changes across organizational units, over time; is quantifi- able and measurable; provides for benchmarking; may be used for financial and non-financial planning; offers predictive ability; and is based on multiple data sources. The end user is the beginning for patient satisfaction strategy mapping and its effective implementation appears to be a significant aid in determining specific strategies to increase customer satisfaction and the positive benefits that satisfied patients experience.

Studies of patient satisfaction cannot be merely looked at, plotted as to move- ment up or down, and put on a shelf. The information gathered needs to be analyzed to learn what customers expect, what the organization is able or willing to do to meet the expectations (its capabilities), and how to manage the expecta- tions the organization is not willing or able to meet.68 For example, shortening the time for test results may not be possible because of the time it takes to do the test properly. however, patient expectations can be managed by explaining the length of time it takes to do the test and making the information available as soon as pos- sible on a secure website – if the patient wants the information this way – or an immediate call from the physician’s office, or at a minimum providing a consumer hot line to call.

health care purchasing decisions are often made through a third-party payer with little or no consumer input; eventually, such a lack of information exchange

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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Chapter 8 Value-adding SerViCe deliVery StrategieS 343

creates distance in the relationship between the provider and the consumer of health care. in 2012 consumers were spending more out-of-pocket for copays and a higher percentage of the cost of care, yet were not aware of how their money was being used. Pressed for time, they become frustrated if they feel their time is being wasted, as when they have an appointment and sit for an hour waiting for an x-ray or to see a physician. Today, consumers have the knowledge to take their business elsewhere. Despite all the studies that have been done, quality improvement has not lived up to expectations. To achieve satisfaction, custom- ers must be satisfied throughout the value chain, from pre-service activities to after-service activities. The problem has been that the studies were not designed with minimal standards of conceptual or methodological rigor; nor were they designed to facilitate quality improvement.69 in 2017 reimbursements are becom- ing more value-based and since customer satisfaction is part of determining value, development of patient surveys are being offered by many marketing research companies.

Billing Activities There is more to the patient’s determination of the value and quality of the total health care experience than the success or failure of the medical procedure or clinical service itself. richard l. clarke, former ceo and President of health Financial Management Association (hFMA) stated: “The best care, and great customer service provided during the patient’s hospital encounter can be destroyed quickly by confusing, complicated, or incorrect billing after- wards.”70 hospital billing activities that irritate customers most include:

● confusion about what the patient’s insurance company has paid. ● confusion about the balance the patient owes the hospital once the insur-

ance company pays its share. ● use of medical terminology that the patient does not understand. ● Sending a bill to the patient before the insurance company has processed

the patient’s claims. ● inability to determine exactly what services the hospital has provided and

what the patient is being charged for a service.71

Greenwich hospital’s convoluted billing statement was reported in the New York Times when a freelance writer tried to figure out what he owed the hospital after his stay. his very public discussion of the problems with billing began a major change for the hospital. having undergone the process, Greenwich recom- mends that when a health care organization realizes that its billing statement needs revision, the task should not be delegated to staff. rather, a task force of actual customers, physicians, information systems personnel, clinical employees, and billing personnel should be assigned the task of making the bill understand- able. Greenwich followed this format and the redesigned billing process reduced consumer complaints from about 30 per week to five per week and, interestingly, there was a reduction in accounts receivable and bad debt because people under- stood their bill and paid it.72

When customers call in with questions about their bill, the manner in which calls are handled is critically important. More than likely someone has to stop

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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with data entry or analysis of data input to answer a patient’s question. if answer- ing customers’ questions is not a priority, customers will know; moreover, costs are associated with doing things incorrectly. consider a hospital or nursing home billing statement that contains errors. not only is there the cost of finding the error, addressing the complaint, and redoing the statement, but there is an addi- tional cost of losing a positive consumer attitude – and, perhaps, a patient who decides to go elsewhere.

Follow-On Activities Follow-on is the provision of additional services after the initial point-of-service delivery. it is almost always preferable to have services recovery occur during services delivery rather than waiting to engage in services recovery at a later time. however, health care managers are not always aware of the failure until follow-on activities are undertaken.

After a patient has been seen by a physician or is leaving the hospital after sur- gery, there is likely a need for further services: a child with an ear infection has to return in 10 days for another check-up to make sure the infection is no longer present; after hip surgery a patient may need to be relocated to a rehabilitation facility to learn to walk again. These additional services are called follow-on value-adding service activities. A new parent with a child’s first ear infection may have no idea about returning. An unexpected broken hip, surgery, and then the need for additional care is not something most families research until it happens. if the health care provider has thought through the follow-on care and provides literature, assistance with placement in another facility, and so on, consumers will leave with a more favorable attitude about the experience.

After a doctor’s visit, can the patient easily find the appointment desk? is the employee that handles follow-on appointments knowledgeable concerning the length of time it will take for a patient’s next visit? Do these employees know that they represent the entire organization to the patient? customer capital is the value of customer relationships and the value those relationships contribute to future growth prospects. customer capital includes an organization’s customer base, customer relationships, customer potential, and brand recognition. Although the specifics vary by industry, it has long been understood that it costs more to gain a new customer than it takes to retain a customer. Given that this is true, it is logical to assume that the customer franchise is an asset of real worth. establishing life- time relationships with customers is the focus of the smart 21st-century organiza- tion because it leads to competitive advantage.73 Follow-on activities can cement or destroy a good customer relationship.

To achieve high levels of patient satisfaction, baptist hospital in Pensacola, Florida felt that it needed to become the employer of choice.74 its strategy included monitoring employee satisfaction as well as customer satisfaction. Managers’ performance is measured in five areas – customer service, qual- ity (length of stay), expense management, employee turnover, and growth – and compensation is linked to accomplishing objectives. Patient portals have been shown to improve patient satisfaction as well as access to personal records and providers (see essentials for a Strategic Thinker 8–5, “What Are Patient Portals?”).

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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Chapter 8 Value-adding SerViCe deliVery StrategieS 345

ESSEntIAlS for A StrAtEgIC thInkEr 8–5

What Are Patient Portals?

Patient portals are secure online applications (apps) that allow patients to access their per- sonal health information with the ability to communicate with their health care providers from anywhere with internet access at any time using an account with a protected username and password.1 The original intent behind patient portals was to increase provider and adminis- trative productivity and efficiency, raise patient satisfaction, boost patient participation in medi- cal decisions, and ultimately improve patient outcomes. Commonly coordinated through the health care provider’s website, patient portals may also function as modules of the provider’s electronic medical record (EMR) system or elec- tronic health record (EHR) system. Vendors offer patient portals as modular parts of EHR systems or as stand-alone products that work with any EHR.

Patient portals can be used to provide edu- cational materials to patients and their families, remind patients of appointments, encourage patients to engage in preventive and chronic care, renew medication prescriptions, pay bills, review test results, and schedule new appoint- ments. Health care providers can use patient portals to achieve several important goals at once: improving productivity, efficiency, and customer satisfaction as well as demonstrating “meaningful use” of health care technology to receive federal incentives.

Potential drawbacks to patient portals include security concerns, difficulty register- ing in the system, and only being able to use one portal per provider (which can be incon- venient for patients with multiple providers). Maintaining engagement between patient and provider can also be more difficult, as some

patients and providers are more comfortable with internet-based communication than oth- ers. Providers’ best interest requires that they consider, establish, and clarify expectations regarding the expected content of responses. In addition, expected response time (all inquiries will receive a response the day they are received) and billing issues associated with time spent responding to patients electronically need to be tracked.

Research on patient portals has associated them with medication adherence, disease awareness, self-management of disease, a decrease in office visits, an increase in preven- tative medicine, an increase in extended office visits (at the patient’s request for additional information), and some evidence of improved health outcomes.2,3

RefeRences

1. Office of the National Coordinator. (2015).

“What Is a Patient Portal?” Retrieved from:

www.healthit.gov/providers-professionals/

faqs/what-patient-portal.

2. C. S. Kruse, K. Bolton, and G. Freriks, “The Effect

of Patient Portals on Quality Outcomes and Its

Implications to Meaningful Use: A Systematic

Review,” Journal of Medical Internet Research 7,

no. 2, (2015). www.1e44.doi: 10.2196/jmir.3171.

3. T. Garrido, B. Raymond, and B. Wheatley, “Lessons

from More Than a Decade in Patient Portals,”

Health Affairs 2016 Blog. Retrieved from: http://

healthaffairs.org/blog/2016/04/07/lessons-from-

more-than-a-decade-in-patient-portals/.

Source: Lauren Wallace MPH, MPA, DrPH Candidate, University of

Alabama at Birmingham.

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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346 StrAtegic mAnAgement of HeAltH cAre orgAnizAtionS

Step 2: Compare the Strategy requirements with the results of the Service Delivery Internal Analysis

each area of the value chain was evaluated during internal analysis (chapter 4) and the conclusions were used during strategy formulation. based on the results of the comparison of the current situation and what strategic managers want the organization to be (the demands of the strategy), value chain components may need to be maintained or changed to carry out the strategy.

A decision table is shown in exhibit 8–9. As suggested by the table, for each component of the value chain, a strategic decision must be made (maintain or change) and general direction provided to the organizational units as to how that decision is to be accomplished. exhibit 8–9 enables organization of the strategic thinking necessary to decide to maintain or change pre-service, point-of-service, or after-service. later, more specific organizational unit strategies (action plans) that carry out the value-adding strategies will be developed.

ExhIBIt 8–9 Strategic Thinking Map for Developing Value-Adding Service Delivery Strategies

Value-Adding service Delivery strategies

Results of Internal Analysis

Requirements of selected strategies

comparison of strategy Requirements and Internal Analysis

Maintain or change

Pre-service Market/marketing research Target market Branding Pricing Distribution/logistics Promotion

Point-of-service Clinical operations Marketing

After-service Follow-up activities Billing Follow-on activities

implementation of a strategy is often the most difficult part of strategic man- agement. new strategies may call for changes in service delivery, marketing, organizational structure, or strategic resources. Such changes typically require new systems and new ways of doing things. Therefore, successful change in the value-adding strategies requires leaders to establish a sense of urgency for change and to clearly articulate the connections between the new changes and the success of the selected strategies.75

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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Chapter 8 Value-adding SerViCe deliVery StrategieS 347

Step 3: Decide to Maintain or Change Pre-Service Delivery

A pre-service strategy is the development of an implementation plan to maintain or change pre-service activities by comparing the results of the internal analysis with the requirements of the broader organizational strategies. it is important that service characteristics and the target market are appropriate for the selected strat- egy. in addition, the price, brand, promotional activities, and logistics for services must contribute to the accomplishment of the directional, adaptive, market entry, and competitive strategies. The services delivery activities were assessed and classified as competitive advantages or competitive disadvantages in the internal analysis phase of situational analysis. As shown in exhibit 8–9, the attributes of the current pre-service activities must be compared with the service character- istics, target market, price, brand, promotional activities, and service logistics that are required by the strategy. results of this assessment will determine whether the strategic managers need to create implementation strategies to maintain or change the pre-service activities.

Maintain Pre-Service Activities When the requirements of the strategy match the current pre-service strengths and needs of the customers, strategic managers should focus on maintaining the strengths, giving particular attention to the areas that have created competitive advantage. For example, if during internal analysis a brand name was evaluated as a strength having high value (h), was rare (Y), was difficult to imitate (D), and was sustainable (Y), resulting in hYDY, maintaining the effectiveness of the brand name is particularly important. Allowing such a strength to weaken may lead to the loss of an important competi- tive advantage. Similarly, maintaining a strong brand name would be important when strong brand names are common (not rare) among competitors (hnDY). in this situation, strong brands have likely become a threshold condition for success. Therefore, in maintaining pre-service activities, strategic managers should:

● engage in periodic customer focus groups and market research to under- stand the wants, needs, and desires of the organization’s target markets and whether they are or are not being satisfied.

● Monitor the demographic, psychographic, and health status characteristics of the service area (with particular attention to trends in the target markets).

● continually communicate to physicians, patients, third-party payers, and oth- ers concerning the type and range of services offered, pricing, and branding.

● Monitor promotional effectiveness. ● Monitor customer ease of system entry (logistics).

Change Pre-Service Activities Pre-service activity changes can be difficult and may require considerable market research as well as promotion. in internal analysis, if the requirements of the strategy call for different services, a different or additional target market, changes in pricing, branding, or promotional activities, change strategies should be initiated. in addition, where significant competitive disadvantages have resulted because of ineffective pre-service activities, it is likely

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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348 StrAtegic mAnAgement of HeAltH cAre orgAnizAtionS

that change strategies will be required. For example, if the promotional strategy was viewed in internal analysis as a weakness, of high value, the weakness is common among competitors, difficult to correct, and competitors can sustain their advantage (hYDY), change strategies should be implemented specifically where competitors may act to develop an effective promotional strategy and achieve a significant competitive advantage. Similarly, if an organization has a weak promo- tional strategy and other organizations have effective promotions that are difficult to imitate and can be sustained (hnDY), strategic managers will need to explore changes that could lead to improvements. Strategic managers who want to trans- form pre-service activities should:

● Modify the service attributes to better match the expectations of the target market.

● Train employees to better provide the new services. ● redefine the target market to match the changing demographic, psycho-

graphic, and health status characteristics of the service area. ● Provide price discounts or price categories among members of the target

market. ● change the balance among advertising, personal selling, and direct market-

ing (one-to-one marketing). ● brand individual products (as opposed to the organization’s name as

the brand). ● redesign accommodations, dining experience, parking lots, and signage.

Step 4: Decide to Maintain or Change Point-of-Service A point-of-service strategy is the development of an implementation plan to maintain or change point-of-service activities by comparing the results of the internal analysis with the requirements of the selected broader organizational strategies. each strategic alternative selected by an organization may affect the point-of-service delivery strategy. however, as discussed previously, central to point-of-service delivery are issues such as quality, efficiency/speed, innova- tion, and flexibility (mass customization) of the service. Most organizations are constantly trying to improve point-of-service delivery – employing an adaptive/ enhancement strategy.

Maintain Point-of-Service Activities When the requirements of the selected strategy match the characteristics of the current point-of-service delivery, strate- gic managers should develop strategies to maintain the current strengths of the organization’s resources, competencies, and capabilities. As with the pre-service activities, particular attention should be given to those point-of-service delivery areas that have created competitive advantage. in maintaining point-of-service delivery activities strategic managers should:

● Monitor service quality through asking customers (physicians, patients, payers, others) if there is a way the experience could be improved – as they

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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Chapter 8 Value-adding SerViCe deliVery StrategieS 349

are the ones receiving the service, recommending the service, or serving as an intermediary.

● Monitor clinical (patient) and organizational (financial) outcomes. ● institute quality programs in key service areas. ● benchmark other organizations’ processes (see essentials for a Strategic

Thinker 7-5). ● Measure the organization’s efficiency (personnel, assets, costs) against peer

organizations and industry standards. ● revise rules and regulations that limit process innovation. ● continue to communicate and emphasize the individuality of customers.

Change Point-of-Service Activities if the requirements of the strategy indi- cate that the present point-of-service delivery processes should be reorganized, then explicit strategies must be implemented. in addition, if internal analysis indicates that the point-of-service delivery process is a weakness (resulting in competitive disadvantages) or the requirements of the strategy call for new stan- dards of quality, efficiency, or innovation, change strategies should be initiated. Strategic managers who want to change clinical point-of-service activities should consider involving a team of appropriate leadership across disciplines to:

● institute a quality improvement program for service delivery. ● re-engineer critical service delivery activities. ● Provide quality enhancement training for service delivery personnel. ● institute a cost-cutting program. ● Provide incentives for efficiency suggestions. ● reduce rules and regulations that limit innovation. ● Provide savings or revenue sharing with employees to encourage innovations.

To change marketing point-of-service activities, strategic managers should:

● Target unserved consumers. ● increase market penetration activities. ● Serve new markets with existing products (market development). ● offer new products for current consumers (product development). ● improve differentiation among services offered.

Step 5: Decide to Maintain or Change After-Service An after-service strategy is the development of an implementation strategy to maintain or change post-service delivery activities by comparing the results of the internal analysis with the requirements of the selected broader organiza- tional strategies. As with pre-service and point-of-service activities, after-service activities must contribute to the accomplishment of the selected strategy. These operations and marketing activities may be quite important in implementing

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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350 StrAtegic mAnAgement of HeAltH cAre orgAnizAtionS

an effective strategy. Follow-up, billing, and follow-on activities humanize the services, reduce hassles and frustration, and provide for continued care. Such activities often make the difference between a positive and negative health care experience and can differentiate the service and create competitive advantage.

effective after-service activities are typically of high value, often rare, fairly easy to develop, and are sustainable. These activities can be the source of at least short-term competitive advantage. however, these areas are often ignored by many health care organizations; therefore the organizations that effectively undertake them may create a long-term advantage.76 careful attention should be given to understanding the after-service requirements of the selected strategy and then strategic managers must decide if the activities should be maintained or changed.

Maintain After-Service Activities When the requirements of the selected strategy match the characteristics of the current after-service activities, stra- tegic managers should develop strategies to maintain the current after-service strengths of the organization through its resources, competencies, and capa- bilities. likewise, these after-service activities that have resulted in a competi- tive advantage should be protected and maintained. in maintaining after-service activities, strategic managers should continue to:

● emphasize and train employees on communication and etiquette. ● emphasize patient satisfaction. ● improve the “readability” of billing statements. ● Stress the importance of correct billing statements and ensure their

accuracy. ● Develop relationships in the referral network to facilitate follow-on activities.

Change After-Service Activities if the requirements of the strategy indicate that the present after-service activities should be changed, then explicit strategies must be implemented. in addition, if internal analysis has indicated that follow- up, billing, or follow-on is a weakness resulting in competitive disadvantage, change strategies should be developed. Strategic managers who want to change after-service activities should:

● Make follow-up an explicit part of patient (customer) care. ● Determine the preferred method for follow-up phone call (home, work,

cell) or email. ● keep a log of patient follow-up as a part of the patient/customer record. ● Train employees on communication and etiquette. ● emphasize customer satisfaction at staff meetings. ● redesign the billing statement with the assistance of a variety of

stakeholders (including patients), and define complicated medical terms.

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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Chapter 8 Value-adding SerViCe deliVery StrategieS 351

● inform customers about billing procedures. ● clear any confusion about billing charges and which charges are to be paid

by insurance. ● continue to improve relationships with payers. ● Develop more and better relationships with referral organizations. ● Develop a list of options for patients who need follow-on referral, explain-

ing the characteristics and pricing of each.

Step 6: Provide guidance to organizational Units value-adding service delivery strategies translate the directional, adaptive, market entry, and competitive strategies into action. As a critical component of the value chain, value-adding service delivery strategies, coupled with value-adding support strategies, set the stage for maintaining strategic momentum through the action plans and control of the strategies.

no position of leadership lasts forever. every health care organization that succeeds at differentiation serves as a model for new competitors.77 The dynamic health care market and ever-changing technology mean that no competitive advantage can be sustained in the long run without a great deal of thought and effort. To further complicate the strategic process, the long run itself is becoming shorter as the rate of change becomes increasingly more rapid.

in conjunction with external analysis, service area competitor analysis, and internal analysis, value-adding service delivery strategies attempt to reposition the health care organization to create new competitive advantages. Although maps may be created for development of value-adding service delivery strategies (see exhibit 8–10 for an example), using a compass to creatively develop new strategies for pre-service, point-of-service, and after-service delivery can rejuve- nate or achieve competitive advantage.

Strategic Momentum: Service Delivery Strategies

Just as the success of the directional, adaptive, market entry/exit, and competitive strategies of the organization must be evaluated as an ongoing part of managing the strategy, the service delivery strategies often must be adjusted as managers learn by doing. This type of change represents an evolutionary alteration – a strategic adjustment. referred to as managing the strategic momentum, “[t]he basic continuity of the business is still credible, and one can hence speak of an extrapolation of the given strategy, even though a lot of operational changes may be taking place. The challenge here is to manage the buffeting of the given strategy and to maintain the strategy on course.”78

in the end, it is implementation that has to be effective and efficient. changes in the “way we do things” represent evolutionary change. each of the value- adding strategies – service delivery and support – should be examined separately

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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354 StrAtegic mAnAgement of HeAltH cAre orgAnizAtionS

to determine whether management has correctly defined the role of these strate- gies in supporting the organization’s overall strategy. Strategic managers must determine whether the service delivery, support strategies, and action plans are well integrated and support one another. The questions presented in exhibit 8–11 provide an evaluation of the effectiveness of the service delivery strategies.

ExhIBIt 8–11 Strategic Thinking Map for Evaluating Service Delivery Strategies

1. Have the pre-service activities provided customers with need-satisfying services? 2. Have the pre-service activities provided the right price, the appropriate information to

current and potential customers, as well as convenient locations? 3. Are the pre-service logistics appropriate for the service? 4. Are the point-of-service activities sensitive to changing customer needs? 5. Are the point-of-service activities efficient? Effective? 6. Has the quality of the services changed? 7. Has the organization innovated delivery of its services? 8. Is the delivery of services flexible (can accommodate special customer needs)? 9. Is there proper follow-up with customers? 10. Is the billing system timely, accurate, and user-friendly? 11. Are the follow-on strategies appropriate?

The logic underlying these questions is that the organization’s strategy is fundamentally sound but the organization’s performance in carrying out service delivery may not be as effective or efficient as it could be. Adding value is an ongoing process and requires the value-adding support strategies to be in concert with the value-adding service delivery strategies. The value-adding support strat- egies are discussed in chapter 9.

Chapter Summary

because of the competition and complexity in the market, health care providers must add value to survive. The value chain consists of value-adding service delivery strategies that are primarily operations (clinical) and marketing oriented as well as value-adding support strategies that include organizational culture, organizational structure, and strategic resources.

The directional, adaptive, market entry, and positioning strategies are imple- mented through value-adding service delivery, including pre-service, point- of-service, and after-service strategies. Pre-service activities include market research to understand the customer and marketing research to understand the customer’s reactions to the organization’s marketing efforts. A variety of health care customers, including physicians, patients, third-party payers, volunteers, employees, and so on must be considered. Patients have to be admitted to a hospital by a physician; third-party payers influence physician choice, length

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Chapter 8 Value-adding SerViCe deliVery StrategieS 355

of stay, and so on; volunteers and employees may also be patients; government entities interpret the need for additional health care subsidies from the public. in addition, pre-service includes segmentation to select the target market and determination of the services that will satisfy the target market. Further, deci- sions have to be made concerning branding as well as pricing, promotion, and distribution/logistics.

Point-of-service delivery is oriented around patient care and delivery – clinical and marketing activities. Marketers study the customer and market to suggest the manner of care delivery, while clinical personnel deliver care. Properly imple- mented mass customization is a way to deliver efficient and effective care.

After-service activities include both clinical (next appointments, further ser- vices) and marketing (determining how to satisfy customers through new prod- ucts/services that are needed) as follow-up activities. Staff could make clinical calls to inquire how the patient is doing and whether additional medication is needed. Marketing follow-up is generally in the form of patient satisfaction stud- ies. billing is another important after-service activity, as it is the time when the consumer decides whether value has been received. Follow-on activities include nursing home care arrangements after hospitalization, arranging home care, and other similar activities. chapter 9 examines implementation strategies for the lower portion of the value chain – the value-adding support strategies.

Practical lessons for health Care Strategic thinkers 

1. Service delivery is the only thing consumers experience; therefore value that is important to them must be created.

2. in health care, quality has to be perceived or the rest of the factors in ser- vice delivery will not matter.

3. The more ways in which an organization can deliver real value, the greater the customers’ loyalty as well as higher returns.

4. Adding value to service delivery has to be at the heart of an effective ser- vice delivery strategy.

THE LANguAgE OF STrATEgIC MANAgEMENT: KEy TErMS AND CONCEPTS 

After-Service Strategy billing Activities brand brand equity clinical Process innovation Disruptive innovation

Follow-on Follow-up kaizen Market/Marketing research Mass customization

Point-of-Service Strategy Pre-Service Strategy Target Market value-Adding Service Delivery Strategies value-Adding Support Strategies

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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Questions for Class Discussion

1. explain the linkage between internal analysis and the value-adding service delivery and support strategies. how are the value-adding strategies linked with action plans?

2. explain the difference between pre-service, point-of-service, and after-service activities. What elements are central to each? Provide an example of how an organization might create a competitive advantage in each of these areas.

3. For a health care organization, explain why pre-service, point-of-service, and after- service activities are fundamentally marketing and clinical in nature.

4. Pre-service, point-of-service, and after-service are different for health care than for pro- ducing and distributing a tangible product. explain some of these differences.

5. Discuss the various ways that health care providers can define the market they want to serve.

6. What role does marketing play in the implementation of adaptive strategies for expan- sion? is marketing ever involved in reduction of scope strategies?

7. Does marketing have a role to play in the market entry strategies?

8. What is mass customization? in what circumstance does mass customization become useful?

9. What is “evolutionary” strategic change?

notes 1. Joseph l. bower and clark G. Gilbert, “how Managers’

everyday Decisions create or Destroy Your company’s Strategy,” Harvard Business Review 85, no. 2 (February 2007), p. 76.

2. richard l. clarke, “The Drive for value in health care,” Healthcare Financial Management 65, no. 1 (2011), pp. 96–103.

3. Andrew S. Gallan, cheryl burke Jarvis, Stephen W. brown, and Mary Jo bitner, “customer Positivity and Participation in Services: An empirical Test in A health care context,” Journal of the Academy of Marketing Science 41, no. 3 (2013), pp. 338–356.

4. Maureen Maurer, “no ‘one Size Fits All’ reporting: consumer views of Maternity care Quality,” American Institute for Research Presentation, (September 16, 2016), www.air.org/person/maureen-maurer.

5. “how Do Pregnant Women use Quality Measures When choosing Their obstetric hospital?” Birth Issues in Prenatal Care 44, no. 2 (June 2017), pp. 120–127.

6. John commins, “hospital rankings contradictory, cryptic, confusing,” Health Leaders Media. www .hea l th leadersmedia .com/communi ty- rura l/

hospital-rankings-contradictory-cryptic-confusing# (accessed november 2, 2016).

7. www.ncqa.org/Pages/about/overview3.htm (accessed June 22, 2017).

8. elyria kemp, ravi Jillapalli, and enrique becerra, “healthcare branding: Developing emotionally based customer brand relationships,” Journal of Service Marketing 28, no. 2 (2014), pp. 126–137.

9. kevin lane keller, Strategic Brand Management, 4th edn (upper Saddle river, nJ: Prentice hall Pearson education, inc., 2013), p. 4.

10. kevin clark and Mary Mcneilly, “case Study: ibM’s Think Strategy – Melding Strategy and branding,” Strategy & Leadership 32, no. 2 (2004), pp. 44–49; J. Daniel beckham, “Marketing vs. branding,” Health Forum Journal 43, no. 2 (March–April 2000), pp. 64–68.

11. James b. Faircloth, louis M. capella, and bruce l. Alford, “The effect of brand Attitude and brand image on brand equity,” Journal of Marketing Theory and Practice Published online December 8, 2015. Accessed from: http://dx.doi.org/10.1080/10696679.2001.11501897.

12. ibid., p. 71.

Ginter, P. M., Swayne, L. E., & Duncan, W. J. (2018). The strategic management of health care organizations. John Wiley & Sons, Incorporated. Created from franklin-ebooks on 2023-10-21 14:56:24.

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Chapter 8 Value-adding SerViCe deliVery StrategieS 357

13. ibid. 14. ibid. 15. Shishi Piaralal and Tan Mei Mei, “Determinants of

brand equity in Private healthcare Facilities in klang valley, Malaysia,” American Journal of Economics 5, no. 2 (2015), pp. 177–182.

16. isabel buil, leslie de chernatony, and eva Martinez, “examining the role of Advertising and Sales Promotions in brand equity creation,” Journal of Business Research 66, no. 1 (2013), pp. 115–122.

17. D. Delvecchio, D. h. henard, and T. h. Frieling, “The effect of Sales Promotion on Post-Promotion brand Preference: A Meta-Analysis,” Journal of Retailing 82, no. 3 (2006), pp. 203–213.

18. keller, Strategic Brand Management, 4th edn, p. 65. 19. Michael k. brady, J. Joseph cronin Jr., Gavin l. Fox, and

Michelle l. roehm, “Strategies to offset Performance Failures: The role of brand equity,” Journal of Retailing 84, no. 2 (June 2008), pp. 151–164.

20. ibid., p. 152. 21. uwe e. reinhart, “The Disruptive innovation of Price

Transparency in health care,” Journal of the American Medical Association 310, no. 18 (2013), p. 1927. See also uwe e. reinhardt, “The Pricing of u.S. hospital Services: chaos behind A veil of Secrecy,” Health Affairs 25, no. 1 (2006), pp. 67–69.

22. James c. robinson, Timothy T. brown, and christopher Whaley, “reference Pricing changes The ‘choice Architecture’ of health care For consumers,” ‘Health Affairs 36, no. 3 (2017), p. 524.

23. ibid., p. 525. 24. P. Fronstin and M. c. roebuck, “reference Pricing for

health care Services: A new Twist on the Defined contribution concept in employment-based health benefits,” employment benefit research institute, Washington, Dc. cited June 15, 2017. www.ebri.org/ pdf/briefspdf/ebri_ib_398_apr14.refprcng.pdf.

25. robinson et al. “reference Pricing changes,” p. 527. 26. James c. robinson and k. MacPherson, “Payers Test

reference Pricing and centers of excellence to Steer Patients to low-Price and high-Quality Providers,” Health Affairs 31, no. 9 (2012), pp. 2028–2036.

27. c. White and M. eguchi, “reference Pricing: A Small Piece of the health care Price and Quality Puzzle,” Washington, D.c. national institute for health care reform, cited June 22, 2017, nihcr research brief no. 18. https://nihcr.org/analysis/improving- care-del ivery/prevent ion- improving-heal th/ reference-pricing2/.

28. Michelle Andrews, “Despite a Growing Appetite, buffet-Style Flat-Fee clinics Shutter in Seattle,” Kaiser Health News, June 20, 2017.

29. ibid. 30. American Academy of urgent care Medicine, 2016.

www. aaucm.org/. 31. elodie Guillaume, ludivine launay, olivier Dejardin,

véronique bouvier, lydia Guittet, Pauline Déan, Annick notari, rémy De Mil, and Guy launoy, “could

Mobile Mammography reduce Social and Geographic inequalities in breast cancer Screening Participation?” Preventive Medicine 100 (July 2017), pp. 84–88.

32. ebizMbA, “Top 15 Most Popular health Websites,” May 2017. www.ebizmba.com/articles/health-websites.

33. G. Deleo, cynthia lerouge, claudia ceriani, and Fred niederman, “Websites Most Frequently used by Physicians for Gathering Medical information,” AMiA Annual Symposium Proceedings, (2006), p. 902 www.ncbi.nlm.nih.gov/pmc/articles/PMc1839616/ (accessed June 2017).

34. curtis P. Mclaughlin and Arnold D. kaluzny, “building client centered Systems of care: choosing a Process Direction for the next century,” Health Care Management Review 25, no. 1 (Winter 2000), pp. 73–82.

35. ibid., p. 17. 36. ibid., p. 18. 37. Tomoyoshi Yamazaki, Mitsuru ikeda, and katsuhiro

umemoto, “enhancement of healthcare Quality using clinical-Pathways Activities,” VINE 41, no. 1 (2011), pp. 63–70.

38. Mclaughlin and kaluzny, “building client centered Systems,” p. 20.

39. Julie Miller, “Mass customization Suits varied needs of large employers: not Too big and not Too Small, Disease Subcategories reduce Administrative burdens of Disease Management,” Managed Healthcare Executive 13, no. 9 (September 2003), pp. 46–48.

40. Margaret headley, “Why Are Medical errors Still a leading cause of Death?” Patient Safety and Quality Healthcare (May 24, 2017), p. 1.

41. kristina P. Makary and Michael Daniel, “Medical error the Third leading cause of Death in the uS,” The BMJ (British Medical Journal) 353 (2016), p. i2139.

42. Julie T. chyna, “enhancing Your Public image,” Healthcare Executive 16, no. 1 (January–February 2001), pp. 7–11.

43. robert c. Ford and Myron D. Fottler, “creating customer-Focused health care organizations,” Health Care Management Review 25, no. 4 (Fall 2000), pp. 18–33.

44. ingo bobel and Amirita Martis, “value creation in health care: The case of the centre hospitalier Princess Grace (chPG) in Monaco,” Journal of Strategic Management Education 6, no. 2 (2010), pp. 1–36.

45. ellen G. lanser, “ensuring a customer-Focused experience: Two Success Stories,” Healthcare Executive 15, no. 1 (January–February 2000), pp. 8–23.

46. ben Thompson, “Dollar Shave club and the Disruption of everything,” Stratechery, July 20, 2016, p. 1. https://stratechery.com/2016/dollar-shave-club- and-the-disruption-of-everything/.

47. lucy A. Savitz, Arnold D. kaluzny, and Diane l. kelly, “A life cycle Model of continuous clinical Process innovation,” Journal of Healthcare Management 45, no. 5 (September–october 2000), p. 308.

48. Michael hammer, “Deep change: how operational innovation can Transform Your company,” Harvard Business Review 82, no. 4 (2004), p. 86.

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49. See ingrid M. nembhard, Jeffery A. Alexander, Timothy J. hoff, and rangaraj ramanujam, “Why Does the Quality of health care continue to lag? insights from Management research,” Academy of Management Perspectives 23, no. 1 (2009), pp. 24–42; Pouyan esmaeitzadeh, “how to Manage innovation and Flourish in hospitals’ clinical iT,” Academy of Health Care Management 7, no. 2 (2011), pp. 60–89.

50. clayton M. christensen, Michael e. raynor, and rory McDonald, “What is Disruptive innovation?” Harvard Business Review 93, no. 12 (2015), pp. 44–53.

51. Peter Yellowlees, Alberto odor, kesha Patrice, najia nafiz, Ana-Maria iosif, and Donald hity, “Disruptive innovation: The Future of health care?” Telemedicine and e-Health 17, no. 3 (2011), pp. 231–234 and Jason hwang and clayton christensen, “Disruptive innovation in health care Delivery: A Framework for business- Model innovation,” Health Affairs 27, no. 5 (2008), pp. 1329–1335.

52. ulrike urkhardt, Astrid erbsen, and Marjam rudiger- Sturchier, “The hospitalist as coordinator: An observational Study,” Journal of Health Organization and Management 24, no. 1 (2010), pp. 22–29.

53. Jill l. Sharer, “The new Medical Team: clinicians, Technicians, and Patients?” Healthcare Executive 15, no. 1 (January–February 2000), pp. 12–17.

54. Julie T. chyna, “Physician–health System Partnerships: Strategies for Finding common Ground,” Healthcare Executive 15, no. 2 (March–April 2000), pp. 12–17.

55. vikas Mittal, “Measuring and Managing Patient Satisfaction: implementing customer Focused Strategy in healthcare using Patient Satisfaction Strategy Maps (PSSM),” (2016), pp. 1–29. Teaching note, rice university, houston, Tx 77005.

56. vikas Mittal and c. Frennea, “customer Satisfaction: A Strategic review and Guidelines for Managers,” MSI Fast Forward Series (cambridge, MA: Marketing Science institute, 2010).

57. M. P. Manary, W. boulding, r. Staelin, and S. W. Glickman, “The Patient experience and health outcomes,” New England Journal of Medicine 368, no. 3 (2013), pp. 201–203.

58. G. D. kennedy, S. e. Tevis, and k.c. kent, “is There a relationship between Patient Satisfaction and Favorable outcomes?” Annals of Surgery 260, no. 4 (2014), p. 592.

59. T. c. Tsai, e. J. orav, and A. k. Jha, “Patient Satisfaction and Quality of Surgical care in uS hospitals,” Annals of Surgery 261, no. 1 (2015), pp. 2–8.

60. Mittal, “Measuring and Managing,” p. 4.

61. Y hong, h. liao, J. hu, and k. Jiang “Missing link in the Service-Profit chain: A Meta-Analytic review of the Antecedents, consequences, and Moderators of Service climate,” Journal of Applied Psychology 98, no. 2 (2013), p. 237 and W. A. kamakura, vikas Mittal, F. de rosa, and J. A. Mazzon, “Assessing the Service-Profit chair,” Marketing Science 21, no. 3 (2002), pp. 294–317.

62. W. J. chang and Y. h. chang, “Patient Satisfaction Analysis: identifying key Drivers and enhancing Service Quality of Dental care,” Journal of Dental Science 8, no. 3 (2013), pp. 239–247.

63. Mittal, “Measuring and Managing,” p. 9. 64. ibid., p. 10. 65. ibid., p. 13. 66. ibid. 67. ibid., pp. 18–20. 68. Julie T. chyna, “The consumer revolution: An Age of

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69. Paul D. cleary, “The increasing importance of Patient Surveys: now that Sound Methods exist, Patient Surveys can Facilitate improvement,” British Medical Journal 319 (September 18, 1999), pp. 720–721.

70. richard l. clarke, “The Drive for value in health care,” Healthcare Financial Management 65, no. 1 (2011), p. 124.

71. “Anxious to Please Patients, hospitals Should remember that bills Anger customers Most,” Health Care Strategic Management 18, no. 11 (november 2000), p. 12.

72. ibid., p. 14. 73. Jan Duffy, “Measuring customer capital,” Strategy &

Leadership 28, no. 5 (2000), p. 11. 74. ed egger, “inspiring Patient, employee Satisfaction

Turns Florida hospital into Top Performer,” Health Care Strategic Management 17, no. 6 (June 1999), p. 13.

75. John P. kotter, “leading change: Why Transformation efforts Fail,” Harvard Business Review 85, no. 1 (January 2007), pp. 96–103.

76. Jayne Greening, “how can We improve the effective engagement of Doctors in clinical leadership?” Leadership in Health Services 25, no. 1 (2012), pp. 20–30.

77. George S. Day, Market Driven Strategy, Process for Creating Value (new York: Free Press, 1990), p. 163; vaidyanathan Jayaraman and Yadong luo, “creating competitive Advantage through new value creation: A reverse logistics Perspective,” Academy of Management Perspectives 21, no. 2 (2007), pp. 56–73.

78. Peter lorange, Michael F. Scott Morton, and Sumantra Ghoshal, Strategic Control (St. Paul, Mn: West Publishing, 1986), p. 11.

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