Using the case study provided along with the strategic plan
Develop clear, measurable objectives, and initiatives to meet the objectives for the organization.
Analyze strategies and methods for meeting objectives and measuring success.
Identify the strategies and methods.
Explain how the strategies and methods are appropriate for the objectives.
Identify barriers and constraints to the objectives.
Explain the methods you will use to address the barriers and constraints.
Develop comprehensive recommendations.
Explain the financial requirements to meet the objectives.
Recommend an organizational structure that would best position the organization as a leader in its market.
Page 35
COMMUNITY HOSPITAL HEALTHCARE SYSTEM: A STRATEGIC MANAGEMENT CASE STUDY
Amod Choudhary, City University of New York, Lehman College CASE DESCRIPTION
The primary subject matter of this case concerns strategic management of community hospitals in the United States. This case has a difficulty level of
five; appropriate for first year graduate level students. This case is designed to be taught in four class hours and is expected to require twenty-four
hours of outside preparation for students. For the graduate student, it should be a half semester long group project with a presentation and report at
the end of the semester .
CASE SYNOPSIS
This case study analyzes the turbulent social, legal and technological issues that are affecting today’s suburban community hospitals in United States.
The soaring health care costs, increasing number of uninsured or underinsured patients, reduced payments by government agencies, and increasing number
of physician owned ambulatory care centers are squeezing the lifeline of community hospitals whose traditional mission has been primary care.
Furthermore, with the enactment of Patient Protection and Affordable Care Act in March 2010, community hospitals are facing new challenges whose full
impact is unknown. This case study would help students learn about Strategy Formulation including Vision and Mission Statements, internal and external
analysis, and generating, evaluating & selecting appropriate strategies for a healthcare organization.
COMMUNITY HOSPITAL HEALTHCARE SYSTEM
With the enactment of Patient Protection and Affordable Care Act in March 2010 (Health Act), and President Obama’s professed goal of making heath care
in the United States more accessible and affordable, the next few years are sure to be very turbulent in the healthcare industry. The Health Act is
expected to provide healthcare coverage to 95% of Americans, which will include an additional 32 million persons nationally (New Jersey Hospital
Association, 2010). The Health Act goes into effect in 2010 with many of its requirements not becoming effective until 2019. Directly because of the
enactment of the Health Act, insurance premiums are expected to increase anywhere from 2% to 9% depending on who is quoting them (Wall Street Journal,
2010). The Health Act requires children to remain on their parents’ health plans
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until age 26, eliminates copayment for preventive care, bars insurers from denying coverage to children and adults (in 2014) with pre-existing
conditions, eliminates lifetime caps on insurance coverage, and requires setting up of insurance exchanges in all states (by 2014) through which
individuals, families and small business can buy coverage (Adamy, 2010; Pear, 2010).
United States spends approximately $2 trillion annually on healthcare expenses (Underinsured Americans: Cost to you, 2009). This amount is more than
any other industrialized country in the world and counts for 16% of the U.S. GDP. This percentage is higher than any developed country in the world
(Johnson, 2010). Despite the substantial healthcare spending, access to employer-sponsored insurance has been on the decline among low-income workers,
and health premiums for workers have risen 114% in the last decade (Johnson, 2010). Furthermore, healthcare is the most expensive benefit paid by U.S.
employers (Johnson, 2010). Despite this outlay, approximately 49 million Americans are uninsured and about 25 million underinsured–those who incur
high out-of-pocket costs, excluding premiums, relative to their income, despite having coverage all year (Abelson, 2010; Kavilanz, 2009). Overall, the
healthcare industry in America is besieged with high cost, uneven access and quality (Flier, 2009). The intractable issues of high cost, uneven access
and quality have made everyone unhappy from patients, hospitals, doctors to employers.
The American healthcare industry is composed of approximately six major interest groups: hospitals, insurance companies, professional groups,
pharmaceuticals, device makers, and advocates for poor (Goldhill, 2010) with the Physicians–part of the professional groups– having the biggest
influence on the industry. Although hospitals constitute only 1 percent of all healthcare establishments–hospitals, nursing and residential care
facilities, offices of physicians & dentists, home healthcare services, office of other healthcare practitioners, and ambulatory healthcare centers–
they employ 35% of all healthcare workers (U.S. Department of Labor, 2010).
Community Hospital Healthcare System
Community Hospital Healthcare System is a not-for-profit organization located in Monmouth County, New Jersey. With its 282 beds and 2400 employees
including 450 physicians, Community Hospital serves approximately 340,000 residents in four suburban counties of central New Jersey. The Community
Hospital Healthcare System is a holding corporation made up of (i) Community Hospital Medical Center, (ii) Applewood Estates, (iii) The Manor, (iv)
Monmouth Crossing, (v) Community Hospital Healthcare Foundation Inc., and (vi) Community Hospital Healthcare Services, Inc. (a for-profit-corporation).
Community Hospital Medical Center (Community Hospital) is a general, medical and surgical community hospital offering an array of primary and secondary
services, including: cardiology services, magnetic resonanceimaging (MRI), diabetes services through Novo Nordisk Diabetes Center, emergency services,
endovascular surgery, inpatient psychiatric
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services, maternity care (single room) and special care nursery, oncology, radiation oncology, rehabilitation, short stay unit, Sleep Disorders Center,
Women’s Health Center, and dialysis unit. Community Hospital Medical Center operates a Family Medicine Residency program in affiliation with the Robert
Wood Johnson/UMDNJ Medical School.
Community Hospital has been selected as one of the best places to work in New Jersey by NJBiz–a business publication–and landed at 20th place among
100 best places to work in healthcare by Modern Healthcare magazine in 2009. The American Nurses Credentialing Center has re-designated Community
Hospital Medical Center a magnet status for excellence in nursing and patient care in 2010 (Community Hospital Healthcare System, 2009 Annual Report).
Only 6% of hospitals in U.S. hold Magnet designation and only 3% have earned re-designation one or more times (Community Hospital Healthcare System,
2009 Annual Report). Community Hospital is also a designated Primary Stroke Center. Finally, a nationally recognized firm has ranked Community Hospital
among the top 5% of hospitals in the U.S. for patient satisfaction (Community Hospital Healthcare System, 2009 Annual Report).
Applewood Estates is a continuing care retirement community with 290 apartments, 20 cottages, 40 residential health care units, and 60 bed skilled
nursing facility.
The Manor provides nursing services for 123 elderly residential units including sub- acute, rehabilitation and intravenous therapy.
Monmouth Crossing provides assisted facility for the elderly consisting of 76 units. Community Hospital Healthcare Foundation Inc. seeks and invests
funds for the benefit of all components of the Community Hospital System except for the Community Hospital Healthcare Services, Inc.
Community Hospital Healthcare Services, Inc. is a for-profit entity that provides related services or participates in joint ventures of related
services that do not meet criteria for being tax- exempt. Examples include an ambulatory diagnostic imaging business and a public fitness club. It also
holds certain real estate in support of the Community Hospital.
Vision–an organization of caring professionals trusted as our community’s healthcare system of choice for clinical excellence.
Mission–to enhance the health and well-being of our communities through the compassionate delivery of quality healthcare.
Community Hospital’s mission and vision is borne out of six Strategic Imperatives– known as pillars. They are: (i) growth and development, (ii)
community involvement & outreach, (iii) physician integration, (iv) customer service, (v) high performance and (vi) renown. According to John Gribbin
(personal communication, August 16, 2010), CEO of Community Hospital, use of technology underpins each of the six strategic imperatives and is used to
achieve goals pertaining to the Strategic Imperatives.
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COMMUNITY HOSPITAL DILEMMA
Traditionally community hospitals have defined themselves to be center of Primary care, i.e., place for general medical and surgical care.
Unfortunately, under the current health care industry practices, general medical and surgical care which form the core of a community hospital tend to
be less profitable than specialty care–heart, trauma and, transplant centers. Additionally, while primary care is increasingly viewed as the long-term
solution to U.S. health crisis, many argue that the Health Act does little to change the economics of specialty vs. primary care. For community
hospitals like Community Hospital, this is not good news. Community Hospital’s mission is primary care, but it is challenged as to how to develop other
services that which are complementary to its mission of primary care that effectively subsidize its commitment to primary care.
Based on market share, Community Hospital faces two direct competitors and other peripheral competitors as it tries to maintain its position as the
community’s healthcare system of choice for clinical excellence and meeting the health delivery needs of residents in central New Jersey.
Shore University Medical Center (SUMC)
Shore University Medical Center is a 502 bed regional medical center that specializes as the region’s only advanced pediatric clinical care hospital.
SUMC is also a Level II Trauma Center, with an affiliation with the University of Medicine and Dentistry of New Jersey — Robert Wood Johnson Medical
School. It is located in Neptune, NJ and competes with Community Hospital in eastern region of Monmouth County, NJ.
SUMC is part of the three-hospital member Meridian Health Systems. SUMC has also received the prestigious Magnet award for nursing excellence three
times. It has been designated by J.D. Power and Associates as a Distinguished Hospital for Inpatient Services (2006) and received the New Jersey
Governor’s Award for Performance Excellence (2005). With their Meridian partner hospitals, SUMC has also received the following awards: FORTUNE’S “100
Best Companies to Work For” (2010), Best Places to Work in New Jersey” for five consecutive years by NJBiz, New Jersey’s Outstanding Employer of the
Year in 2003 and 2009, One of the top 100 Most Wired Health Systems in the United States for 10 consecutive years, and John M. Eisenberg Award for
Patient Safety, one of the highest recognitions in the nation for hospital quality.
University Hospital (UH)
UH is unique among the three hospitals because of its size and breadth and depth of medical services provided and specialties offered. UH is a 610-bed
academic medical center and
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a teaching hospital of UMDNJ-Robert Wood Johnson Medical School in New Brunswick, NJ. UH competes with Community Hospital in the northern and western
part of Monmouth County and eastern and northern Middlesex County. Since it is a teaching hospital, UH provides services and speciality care that
Community Hospital would not be able to provide even it desired to do so. UH is a Level 1 Trauma Center, with a separate Bristol-Meyers Squibb
Children’s Hospital (BMSCH) with research and rehabilitation facilities. Moreover, UH specializes in cardiac procedures including heart transplants,
has a cancer hospital, offers state of the art robotic surgery and provides kidney transplant services.
UH is recipient of many awards and recognitions: (i) one of America’s best hospitals according to U.S. News and World report, (ii) “Hospital of the
Year” by NJBiz, (iii) top-ranked cancer programs, (iii) recognized exceptional U.S. hospitals in quality and safety, (iv) recipient of Magnet Award for
nursing excellence, (v) award for excellent stroke care by American Heart Association, and (vi) high patient satisfaction ranking by the patients of
BMSCH.
Tables 1 to 5 below provide data that should be used to determine the competitive advantage/core competencies of Community Hospital. The tables
represent data and ratios about hospital finance (tables 4 & 5), safety and mortality rates (tables 2 & 3), and patient experience (table 1).
Table 1: Hospital Experience Survey (%)
CMC SUMC UH NJ Avg.
Patients who reported that their nurses “Always” communicated well. 74 75 73 72
Patients who reported that their doctors “Always” communicated well. 78 75 76 76
Patients who reported that they “Always” received help as soon as they wanted. 60 59 59 56
Patients who reported that their pain was “Always” well controlled. 69 69 67 66
Patients who reported that staff “Always” explained about medicines before giving it to them. 59 57 58 55
Patients who reported that their room and bathroom were “Always” clean. 64 62 64 66
Patients who reported that the area around their room was “Always” quiet at night. 48 49 49 50
Patients at each hospital who reported that YES, they were given information about what to do during their recovery at home. 77 76 81
77
Patients who gave their hospital a rating of 9 or 10 on a scale from 0 (lowest) to 10 (highest). 68 62 66 60
Patients who reported YES, they would definitely recommend the hospital. 69 68 74 64
This table provides data from a survey that asks patients about their experience during a recent hospital stay. http://www.hospitalcompare.hhs.gov/
August 11, 2010.
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Table 2: Hospital Mortality Rates Outcomes of Care Measures
CMC SUMC UH
Death Rate for Heart Attack Patients No different than U.S. National Rate No different than U.S. National Rate No different than U.S. National
Rate
Death Rate for Heart Failure Patients Better than U.S. National Rate Better than U.S. National Rate No different than U.S. National Rate
Death Rate for Pneumonia Patients No different than U.S. National rate No different than U.S. National Rate No different than U.S. National
Rate
Rate of Readmission for Heart Attack Patients No different than U.S. National rate No different than U.S. National Rate No different than U.S.
National Rate
Rate of Readmission for Heart Failure Patients Worse than U.S. National Rate No different than U.S. National Rate No different than U.S. National
rate
Rate of Readmission for Pneumonia Patients Worse than U.S. National Rate No different than U.S. National Rate Worse than U.S. National Rate
This table measures the hospital mortality rates for the three hospitals and compares those results with U.S. National Mortality Rates.
http://www.hospitalcompare.hhs.gov/ August 11, 2010.
Table 3: Recommended Care/Process of Care: Hospital Overall Scores (%–higher score is better)
CMC SUMC UH Top 10% of Hospitals scored equal to or higher than Top 50% of Hospitals scored equal to or higher than
Heart Attack Overall Score 96 99 98 100 97
Pneumonia Overall Score 93 96 83 99 96
Surgical Care Improvement Overall Score 90 97 95 98 95
Heart Failure Overall Score 89 97 91 100 96
This table compares Heart Attack, Pneumonia, Surgical Care and Heart Failure Care among the three Hospitals and other hospitals in State of NJ. New
Jersey Department of Health and Senior
Services, Web.doh.nj.us/…/scores.aspx?list…, downloaded August 13, 2010
.
Table 4: Ratios and Indicators
CMC SUMC UH
Average Length of Stay (days) 3.6 4.6 5.0
Medicare Average Length of Stay (days) 4.7 5.7 6.5
Occupancy Rate for Maintained Beds (%) 78.8 77.7 82.1
Operating Margin Ratio (%) 2.4 2.9 0.1
Total Margin Ratio (%) 8.7 9.3 8.6
Current Ratio 3.97 2.23 1.51
Modified Days Cash on Hand Ratio 241.6 194.4 250.2
Net Patient Service Revenue 6,206 7,287 8,653
Total Expenses per Adjusted Admission 6,286 7,405 8,783
Charity Care Charges as percentage of total Gross Charges 4.0 4.4 5.0
Provision for Bad Debt as Percentage of Net Patient Service Revenue 1.9 4.3 5.0
This table provides ratios for Utilization, Financial Health and Operational Performance for three hospitals. FAST Reports, New Jersey Hospital
Association.
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Table 5: Key Statistics for Community Hospital
2007 2008 2009
Beds 271 276 282
Births 2,026 1,869 1,749
Emergency Department Visits 60,344 60,828 64,460
Family Medicine Center Visits 18,424 20,046 19,482
Health Promotion Visits 53,291 51,072 50,880
Patient days (including same-day surgeries) 83,968 82,533 76,635
Physical/ Occupational Therapy Treatments 92,911 106,856 122,871
Radiology/Imaging Procedures 125,117 130,108 127,913
Surgeries 15,092 14,033 13,309
Employees 1,664 1,743 1,770
Uncompensated Healthcare 10,537,747 10,885,754 10,390
Bad Debt 2,750,418 2,930,189 3,561,270
Senior Living Communities Occupancy Rates (avg. in %) 90.5 91.4 89.3
This table provides key statistics for Community Hospital for past three years. 2007- 2009 Community Hospital Healthcare System Annual Reports.
Outlook
The population of Monmouth County, NJ is set to increase from 646,088 to 657,798 from 2009 to 2014. The median age will also increase from 40 to 41,
and per capita income will increase from $40,189 to $42,166 during the same period (North Carolina Department of Commerce, 2008). The CEO of Community
Hospital worries that with each passing day the continued viability of his hospital becomes difficult. Moreover, he believes that the Health Act will
hurt Community Hospital’s bottom line by about a $1 million per year. However, the CEO believes that Community Hospital is well positioned to meet its
challenges and will succeed, albeit with hard work, talented employees and some luck.
Federal government through Medicare and Medicaid provides Community Hospital’s revenue of about 45%. Generally, Medicare and Medicaid payments to
hospitals are approximately 20% less than the actual cost (Arnst, 2010). Remaining revenue of Community Hospital comes mainly from insured patients.
Community Hospital, like most hospitals across the country receives most revenue from treating complex health care diseases such as surgeries and
procedures that require hospital stay and care. Ominously for Community Hospital, due to diffusion of health care technologies, services with most
revenues are moving away to private surgery centers owned by physician groups. Additionally, the enactment of the Health Act will lead to reduction of
approximately $1 million to Community Hospital’s bottom line. The challenge for strategists at Community Hospital is to provide primary care and
charity care (NJ law requires every hospital to medically stabilize anyone–regardless of insurance or ability to pay–and treat those patients to the
full extent of services offered by the hospital) in a weakened economy with increasing charity care expenses and rising bad debt. The strategists must
find
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new sources of revenue to allow Community Hospital to support its mission while secure enough funds to meet its commitments to primary and
uncompensated care.
CONCLUSION
Community Hospital is in a challenging environment due to changing demographics, highly regulated health care industry and having an uneven playing
field compared with physician owned surgery centers. Matter of fact, one-third of the nation’s community hospitals had operating losses in 2008
(Nussbaum & Tirrell, 2010). Patients with good jobs and appropriate health insurance are leaving the region, while physicians are taking high revenue
procedures to privately owned surgery centers. Additionally, with the reduced Medicare and Medicaid reimbursements and increasing charity care/bad debt
cost; Community Hospital needs to create a new sustainable business model. Please prepare a strategic plan that will steer Community Hospital through
the turbulent times ahead.
REFERENCES
Abelson, R. (2010). Bills Stalled, Hospitals Fear Rising Unpaid Care. Retrieved February 9, 2010, from
Adamy, J. (2010). Health Insurers Plan Hikes. Retrieved September 7, 2010, from www.wsj.com.
Arnst, C. (2010, January 18). Radical Surgery. Bloomberg Businessweek, p. 40.
Community Hospital Health Care System. 2009, 2008, 2007 Annual Reports. Freehold, NJ.
Flier, J. (2009). Health ‘Reform’ Gets a Failing Grade. Retrieved November 17, 2010, from
www.wsj.com/…/SB1000142405274870443
Goldhill, D. (2009). How American Health Care Killed My Father. Retrieved January 20, 2010, from
www.theatlantic.com/doc/print…/health-care
Johnson, T. (2010). Healthcare Costs and U.S. Competitiveness. Retrieved January 31, 2010, from
www.cfr.org/…/healthcare_costs_and_us_co…
Kavilanz, P. (2009). Underinsured Americans: Cost to You. CNNMoney.com. Retrieved January 31, 2010, from
http://CNNMoney.com
North Carolina Department of Commerce. (2010). Monmouth County (NJ) January 2010. Retrieved January 31,
2010, from https://edis.commerce.state.nc.us/docs/countyProfile/NJ/34025.pdf
New Jersey Hospital Association. (2010). FAST Reports. Princeton, NJ.
New Jersey Hospital Association. (2010). Memorandum to Chief Executive Officers. Princeton, NJ.
Nussbaum, A., & Tirrell, M. (2010). Health Reform is Dead. Let’s go Shopping. Bloomberg Businessweek, p.49. Pear, R. (2010). Health Plan Won’t Fuel Big
Spending, Report Says. Retrieved September 9, 2010, from
www.nytimes.com/2010/09/../09health.html…
New Jersey Department of Health and Senior Services. (2010). Hospital Performance Report. Retrieved August 13,
2010, from http://web.doh.state.nj.us/…/scores.aspx?list…
U.S. Department of Labor, Bureau of Labor Statistics. Career Guide to Industries:
2010-2011 Edition. Retrieved January 31, 2010, from http://www.bls.gov
Wall Street Journal (2010). Sebelius has a List. Retrieved September 13, 2010, from www.wsj.com
Journal of the International Academy for Case Studies, Volume 18, Number 1, 2012
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