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What Doctors Should Know About Strategic Planning

By Samuel H. Steinberg, Ph.D.

Strategic planning is a well-understood business activity, studied by every business administration student in the world. People who pursue business degrees typically spend a significant portion of their time in school being educated on how to do it and, hopefully, get to practice these skills on a regular basis in their work life.

Unfortunately, it is doubtful that any medical school curriculum has a strategic planning course and, with most pre-med students pursuing science-oriented undergraduate degrees, few physicians ever come in contact with this activity prior to entering practice. If they are fortunate to join a practice of sufficient size, they may have an administrative person with knowledge of strategic planning; however, it is my experience that most practices utilize administrative staff to manage the daily activities of the practice and leave little, if any time for planning efforts. Most practices feel that they are just too busy to engage in planning, although it is very likely that some physicians do it intuitively, but without a formal strategic or business planning process.

Most physicians recognize that they are operating a business and that they require a plan to guide their activities. Staff must be hired, trained, and managed. Employees require benefit programs and have a many personnel functions that must be maintained. The practice has equipment and facility assets that must be monitored, maintained, and replaced when needed. Billing systems must be utilized and electronic medical records may be in place. In order to successfully manage these and other business functions, there must be at least a rudimentary business plan, and a better approach is to pursue a strategic plan that encompasses both the business functions required by the practice as well as the higher level strategic activities that will allow the practice to remain competitive and achieve the long term goals of the practice members.

Strategic planning encompasses the activities discussed below and can be accomplished without an expensive or time-consuming effort. Depending on the size of the practice, it can be done by the physicians themselves, or they can utilize their practice administrator, or bring in some consulting help. It need not be a very formal process or result in an expensively printed document, but can be informal and even hand-written. What is important is that the practice has a plan and there is some discussion regarding the following plan elements.

 

Market and Environmental Assessment

This activity looks at the internal capabilities of the practice and the external marketplace in which it exists, and seeks to provide an objective review of the capabilities of the practice, including the scope and distribution of services provided, the experience and qualifications of the staff, the factors that are used to measure the quality of care delivered, and the financial performance of the practice. The goal is an objective assessment of the strengths and weaknesses of the practice to be used as a basis for future planning. This may include the need for additional support staff or for a specific area in billing or collections that requires improvement. Perhaps a key physician is nearing retirement age and a recruitment plan must be developed. Without a thorough understanding of the current state of the practice, it is impossible to move forward with the development of a useful strategic plan.

The external assessment is designed to evaluate the marketplace factors that affect the practice, both now and in the future. This will include some measures of the population served, including growth forecasts, and the demographics of the population served by the practice. It will also include a look at the competition, and their strengths and weaknesses relative to your practice. We also want to gather any available information regarding major reimbursement trends and any regulatory issues that must be dealt with. For example, if your major payor is reducing reimbursement or bundling services under one payment, or if another regulatory matter is being implemented (HIPAA is a recent example), the practice needs to address these matters in their planning.

Potential opportunities for future growth must be considered here, as well. This may include newly developed services that can add to practice revenues or services that are not as available in your market area as they should be. Perhaps you have an idea for a joint venture with your local hospital or see an opportunity to compete with them and provide a more accessible, consumer-friendly service.

 

Future Direction and Strategies

Having accumulated a great deal of information in the previous activities, the practice is now ready to begin its future-oriented strategic planning effort. Understanding the capabilities of your own practice, the state of the competition, and the assumptions regarding the future, allows you to determine what your future should look like. Perhaps you see the need for an additional service provider, maybe a physician extender, to perform certain services that will be reimbursed at a lower level in the future. Maybe there is an opportunity to extend some marketing or advertising into a new geography that has a growing population of well-insured people. The competitive analysis might have shown that a major competitor is close to retirement age and this may represent a prospect for practice expansion. These, and many other issues, may result from the data-gathering effort completed and allow you to develop the major strategies that you intend to pursue.

 

The Strategic Plan

Each of the major strategies will have multiple components, including such things as the scope of services you intend to provide, the resources needed to provide those services, the volumes necessary for the practice to generate a profit from the service, and the specific tasks needed to accomplish the strategy. You must deal with equipment needs, staffing requirements, how you intend to market the service, the funding needed to purchase the equipment or expand your facility, and the responsibilities and timing of implementing the plans. Each major strategy essentially has its own plan as you determine how to move forward.

The plans must then be prioritized to determine the sequence of efforts. No organization can have more than a few major strategies, even very large groups, or the plan can be overwhelming. The order of implementation must take into account the importance of the strategy to the future success of the practice as well as such things as who will be charged with the accountability to implement it and whether the resources are readily available to proceed. Everyone in the practice is assumed to be busy, but implementation must be a key responsibility or the entire effort is meaningless. Ultimately, the success of any strategic plan is in its execution.

It is recommended that you plan to look at least three years into the future, and no more than five years. In addition, the plan must be reviewed at least quarterly and revised annually so that it is up-to-date and relevant. The environment changes, people come and go, regulations are modified, and the plan must reflect the current reality of the practice and the marketplace.

Planning does not get done because of two reasons: the members of a practice are extremely busy and/or they simply do not value the planning effort as worth their time. Very little can be done regarding the former issue, but the latter requires the leaders of a practice to convince themselves and their colleagues that strategic planning is an important function, as important as sending out the bills and collecting the revenue.

Physician practices live and die, merge with other practices, or sell themselves to another organization. All of these situations can be appropriate for a specific time and place, but it is the intent here for the practice to determine its own future and plan for achieving it. Too often, practices succumb to the forces around them or the key physician retires without really even attempting to control their own destiny. The environment, especially reimbursement changes and regulatory matters, are in a state of constant flux in today’s health care system and they sometimes have dramatic impact on the future viability of a practice.

Utilizing a sound strategic planning process allows the practice to stay in touch with their current realities and focus their efforts where needed to assure their success. The planning process need not be a burdensome activity, but must be seen as a key element of the responsibilities of the practice leadership. Having a plan in place, and keeping it current, improves the likelihood of the practice being successful far into the future.

 

Samuel H. Steinberg, Ph.D., FACHE, is a senior strategist with Health Strategies & Solutions, Inc.

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