Healthcare; Zane Case Study

Healthcare; Zane Case Study

Introduction

Any organization operates in an environment dividend into an internal and an external environment. The internal environment refers to that environment the organization has control over. This relates to the company itself, its policies, its processes, strategies, employees, the management team, and organizational structure. This environment is easy for the organization to control. On the other hand, an organization has an external environment, which is an environment outside the organization, and beyond the control of the organization. The external environment dictates what happens in the organization. A healthcare facility is an organization that aims at providing medical care to the community in which it exists.

Healthcare external environment

Various variables create the healthcare external environment. These variables include, firstly, the economic variable. This force focuses majorly on economic elements, such as, interest rates, employment rates and competitive forces in the healthcare industry. Secondly, the healthcare external environment comprise the technological variable, which relates to advancement in Information Technology, infrastructure in the hospitals and new products in the market in relation to types of services a hospital offers. Thirdly, the political variable relates to issues involving the Government of the land.. The fourth healthcare external environment variable is the legal variable. This relates to the regulator forces, price ceilings, laws, and regulations governing healthcare delivery. Finally, the social-cultural factor also falls in the healthcare external environment. This variable relates to the economic power and changing lifestyles of people, culture, norms, social beliefs and values of the community around the healthcare facility (Muller, Bezuidenhout & Jooste, 2006).

The healthcare external environment plays a prime role in the success of a healthcare facility. Therefore, it is essential to carry out an environmental analysis to identify the strengths, weaknesses, opportunities and threats facing the facility. The information gathered during an environmental analysis aids the healthcare facility in improving its strategic management, and translates into a possibility for the facility to meet its business goals. In addition, getting the real situation of the healthcare environment aids the management team to develop clear strategies, which guide the facility to attain the business goals. The commonly utilized tools of environmental analysis include the 5 Cs analysis, the SWOT analysis, and the PEST analysis. Generally, scholars refer to the environmental analysis as a situational analysis, which covers all these tools. According to Ginter, Duncan & Swayne (2013), a situation analysis is the analysis of the internal and external environments of the organization, and relates to the past, present and future aspects.

The 5 Cs analysis tool limits its analysis on the company, customers, competitors, collaborators and the general climate. The company relates to the internal situation of the healthcare facility whereas the rest relate to the external situation. Secondly, the SWOT analysis is an environmental analysis tool that aims at identifying the strengths, weaknesses, opportunities and threats of the products offerings of the healthcare facility. That is, the listing the most relevant problems and opportunities and assess the capability level of the healthcare facility to deal with them. The strengths and weaknesses relate to the internal environment, while the opportunities and threats relate to the external environment (Muller, Bezuidenhout & Jooste, 2006). Finally, the PEST analysis is a tool for environmental analysis that analyzes the healthcare external environment variables. It analyzes the macro-environmental political, economic, societal and technological factors. This analysis tool covers the climate part of the 5 Cs analysis.

Zane Case Study

The healthcare environment in Massachusetts as Ellen Zane assumed leadership was deteriorating. Many of the healthcare hospitals were performing poorly and making huge losses. In addition, the services offered were of poor quality. There was underfunding by the Federal and State Governments, which led to surging medical costs, Medicare, and Medicaid payments lagged behind. Bad debts from patients led to significant debt that threatened the healthcare. This further led to market consolidations, such as, mergers, closures and conversions, which aimed at salvaging the healthcare industry. A good example was the merger between Tufts-NEMC and Lifespan in 1997. In addition, the hospitals were financially unstable as insurance companies payment depended on the volume of patients. Thus the healthcare industry preferred quantity over quality. Consequently, there was a migration of customers, nurses and doctors to more expensive AMCs in search of quality care. This resulted in a deregulation of hospitals by Massachusetts in 1991 to move them towards cost effective management processes. In this period, the technology was advancing, in both information technology and medical equipment.

In the early 1990s, Tufts-NEMC had strong programs in cancer treatment, transplants and neurosurgery. In the mid-1990s, Tufts-NEMC merged with Lifespan Corporation. It added a maternity service in 1992, which made it the first full-service private teaching hospital in Boston. It even posted gains, however, due to a write-down in assets. In 1995, Harvard Pilgrim Healthcare discounted Tufts-NEMC from coverage, citing high costs. It then like other AMCs became slow to react to market pressures, and was ineffective in improving processes and cash flow. Thus, it was losing physicians, the market share and hospital acquisitions, such as, Faulkner and Tufts Medical School teaching site to Partners and CareGroup. By 1996, its debt had risen to $240 million from $130 million in 1990. However, in 1997, Tufts-NEMC opened The Neely House, an unique bed and breakfast style home for cancer patients and their families. This facility was within the hospital, an outstanding investment.

By 2002- 2003, Tufts-NEMC was facing various problems. All these problems developed after a merger with Lifespan Corporation in the mid-1990s. Firstly, the hospital was recording huge losses despite high revenues. In 2002, it recorded a loss of $12.3 million on a revenue of $476 million. The losses increased in 2003 to $38.5 million on revenue of $582 million. Secondly, the hospital had distorted administrative departments. This is following a brain drain when Lifespan took the administrative and support functions from Tufts-NEMC and centralized them in Rhodes Islands after the merger. Therefore, Ed Schottland the newly recruited COO set out to restructure them.

Ellen Zane moved to Tufts-NEMC in July 2003 after 10 years with Partners, a well performing hospital and a competitor of Tufts-NEMC in Boston. Tufts University’s President convinced her to take up the CEO position as he felt that she had the right mix of skills to build and implement a successful strategy for the hospital. She was the first non-physician and female permanent CEO in Tufts-NEMC’s history. In the first 6 months in Tufts-NEMC, Zane developed a consulting group called BDC Advisors, which carried out an environmental analysis to identify why the hospital was making a loss of $6 million in a month. Secondly, she conducted a “rapid diagnostic” to determine how to stern the losses. Thirdly, she reviewed the managed care contracts, and found out that Tufts-NEMC was underpaid. Finally, she realized that it was crucial to maintain the hospital as an AMC despite the difficulty of managing a major medical center without the volume of cases or endowments that competitors, such as, Partners enjoyed.

By mid-2006, Zane had accomplished various goals. Firstly, she had made staff changes by replacing half of the incompetent management team with more competent one. For example, she replaced the senior vice president of strategy with Deborah Joelson, a network-building expert from Partners. Secondly, she improved communication and outreach among the staff of the hospital. She accomplished this feat by the introduction of staff meetings and email addresses, where she encouraged sharing of ideas and communication of grievances. Thirdly, she introduced the Agenda for Change, a restructuring plan that improved Tufts-NEMC’s processes. Fourthly, she reduced the Length of Stay at the hospital, a cost-saving initiative that saved costs for the hospital. Fifthly, she re-opened contract negotiations, which improved Tufts-NEMC’s reimbursements by $20-25 million. The sixth accomplishment Zane made was bringing back the affiliations and networks that the hospital had lost over the years. Finally, she developed a working relationship with the Tufts University, which built joint initiatives in research and fundraising.

If I were Zane, my strategic plan for the next 6 months would to increase the number of bed space. More bed space with short length of stay will translate into more revenues and a higher profit. For the next 12 months, my strategic plan would be to make Tufts-NEMC a lower cost alternative and move the care to community hospitals.

 

 

 

 

References

Ginter, P. M., Duncan, W. J., & Swayne, L. E. (2013). Strategic management of health care organizations. San Francisco, CA: Jossey-Bass.

Muller, M., Bezuidenhout, M., & Jooste, K. (2006). Health care service management. Cape Town: Juta.

 

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