A Strategic Dilemma You just hung up the phone after a conversation with the Chairman of the Board of Directors
of the St. Michaels Medical Center, a not-for-profit, acute care, community hospital that is part of a 10-hospital healthcare system located in the southern part of the United States. You accepted the offer to become their new CEO. You are a little unsure if you're ready for such a big step, but you know it will be an exciting challenge. With 300 beds and a wound-care center, St. Michaels serves a service area population of 250,000 people and provides cardiac, general medicine, OB/GYN, emergency, and outpatient services. The hospital was built about 30 years ago in what was a thriving urban community and had no significant healthcare competition. Over time, a worsening economy has led to changing demographics in the service area, and the community is now populated mostly by underrepresented groups with limited financial resources. With the community's growing economic challenges, the hospital has continued to experience significant losses in market share and a negative operating margin. Over the last 8 years, the hospital has struggled to return to a sustainable model, but these efforts have been frustrated by a lack of capital, low patient census, departures of physicians, perceived poor quality and low morale among the employees, and lack of community support. As the hospital's condition has continued to deteriorate, the need for a complete overhaul of the hospital operation has become imperative. During its heyday, the hospital had been very profitable and renowned for its high-quality care as well as its high level of patient satisfaction. In an attempt to improve the operations of the hospital, the board has offered you this opportunity with a mandate to "turn things around." You pride yourself on being a strategic thinking leader, but you are worried about what options to consider in developing your turnaround plan for the hospital. As you ponder the issues before you, you realize that improving St. Michaels will demand significant critical thinking and ingenuity. You will have to financially stabilize the hospital and improve its quality of care and patient satisfaction. You begin making notes and identify the steps that you will consider for your turnaround plan. This plan will include your action steps for the next 90 days, 6 months, and 1 year after you have been on the job. The following are key statistical attributes that were used to help generate your plan. Key Statistical Attributes of the Hospital 2010 Capacity Licensed Beds: 300 Operated Beds: 200 Medical Staff: 80 Key Services Cardiac Services Emergency Services Maternity/Women's Services General Medicine Patient Statistics Admissions: 6254 Total Surgeries: 2444 Outpatient Visits: 17,453 Emergency Room: 39,362 Deliveries: 1252 Total Patient Days: 27,863 Revenue/Expenses Key Financials 2007: (000) Total Gross Revenue: $236,129 Total Deduct from Revenue: $156,938 Net Patient Revenue: $79,191 Total Operating Expenses Contribution Margin: $(1251) Total Capital Expense: $3640 Operating Margin: $(4891)
Case Study Discussion Questions
1. What can you do to foster strategic thinking in this situation?
2. How will you involve your team and encourage them to think strategically?
3. List the items in your action plan for the next 90 days, 6 months, and 1 year after you have been on board.
4. What are the various strategic options that you have considered and the reasons for your preferred choices?
5. What metrics would you use to measure your progress? Show a sample TOWS matrix.
6. Which individuals, organizations, and structures might present obstacles or challenges for successful implementation of your plans? Which individuals, organizations, and structures could be supportive for your actions? Why?
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