HFMA Region 5 Webinar September 23, 2015 · 2019-01-25 · Strategic Repositioning Some Definitions...

HFMA Region 5 WebinarSeptember 23, 2015

Strategic Repositioning1

Strategic Repositioning

Speaker Backgrounds

Peter L. DeAngelis, Jr. Don McKenna

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Overview for today Share a process that will assist Healthcare Providers achieve the

targeted outcomes associated with the execution of strategies What it is not

Traditional Strategic Planning (assumes a vision and desired future state has been created)

Rocket Science Process and learnings are being shared based on experiences of

speakers as providers

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Assumptions about the current environment for providers Major transformation well underway and is accelerating Visions and emerging strategies look very different

Level of disruption is high and will continue Innovation in Healthcare ubiquitous and a required competency for

providers to embrace Provider bandwidth is stretched at all levels, including leadership Living through the volume to value transformation

Competency gaps likely exist in new skill sets Time is of the essence Teamwork has never been more important to achieve the transformation

necessary, yet many organizations still operate in operational silos

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There are 3 additional important assumptions that frame our topic today1.) There is an Execution Gap in all Healthcare Providers which typically

occurs after a strategic vision for the future has been created• That Gap typically is most evident in significant strategic tactics

identified as important priorities• That Gap exists even with various performance improvement

models in place within the organization2.) That size of that Gap is both a challenge and an opportunity, and in

many ways defines existing organizational leadership and culture3.) A disciplined execution-focused process (Strategic Repositioning) can

be an enabler addressing the Execution Gap, can improve the outlook and results, and ultimately lead to strategic success

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“When companies fail to deliver on their promises, the most frequent explanation is that the CEO’s strategy was wrong. But the strategy by itself is not often the cause. Strategies most often fail because they aren’t executed well.”

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Some Definitions for Clarity Strategic Vision/Plan – A broadly defined plan creating a desired future Strategic Framework – A summary of mission, vision, values,

organizational operating principles/model, competencies, strategic goals; output of the Strategic Planning process

Strategic Financial Plan – A financial projection depicting key assumptions and outcomes necessary to achieve the desired future financial targets and goals of the Strategic Plan

Operating Plan and Budget – Short-term, detailed plan to achieve tactical objectives – tasks and $’s

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Strategic Repositioning – Periodic assessment and modification of the Strategic Framework, most specifically strategies and tactics, utilizing the essential organizational competency of Strategic ExecutionStrategic Execution – Essential organizational competency that successfully hard wires strategic framework into tactical work plans, fully integrated with the operating plan and budget, to achieve the necessary outcomes

Strategic Execution enables effective Strategic Repositioning to be successful, and ultimately the Strategic Plan and Vision of the Organization’s desired future

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Strategic Repositioning with Strategic Execution…Powerful!

Leadership of the Process

% of failures associated with change in organizations is disturbingly high

Successful Execution occurs when a well developed plan and set of tactics is combined with effective leadership of change

Of all the aspects used to successfully implement change, nothing trumps engaged leadership

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Assumption #1 There is an Execution Gap....

There is an Execution Gap in all Healthcare Providers which typically occurs after a strategic vision for the future has been created• That Gap typically is most evident in significant strategic tactics identified

as important priorities• That Gap exists even with various performance improvement models in

place within the organization

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Too often, strategy can be “eaten by culture”, yet it is also true that execution can “trump strategy”. Said another way, a good strategy –well executed – will beat a great strategy, poorly executed, every time! The ability of Hospitals and Health Systems to execute on strategy and key tactics as an essential core competency in today’s transformational, challenging healthcare environment.

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There is a difference between organizations that consistently achieve results at a very high level, and those that have a good Strategic Vision, but where execution is uneven.

Strategic Repositioning –Where is the Gap?

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Vision

Strategy

Tactics

Strategic Financial

Plan

Operating Plans and Budget

Results

Assessment

- Where on the strategy development/strategy deployment continuum are gaps most likely to occur?

- Provider’s challenges are complex; gaps in deployment of tactical opportunities often occur when time is of the essence, bandwidth is limited, and competencies may need to be supplemented

Building Execution Competency –An Assessment Penetrating Questions are Critical – Identifying the Execution

Gap…in your organization What is your track record for successful execution of important

projects/meeting targets? (EHR/MU, Performance Improvement, etc…) How large is the financial gap you are projecting in your strategic

financial plan? What is the likelihood your current tactics will close it? In the time identified?

Do you have the bandwidth to execute all of what is planned? Do you have the competencies and colleague level of engagement to

execute your selected strategies and tactics?

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Strategic Repositioning – What needs to change? The results of your assessment of the Execution Gap then needs to

translate into thinking how to narrow the Execution Gap, ie., what needs to change? Critical first step to the Strategic Repositioning Effort Keep in mind the well known definition of insanity

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Assumption #2 – The size of that gap is both a challenge and an opportunity

That size of that Gap is both a challenge and an opportunity, and in many ways defines existing organizational leadership and culture

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The Gap – challenge AND opportunity The importance of painting the right picture Change! Asking to think in new paradigms Transformational Leadership

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Impact of Demographics

& Inflation

Assumptions:1. Operating environment and current mix of services and performance constant throughout the period (i.e., does not consider in-process initiatives, new market entrants, significant

reductions in employment or other exogenous factors)2. Assumes shifts in demographics, migration to health insurance, and other reimbursement declines related to PPACA3. Remaining gap is subject to the above assumptions as well as the ability to execute on potential improvement plan

Financial Challenge 2011-2017Operating Income Projections ($M)

3% Operating Margin Target in 2017

Key:Margin dilutive effectsPerformance prior to repositioningMargin accretive effects

OperatingIncome

FY 10

Impact of Reimbursement and Coverage

FY 17 Prior to Repositioning

OperatingIncome

Alignment with Top Quartile

Operating Expense

Gap to 3% Performance

3% Target OperatingIncome

FY 17 Post Strategic Repositioning

$33M

($256M)

($172M) ($396M)

$222M

$342M $167M

Components of the Gap Analysis (Waterfall) – Summary of Financial Outlook 2011 - 2017.

Limited Number of OrganizationsRide the Cycle of Change

Many “Established” Organizations Fail to Evolve Focus solely on branding and cost reduction

Most “entrepreneurial” organizations absorbed The need for “ramp up” capital & supportive functions Creative new partnerships

Limited Number of Prior Prestige Organizations Survive By becoming “learning” organizations able to incorporate changesSource: Andre DelBecq

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Related to Healthcare

In A Period of Paradigm Transition Efficiency Responses Necessary But Not Sufficient New Modalities of Care and Delivery Must Also Be Tested &

Adopted Transfer low cost, high quality models from other countries Meet the expectations of the millennial generation comfortable

with mobile, electronic technology Increase personalized care based on genotypic diagnostics Interface with informed, self-organizing collectives of patients Partner with populations of patients, etc.Source: Andre Delbecq

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IBM Foundation Study

Majority of “Executives” Perform Poorly In Context of Rapid Change Fail to partner with clients to experiment with new delivery modalities Unable to develop creative and adaptive cultures Unwilling to rapidly assimilate new modalities developed “outside”

their organizationCan Only Execute on Prior Models

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Paradigm Change Requires Transformational Leaders

Different from “Executives”, “Administrators”, and “Managers”Embrace A Genre of Strategic Decisions Where ends are unclear Where means must be discovered Where experimentation must substitute for expertise Where implementation must be achieved through new alliances

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Assumption #3 – Strategic Repositioning Process as an enabler A disciplined execution-focused process (Strategic Repositioning) can be an enabler addressing the Execution Gap, can improve the outlook and results, and ultimately lead to strategic success

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A robust, periodic Strategic Repositioning Process is an essential part of the overall, integrated strategic and operational process fabric What does it look like and how does it work?

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Strategic Repositioning – Key Execution Elements Clarity of purpose – “putting it in perspective” Process Work Plan Monitoring the Plan’s Implementation

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Start Strategic Repositioning with Purpose and Clarity - EXAMPLE…

Memo to CHE Leaders…..

The Strategic Repositioning process will assess the viability, sustainability and achievability of our mission in each existing community we serve in the context of the new healthcare business model, where value not volume is the driver

Without sustainable margins, we cannot carry out our mission and achieve Vision 2017 The financial goals of the System, and each Operating Entity, are a minimum 3% operating margin and minimum

10% EBIDA margin by 2017 Strategic ideas and concepts will begin at the Operating Entity and be guided by the responsible CHE EVPs RHCs are expected to identify strategies and tactics for consideration based upon sound market analyses. Those

strategies and tactics will be evaluated and prioritized with rationale and reasonable assumptions We will conduct our thoughts and analyses within the Value-Based Decision-Making framework The EVPs will ensure each Operating Entity:

— Is making progress— Has the necessary resources— Is pursuing realistic, achievable, and sustainable strategies— Is communicating within its Operating Entity and with its local Board

The System Office, supported by the identified consulting support, will assist with strategy review, prioritization, data assessment, modeling, etc. as requested and required by the Operating Entities and/or EVPs.

Operating Entities and System Office plans that meet the minimum 3%/10% targets will be consolidated for the system-wide strategic plan and strategic financial plan. From there, the next fiscal year operating plan and budget will be developed

Target Metrics - Example

• The target metrics for the Strategic Repositioning effort relate directly to the Strategic Framework. • The Strategic Repositioning plans should support the goals in the Strategic Framework.

FinanceTop 10% in the provision of community benefits (as percent of operating revenue)A minimum 3% operating margin & 10% EBIDA margin by 2017

QualityRanked in the top 10% of all nationally recognized/accepted quality and safety measures

ServiceRanked in the top 10% of all nationally recognized/accepted measures of health care service excellence across the continuum of care

GrowthServe more persons in the eastern United States than any other not for profit health organization

PeopleTo be known as the preferred employer by achieving top 10% performance in attracting, retaining, and developing all health care colleagues

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Strategic Repositioning – “periodic” and “adaptive”

Addressed a new business model (the shift from volume to value) that could result from health care reform

Focused us on aligning our strategic initiatives with targeted metrics

Insure alignment with the increasing pace of change, driven by PPACA and increasing volume/rate revenue pressures

More clearly outline the path to new business models: Population health Clinically integrated networks Service distribution networks

Continue to align our strategic initiatives with targeted metrics

Refresh our 2011 initiatives as necessary; add or subtract as needed

2011 2013

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Approach and Timing – A Disciplined Process - Example The Strategic Repositioning effort will be completed by early September, assuming key dependencies

and requirements are satisfied on schedule throughout the effort.

Stage 0:ActivateProject

Stage 1:Develop Foundation

Stage 2:Identify Strategies

and Tactics

Stage 3:Select

Strategies

Stage 4:Codify &

Operationalize Plan

Fact-Base Reviewed with

RHCs(Due 4/15)

RHC/System Office Teams Draft

Repositioning Strategies via

Playbook(Due 6/10)

Preliminary Review of

Submissions(Due 6/17)

Aggregation, Prioritization &

Sequencing(Due 8/19)

Updates to Strategic Plans,

Strategic Financial Plans, and Capital Plan

(Due 9/9)

All RHC teams will be responsible for identification of key repositioning initiatives (expected to be 6-8)

EVPs will provide executive leadership during this phase and will serve as System Office liaisons to RHCs during this process

Data Request Received

RHC Launch &

“Playbooks” Received

MidPoint Check-In

Completed(Due 6/10)

Final “Playbooks”

Due to System Office

(Due 7/29)

1 2 3 4 5 6

Informs 2012 Operating Plans & Budgets

Approach and Timing – A Disciplined, Integrated Process Integrating Strategy, Operations, Finance

RHCs submit new FY14 New Ministry Budget (Mid‐May)

March April May June July Aug Sept

Initial Budget Guidance and

Direction Provided to RHCs

(late March)

New Ministry Financial/Budget Development

Strategic Planning/Repositioning

RHC/EVP Review Session #1(Weeks of 4/29‐5/13)

RHC/EVP Review Session #2:(Weeks of 6/3 – 6/10)

RHC/EVP Review Session #3(Week of 7/8)

RHCs Present Plans to SMT for Feedback

(August 20th & 21st )

Final Submission of Strategic Framework and Revised Financial Forecasts & Budgets (8/31)

RHCs Develop new FY14 New Ministry Budget

Consolidate Budget & Estimate Capital

Needs

Budgets Submitted to New Ministry (June 11th)

Repositioning Kick Off

(March 21‐22)

RHCs Submit Repositioning Plans and Threshold Capital Requests (8/2)

RHCs Revise Existing and Develop New Initiatives

Refine Initiatives

Present Final FY14 Operating Budget &

Capital Allocations to CHE Trinity Health Governance (9/12)

RHC Driven

System Office Driven

RHCs Continue to Develop Community Needs Assessment

RHCs submit Community Needs

Assessment (5/10)

RHC Board Approval of Community Needs Assessment & Implementation Plans

(7/31)

Education Sessions

Project Organization Chart – Structure and Accountabilities

Senior Management Team

Executive Steering Group(COO, CFO, VP Planning, Operating

Entity Leaders)

System Office Team(s)

Process Support Strategic Financial Support System Office Support

Recommends final strategic repositioning plan to Governance Removes barriers that hinder success

Assesses progress against strategic and business objectives Meets regularly to review status and resolve cross-functional issues Supports review and evaluation of strategic initiative plans as well

as prioritization and staging Facilitates coordination across teams

Assist System Office to support modeling and development of strategic financial plans

Provide support for aggregation of strategies and lead compilation of financials, participate in review process

Provide as-needed support for financial analysis

Act as primary lead on incorporation of outcomes into 2012 Operating Plan / Budget and 5 Year Capital Plan (system and Operating Entity level)

Manage overall program and execution Produce Fact-Base and Playbook Provide on-going training for Operating Entity

leads in Playbook completion As needed, support strategy formulation Lead aggregation of proposed strategies and

financial analyses for review by Leadership; identify where additional clarification needed

Evaluate implementation considerations

Operating Entity Teams

Serve as liaison to the Executive Steering Group

Provide executive leadership to guide RHC progress and initial review of RHC strategic repositioning plans

Manage access to additional external support, as required

Develops key strategic initiatives to align with overall program goals (e.g., build 6-8 initiatives to achieve minimum 3% operating margin and 10% EBIDA margin by 2013) Documents margin and volume impacts of each strategy as well as potential staffing and/or capital requirements Assesses risks and defines mitigation strategies Responsible for day-to-day leadership of working groups

Coordinate access to data / interviews necessary to complete Fact Base

Provide logistics support for key milestones (e.g., Playbook Training, RHC Mid-Point Check-In, EVP Status Updates, etc.)

Supplement fact-base with select analyses Support modeling and development of

strategic financial plans

Support Resources

EVPs

Actions to Support a Successful Launch of Strategic Repositioning – Clarity of roles and timing lead to disciplined execution

• Identify a local Operating Entity ‘Team Leader’ who will receive training on the “Playbook” and be the primary point-of-contact for the organization throughout the process

— Submit your Operating Entity Strategic Repositioning Team Leader to Executive Steering Group by March 30

• Develop a project plan to complete your local Repositioning Plan between mid-April and mid-July

• Begin facilitating conversations locally with key stakeholders , particularly governance, regarding process

• Find avenues to begin educating key participants on local market developments and key external trends that will shape your operating landscape over the next 5-10 years

• Determine whether any external support/facilitation will be required to facilitate completion of your Repositioning plan

• Continue to be responsive to System Office data requests to ensure timely delivery of Fact-Base documents

• Actively organizing foundational materials (Fact-Base and Playbook) which will be distributed to the Operating Entities during the 1st two weeks of April

• Discussing Strategic Repositioning with Operating Entity CEOs & Board Chairs March 30/31

• Organizing 3-5 “System Office” teams which will coordinate RHC plans related to the following areas:

— Continuum of Care

— Reimbursement and New Payment Models

— Physician Engagement / Alignment

• Holding multiple ‘training sessions’ for Operating Team Leads and key participants

— External Trends/Planning Landscape: April 8

— “Playbook” Training - week of April 11

System Office Operating Entity

Developing the Foundation: Tools to Guide the Process To support the rapid and consistent identification of potential repositioning strategies, each RHC team will be provided

with an objective analytical framework (Fact-Base) and toolkit (Playbook).

Fact-Base PlaybookThe Fact-Base will provide an objective assessment of the strategic, financial & operating position of each RHC.

Context:

• The intent of the Fact-Base is to provide each Operating Entity with a common analytical starting point for their exploration of potential repositioning strategies

• Analyses will be retrospective and forward-looking

Components:

• Operating Entity Profile – Comparison of recent financial and operating performance to key internal metrics and external peer group comparisons

• Reimbursement & Coverage Analysis – The projected impact of coverage shifts & payment impacts from Health Care Reform for the period 2012-2019

• Competitive Landscape Assessment – Analysis of the relative positioning of each Operating Entity to its competitors based on factors such as growth, financial strength and value-creation (cost/quality alignment)

Each Operating Entity/System office team will receive a ‘Playbook’ to support the documentation of their proposed strategies

Context:

• The Playbook will contain a set of tools designed to ensure the Identification of repositioning strategies is completed in a consistent manner across Operating Entity/ System Office teams

Components:

• Narrative Summary – The narrative summary will provide templates to support the assessment of current position (SWOT), targeted strategies and implementation readiness

• User Guide – The Playbook will be supported by a user guide which will provide instructions, outline key assumptions & provide examples for the RHC/System Office Lead

• Financial Impact Model – Expected revenue, cost and capital implications of targeted strategies should be loaded into each Operating Entity financial model

Fact Base Analytics - ExamplesRHC Profile

Competitive Landscape Assessment

Reimbursement & Coverage Analysis

Competitive Positioning

0

00

00

00

00

00

2011 2013 2015 2017 2019

Live

s C

over

ed Commercial (Traditional)Commercial (Health Exchanges)MedicareMedicaidUninsured

12

3

4

-14.0%

-12.0%

-10.0%

-8.0%

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Mar

gin

%

3% target

SURPLUS GAP

Planning Horizon Beyond

Service Line Performance

F

EC

BD

A

G

H

-

36

72

- 36 72

Lower

Clin

ical

Val

ue

HigherFinancial DurabilityLower

Higher

Projected Coverage Shifts

Projected Reimbursement Impact

Financial Trending and Comparisons

External Benchmarking

Competitor A

Client A

Client B Competitor B

Competitor C

Competitor FCompetitor D

Competitor E

Competitor HCompetitor G

Growing faster than market rateGrowing slower than market rate

Follo

win

g m

arke

t lea

der

Lead

ing

mar

ket

Comparative Growth Rate

Rel

ativ

eM

arke

t Sha

re

= 100 Discharges

2005 2006 2007 2008

Net Patient Service Revenue $161.2 $234.2 --- $141.5 $158.6 $172.1 $188.9 $212.6Operating Income --- $0.4 --- $4.1 $4.5 $3.9 $0.1 $0.6Operating EBIDA $16.1 $17.3 --- $12.4 $12.9 $11.5 $9.9 $15.4Net Income* --- $4.4 --- $6.8 $8.1 $6.7 $0.3 $1.5Cash Flow (Net Inc + Depr)* --- --- --- $14.2 $15.6 $13.8 $8.9 $13.6Unrestricted Cash --- $75.4 --- $30.1 $37.9 $49.7 $26.7 $50.4Total Debt --- $123.1 --- $15.0 $77.4 $76.3 $75.5 $72.8Capital Expenditures --- $20.3 --- $8.1 $9.8 $36.2 $48.2 $2.9

ProfitabilityOperating Margin 1.4% 0.3% 2.9% 2.9% 2.8% 2.3% 0.0% 0.3%Operating EBIDA Margin 8.8% 7.5% 10.5% 8.6% 8.0% 6.6% 5.1% 7.1%Excess Margin* 2.0% 2.1% --- 4.7% 4.9% 3.8% 0.1% 0.7%

Debt PositionMADS Coverage (x)* 2.7 2.8 4.0 4.3 4.7 4.1 2.9 4.7MADS % of Operating Revenues 3.5% --- 3.0% 2.4% 2.2% 2.0% 1.8% 1.6%Debt to Capitalization 42.7% 50.6% 37.0% 15.0% 45.2% 43.2% 44.2% 42.9%Debt to Cash Flow (x)* --- 6.1 3.4 1.1 4.9 5.5 8.5 5.4

LiquidityCash to Total Debt 77.4% 63.9% 115.0% 200.1% 49.0% 65.1% 35.4% 69.3%Days Cash on Hand (days) 117.5 99.9 --- 82.8 92.9 110.7 53.1 90.2Days Cash on Hand (CHE) --- --- 180.0 85.9 97.3 116.6 56.3 95.6Days in A/R 47.5 47.3 --- 45.9 42.4 42.2 44.0 42.9

OtherAverage Age of Plant 9.7 10.3 --- 7.3 7.9 8.8 7.8 6.6Capital Spending Ratio 134.1% 140.0% --- 108.7% 130.3% 506.9% 555.2% 24.0%Compensation Ratio 50.1% --- --- 56.4% 55.6% 55.3% 56.4% 53.5%

CHE Targets

Projected 2009Ratio / Statistic

S&P "BBB" (A)

ActualMoody's "Baa" (B)

‐

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

0102030405060708090100

Peer Group Percentile

FTEs

Per

CM

I Adj

uste

d AO

B

Client A(61st %ile)

Client B(58th %ile)

Competitor B(40th %ile)

Competitor G(39th %ile)

Competitor F(75th %ile)

Competitor E(21st %ile)

Competitor C(25th %ile)

Competitor H(46th %ile)

Top Quartile

Competitor D (12th

%ile)

Competitor A(32nd %ile)

Rea

dmis

sion

Com

posi

te

Scor

e

Operating Expense / CMAED

Strategic Considerations – Developing the Playbook

36 Mission

• Is the ministry essential to the community? • Are community healthcare needs being met by other providers? • What are new ways to serve vulnerable populations (Medicaid, Charity, Medically Underserved )?• What collaborations would be beneficial?• Which homeless initiatives should the Ministry focus on?

Competitive Positioning

& Value Proposition

What are the Ministry’s core services and how do they differentiate the ministry? What should they be? How is this Ministry positioned to achieve Vision 2017? What is the Ministry’s key value proposition to payers and managed care plans - Price? Quality? What is the Ministry’s value proposition to patients - Access? Service? Catholic Identity? What competitive moves would allow the Ministry to capture market share? What services are critical to improving competitive position? Which assets are the most/least accretive to the Ministry’s strategy over the next 5 years? How will the ministry prepare for population health and taking on more risk-sharing strategies? How will the role of the acute care facility change as a result of healthcare reform? How can the Ministry promote “systemness” to attract and retain customers in the network? How will the Ministry balance near term pressures for volume and longer term strategies for value?

Physician Alignment

What alignment models should the Ministry pursue? Should we grow employed physician base, focus on affiliated physicians more, or both?

What is the Ministry’s top 3 physician strategies to increase its referral base? Are we already enrolling physicians in patient-centered medical home models (PCMH)? What balance between Primary Care Physicians and Specialty Physicians should we target? What strategies can improve performance of the physician practices?

Care Continuum& New Care

Models

How can clinical quality improvement programs be utilized to drive overall performance (e.g., ACT initiatives)?

What should the Ministry’s footprint be along ambulatory, acute, and post acute services? Should the Ministry explore new sites of care – Retail Clinics? Employer Clinics? What new collaborations/partnerships along the continuum of care would be beneficial?

Strategic Considerations – Developing the Playbook

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ReimbursementModels & Risk

Sharing

What impact will the health exchanges (public & private) have on payer mix and contracting ? What capabilities are necessary to successfully assume greater financial and performance risk in a value-based

purchasing environment? What strategies will assure “break-even” for Medicare patients? How can the Ministry leverage its presence in the market to command more favorable rates? What strategies should help improve net revenue rates? Should the Ministry engage in employer-direct contracting? How? Do we have the necessary scale? Should the Ministry enter gain/risk sharing with other providers and with physicians (e.g., ACOs, bundled

payments) ? What is the Ministry’s strategy for managing financial risk in an ACO or bundled payment environment?

New Markets, Services and Customers

How will you increase covered lives in your market? Which types of services are valued by the marketplace? Do these make sense from both volume and margin

perspectives? Which areas of the market / adjacent markets should the Ministry pursue? De-emphasize? What strategies improve the levels of business while increasing market share? What can the Ministry do with other local RHCs? Can the Ministry expand non-core business areas to grow revenues and support margin (e.g., Monetize clinical

data? Acquire other local players?)

Operational Efficiency

To what extent can operational efficiency be further improved; what opportunities for cost reduction have not yet been explored?

Are there clinical support services the Ministry should consider outsourcing? e.g. Lab services? What plans exist to centralize, standardize, or outsource back-office services – Across the RHC? At the System

Office? Can vendor contracting be centralized – Across the Operating Entity/Across the System? Should certain non-patient focused business lines be reconsidered and outsourced (e.g., Dietary / Cafeteria,

Parking, Security, Custodial)?

Strategic Repositioning – Aligning Gaps to Target with Tactics and Execution Discipline - EXAMPLE

Phases Create the BusinessImperative

Formulate Core Strategies Refine Strategies & Plan for Execution

Approach • Use standard assumptions to predict:– Coverage shifts– Reimbursement impact– Operating margin impact

• Recognize market share and payer shifts

• Understand current operational, quality & financial performance opportunities

• Use Strategic Considerations to assess current strategies & revise or develop new initiatives

• Revise/Develop high level financial impact & capital requirements for each initiative

• Determine potential organizational performance based on proposed initiatives

• Refine initiatives

• Build detailed financial impact models

• Develop execution milestones and timeframe

Deliverables • Revised Waterfall Chart • Revised initiatives with Narrative Summary & High Level Financial Impact

• Preliminary Operating Performance

• Preliminary Capital Request

• Revised initiatives with:– Financial Model– Implementation

Milestones• Final Capital Requests• Final Strategic Financial

Plan

Timing April June August

Strategic Repositioning – the right set of tactics (strategic priorities) is crucial to successful execution and should be thoroughly vetted

A meaningful tactic includes… An engaged team Metrics in relation to strategic framework Achievable Milestones and timing Strategic Financial Plan elements (to be built into capital and operating budgets)

Investment required Capital Working Capital People/Competencies

Projection – Operating and Cash Flow Impact Performance Improvement plan, as needed Monitoring mechanisms aligned with Operating Plan Accountabilities (system/corporate, operating unit) Change management principles identified Communication plan integrated

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More About Tactics/Development

All the hard work leads to this – the most innovative and creative part of the process

Understood that status quo is unacceptable in almost all cases as the fact base demonstrates

Stretch the organization, but achievable Facilitation External views and ideas critical to consider

Execution starts here, not after gaps are created – leadership will need to force the dialogue early in the planning cycle to overcome the resistance Much harder if the organization is not compelled by the fact base

Ask the difficult questions – see strategic considerations Accountability of a plan rests at the operating level once the strategic

framework has been identified Use the team(s) as much as possible – there is no wise man with all the

answers

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Potential Playbook Tactics

Each Strategic Repositioning Tactic Criteria - not currently in operating plan and would have a significant impact – could be operational areas or

strategically new areas for growth or change Each operating unit should have a playbook, that aligns to system playbook, which should also be created Collectively these fill the gaps (financial, quality, value, patient experience, colleague engagement, etc.) that the

fact base has revealed Example of Tactics which emerged from the rigor of the process

Substantially grow service line Implement a meaningful colleague engagement strategy Implement a meaningful patient experience strategy Create and Implement an HIX Strategy focused on population health triple aim goals Create and Implement a CIN/ACO and participate in shared or full risk arrangements Achieve a Medicare Breakeven or better cost structure Create/accelerate a Performance Improvement Infrastructure Create an enhanced Physician alignment, pluralistic model Explore Joint Venture opportunities Create or align with an Innovation Center Divest certain activities and programs Implement Retail Strategy Merge or Consolidate

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Final Submission Deliverables – Overview - EXAMPLE

Objectives

• Determine the critical success factors for the RHC across the portfolio of 6-8 initiatives

• Identify key milestones for implementation of each initiative• Complete a more robust narrative and financial analysis for each initiative to build

the “business case” for each one

Required Submissions

to System Office

For the Final Submission at the end of Step 4, the RHCs should submit the following:•Detailed Narrative Summary for each initiative•Detailed Financial Impact Analysis for each initiative•Execution Milestones for each initiative•Critical Success Factors

TimingWeek ending

7/29 (Week 15)

Suggested Preparation Review feedback from Midpoint Review

Good Samaritan

Sacred Heart

Sacred Heart

St. Mary’s

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Narrative Summary (1/2)

Acquisition of St. Joseph’s East Georgia

Description

Acquire critical access facility in Greene County and build a replacement facility. Critical success factors include: completion of facility acquisition, successful integration of facility into the St. Mary’s system, and

increased system presence in Greene County community. Proposed implementation is January 2012 with an end time of 2014. Initiative addresses the following community needs: lack of access to specialists providing services at the facility, increase clinical

offerings and expanded community health programs. Local medical staff, EMS providers, County Commissioners, and local FQHC are strategic partners in the development and ongoing

operations of the initiative.

Strategic Pillar Alignment

Service Quality People Financial Growth

X X X X X

Expected Benefit

Continue ministry of Catholic healthcare in Greene County, Georgia. Expansion of St. Mary’s regional presence in CSA. Connection between the St. Mary’s Health Care System and the community – improve awareness of ministry and service offerings

such as home health, hospice, and the dementia unit. Initiative will contribute towards the 2017 growth goal by both increasing the number of patients served, and expansion of St. Mary’s

presence into this community, and it contributes to the finance goal of target operating and EBIDA margins. KPIs may include: Completion of the acquisition, design and construction of new facility, support from local EMS and primary care

physicians, recruitment of surgeons and other medical specialties and a successful philanthropy program to support the hospital.

Expected Cost

Estimated Capital Costs Estimated Operating Costs (Annual Basis)

$45 million $14 million

Details

Capital costs presented in Capital Management Committee presentations. Operating costs are exclusive of overhead allocation from St. Mary’s. Construction of a new facility is part of the initiative and estimated in the capital costs. Potential sources of funds will include tax-exempt bonds and philanthropy.

St. Mary’s Health Care System, Inc®


Acquisition of St. Joseph’s East Georgia

Stakeholder Impact

Community will have a positive economic impact through replacement facility that serves Greene and adjacent counties. St. Mary’s will see positive growth in patient activity and post-acute care services. Greensboro community will see a positive impact through increased access to specialists and expansion of local services.

Market Impact

25% of Greene County residents receive care at St. Joseph’s East Georgia. 45% of Greene County residents receive inpatient care in Athens. Initiative will increase market share of SJEG from Greene County residents and an increase in activity throughout the St. Mary’s

Health Care System. Positive growth in outpatient imaging and therapy services with new facility. Improved services and facility will aid in recruitment of additional providers.

Ease of Implementation 2

Barriers to Implementation

Lack of financial commitment by local municipality. Community support impacted due to site location of replacement facility.

Level of Organizational

Change Required

Rate of Overall Change Level: Medium (a few functions at a single facility will be impacted). System integration and community support for both Athens and Greensboro markets will be vital to the success of the initiative. Many departments within the health system will be impacted by the addition of the facility.

Status (Select status and give

supporting detail)

New Planned, Not Started

In Process Details

X Currently in due diligence phase of intent to purchase and providing interim management for SJEG.

Potential Risks to the Organization

Low Risk: Inability to further integrate St. Mary’s into the local community. Status of reimbursement models for critical access hospitals.


Acquisition of St. Joseph’s East GeorgiaMilestone Description Estimated Timing Risks and/or

Dependencies

1 Due diligence Required information will be submitted and reviewed by both organizations Ends August 2011

Delay in submittal or review of information

2 Completion of acquisition

All deal points and approvals will be completed for acquisition of St. Joseph’s East Georgia December 2011

Unforeseen operational/

financial issues

3 Greene County Indigent care funding

Greene County will approve increase of indigent care funding to support new hospital December 2011

Inability to secure support from

Greene County

4 Begin construction Construction will began for replacement facilityMid - 2012

Lack of increase in Greene County

funding

5 Construction completed

Construction will be completed for replacement facility4th qtr - 2013

Delays by construction

company

6

7

8

9

Execution Milestones



Improve the Health System’s Value Proposition

Description

Improve the quality and cost proposition for financial stability and continue momentum of being a regional leader in health care. Participation in regulatory and Payors reimbursement programs to mitigate reductions in reimbursement. Improve operations by implementing evidenced-based processes and technologies to improve continually in areas of quality and

safety as referenced in the 2017 goals. Improve operations by optimizing opportunities for efficiencies through the Six Sigma/Lean process with a focused approach. Develop a clinic combining outpatient diabetes, heart failure, and palliative care clinics to meet the identified community needs. Critical success factors include: Alignment with reimbursement programs and incentives, achieve Top 10% recognition for

excellence in patient care and outcomes, engagement of system in an efficient, learning, and productive mindset. Installation of EMR system for home care and hospice. Start time is immediate in 2011 and ongoing achievement of excellence in quality, service, access, and value. Community needs met include: increased quality of care, expand value of healthcare dollars, and improve patient outcomes.

Strategic Pillar Alignment

Service Quality People Financial Growth

X X X X X

Expected Benefit

Optimization of payments and incentives available from Payors. Attraction of higher credentialed staff and physician expertise through new technologies and reputation for “best place” to work. Reduce growth of expenses while increasing volume and quality using Six Sigma/Lean principles to achieve excellence through

disciplined execution in order to meet financial goals by 2017. A continuous learning environment that promotes workforce, leadership, and career development that supports goals and initiatives. Public recognition for excellent quality of care. Patient, physician, and referral entity preference per 2017 goals. Reduce repeated and avoidable hospital visits due to lack of care oversight and resources. Potential KPIs: Increased financial performance, surgical volumes due to increased capacity, Payor incentives, market share and

community benefits. Reduced readmissions and expenses, recognition for Top 10% in service, quality, and safety. Improved system reliability and documentation functionality. Negative net revenue impact if goals not achieved.

Expected Cost

Estimated Capital Costs Estimated Operating Costs (Annual Basis)

$850,000

Details

Joint Commission certifications. $14,000 for new certifications, average of $12,000 per year for recertification's. Purchase of EMR documentation system of home care and hospice – $300,000 plus training expense of $155,000. Consultation and training costs for Six Sigma/Lean training and implementation – $150,000 for Six Sigma/Lean expertise and

$140,000 for staff training.



Improve the Health System’s Value Proposition

Stakeholder Impact

Associates and physicians will explore, improve, and implement changes needed to improve quality to meet regulatory and or other Payors’ targets to maximize reimbursement.

Health care system will function to improve utilization of identified Six Sigma/Lean management principles to improve patient outcomes and provide care in the least expensive and safest environment possible.

Staff will continually be challenged to achieve highest quality possible.

Market Impact Reputation for excellent quality with drive market share and draw patients, payors and physicians to our health care system. Market share will increase through increase inpatient and continuing care admissions.

Ease of Implementation 2

Barriers to Implementation

Sustained operational growth if opportunities are not seized. Lack of willingness to accept, support and implement changes to improve quality, efficiency and effectiveness.

Level of Organizational

Change Required

Rate the overall change level: Medium. Branding and marketing, education on Six Sigma/Lean principals, departments to meet efficiency expectations. Willingness of departments, staff, and physicians to set improvement targets and implement them timely and effectively. Implementation and efficient use of EMR systems for home care and hospice documentation.

Status (Select status and give

supporting detail)

New Planned, Not Started

In Process Details

X EMR implementation is scheduled for 2012. Six Sigma/Lean principles training 4Q2011.

Potential Risks to the Organization

Medium risk: Potential financial performance/targets not achieved. Loss of market share if quality and value not achieved and public awareness of achievements not recognized.


Improve the Health System’s Value PropositionMilestone Description Estimated Timing Risks and/or

Dependencies

1 Completion of training for Six Sigma/Leanmanagement principles

Education and training to managers and senior leaders on Six Sigma/Lean principles and techniques to systematically approach performance and efficiency. December 2011 Delay in achieving

efficiency targets

2 Establish Six Sigma/Lean targets

Systematic review and identification of areas that have opportunities to improve service, financial and process efficiency, and quality in order to set target’s and expectations.

Early 2012Missed

opportunities for success

3 Implementation of EMR documentation system

Purchase, installation, training and implementation of documentation system for home care and hospice to improve documentation and improve quality through intuitive system prompts, improved multidisciplinary communication for clinical assessment and/or treatment.

Mid - 2012

Reduction in quality scoring and

payments due to documentation and

communication

4 Achievement of quality targets

Meet maximum targets, benchmarks, and goals as determined by CMS, Blue Cross, PHA, and others to maximize reimbursement and reward. Ongoing

Missed opportunities for optimizing quality

and financial success

5

6

Execution Milestones


3.90

3.95

4.00

4.05

4.10

4.15

4.20

2008 2010 2012 2014

4.00%

4.12%

Employee Satisfaction

70

75

80

85

90

2008 2009 2010 2011 2012 2013 2014

State Average = 79%

77.4%

86.6%

Employee Retention

3.3

3.5

3.7

3.9

4.1

4.3

4.5

2008 2010 2012 2014

3.75%

4.31%

Physician Satisfaction

2008 2009 2010 2011 2012 2013 2014 2015

Financial Performance

Good Samaritan Opened

2015 Healthgrades Awards55

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Closing the Gap - Summary

Impact of Demographics

& Inflation

Assumptions:1. Operating environment and current mix of services and performance constant throughout the period (i.e., does not consider in-process initiatives, new market entrants, significant

reductions in employment or other exogenous factors)2. Assumes shifts in demographics, migration to health insurance, and other reimbursement declines related to PPACA3. Remaining gap is subject to the above assumptions as well as the ability to execute on potential improvement plan

Financial Challenge 2011-2017Operating Income Projections ($M)

3% Operating Margin Target in 2017

Key:Margin dilutive effectsPerformance prior to repositioningMargin accretive effects

OperatingIncome

FY 10

Impact of Reimbursement and Coverage

FY 17 Prior to Repositioning

OperatingIncome

Alignment with Top Quartile

Operating Expense

Gap to 3% Performance

3% Target OperatingIncome

FY 17 Post Strategic Repositioning

$33M

($256M)

($172M) ($396M)

$222M

$342M $167M

Components of the Gap Analysis (Waterfall) – Summary of Financial Outlook 2011 - 2017.

$33m

$118m

($396m)

$167m

$72m$91m

Financial Performance - Updated Results post 2 rounds of Strategic Repositioning

(Operating Income)

GAP Fillers To Date* Operations‐Work Force Management‐ Supply Chain‐ Rev Cycle‐ Performance Excellence‐ Others

* Strategic(Ministry Transformations)‐mergers, divestitures, jointventures

FY 10 FY 11* FY 12 FY 13 FY 17 FY 17Budget Prior SR Target @ 3%

Operating Margin

Strategic Repositioning - Elements

Key Repositioning Elements – Desired Impact of the Strategic Repositioning Process Strategic Framework/Vision Validated Strategic Considerations Critical, Robust Dialogue, Execution

considerations integrated Tactical work plans Execution ready; clear milestones and

KPIs Strategic Financial Model Integrated with Tactics and their

impact Operating Plans and Budget Aligned with key tactical metrics Performance Improvement Ubiquitous

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Summary and Wrap Up of an Effective Strategic Repositioning Process – Key Takeaways or “the Checklist…” Build on Strategic Framework and Vision Robust Dialogue, Engaging Key Stakeholder throughout Tactics detailed with an execution focus Executable Work Plan

Integrated with Operations, Finance Supported Leading Change principles incorporated Disciplined and Organized Involve Transformational Leadership Work by Teams

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Key Learnings and Final Comments Organizational Structure Considerations Consultants This is hard

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A word about the corporate/parent role for those in systems large and small Corporate/Parents can either create or destroy value of an organization Value creating roles in Strategic Repositioning typically will look like: High level direction Top down objectives Business development road maps M&A support Leveraging shared services where demonstration of value Strategic Tactics typically best to be locally driven

Key Message – role of corporate and operating units in this process is critical to clarify and build into the process

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A word about Consultants Know your scope Know your competencies Think your plan through with those you trust and test it One stop shop for support is rare Spend time building your team – internal and external and how it will

execute during the process

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A final word for those who may find this hard Reflect on your organization’s mission and core values as they have

likely not been changed If values suggest such noble behaviors as integrity, community,

teamwork, courage, reverence, justice, and stewardship this process provides the opportunity to demonstrate them

Your values will be your bedrock, as usual, and Strategic Repositioning must be a reflection of who you are in this regard

Also reflect on the great Jimmy Dugan…

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Strategic Repositioning66

Peter L. DeAngelis, Jr., PartnerIMA Consulting6 Hillman Drive, Suite 100Chadds Ford, PA 19317866-840-0151 (office)215-264-5382 (cell)[email protected]

Don McKenna, FACHEPresident and CEOSt. Mary’s Health Care System1230 Baxter StreetAthens, GA 30606706-389-3000 (office)[email protected]

HFMA Region 5 Webinar September 23, 2015 · 2019-01-25 · Strategic Repositioning Some Definitions...

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