Strategic Initiatives Case Study: Hospital and Health Care – Part 2

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This is the second of several postings on Strategic Initiatives in Hospital and Health Care. There are good lessons here from the enterprise perspective as well as for the leadership of a strategic initiative.

Organizational Turnaround through Strategy

St. Mary’s Duluth Clinic Heart Center (SMDC) is an integrated health system with 4 hospitals, 17 clinics, and 7,000 physicians and employees managing more than 400,000 patient visits each year. SMDC – like many organizations has grown organically and through merger. Following one large merger, it found it had a “strategic plan” which listed more than 350 initiatives! In its attempt to comprehensively-approach strategy formulation & execution, SMDC struggled because its initiatives were not strategic. As a result, people were not clear on their roles to execute the strategy. SMDC reported that:

  • Executive Leadership Team mired in operational fire-fighting and day-to-day details
  • Board of Directors unfocused and confused about their role
  • Management and employees did not understand the strategic direction of the organization
  • Gradual decline of margin

The turnaround included much hard work, including the refinement of metrics through the balanced scope card, and the use of strategy maps to guide the prioritization of strategic initiatives. This aligned the entire organization through a common set of well-understood objectives and created a platform for developing a single organizational culture of accountability. The result was a $20 million dollar financial turnaround and return to profitability.

Analysis of One Strategic Initiative

Congestive heart failure is a highly prevalent, costly condition that imposes a significant burden on those it affects. In this strategic initiative*, SMDC focused on long-term costs and quality of care and achieved excellent results. It delivered benefits that include the following: increased use of appropriate medications, improved outcomes and functional status, and reduced readmission rates, length of stay, and overall costs of care for the health system.

Leadership Lessons for Strategic Initiatives

  • Understand the financial implications – SMDC was losing money on hospitalized congestive heart failure patients largely because they were admitted in a highly decompensated state that required lengthy, costly stays. The program management approach involved first building a data-driven case for costing and performance over a six-month period, and evolved into a learning process for developing methods and training, incrementally gaining support for the benefits of the initiative. SMDC funded the initiative and provided medical doctors, nurses, support staff and at least 100 hours of time from IT for database development.
  • Sequence benefits delivery – In this case, there was a goal to improve the provision of guideline-directed care. As the organization achieved its early goals, other benefits follow, such as decreased admission rates. SMDC found that it took time to get to the desired financial performance. It looked for both direct and indirect opportunities for revenue generation, as it may take time for the program to generate revenues on its own. From this base, the leaders can add additional goals.
  • Engage stakeholders early – Two key stakeholders – nurses and primary care physicians – received considerable attention in the strategic initiative. For example, primary care physicians have concerns about control over the care of their patients. The program communication plan addressed this concern.
  • Scale up the program – Start the program on a small scale so that the staff is not overwhelmed, and then increase as the as people learn the new system and as qualified staff are added.
  • Consider organizational structure and ownership of the solution – In this case, SMDC found that the creation of a separate entity (to operate and maintain the new capability) might cause confusion about referral patterns and program ownership. The learning: look for a logical “home” for the resulting solution.
  • Understand each strategic initiative in the larger enterprise context – It is tempting for organizations to affix the adjective “strategic”to every endeavor. Further, it is a stretch to expect people to give full effort to the initiative while doing their normal workload. Management is about making choices on where to invest scarce resources, and you can identify a strategic initiative by looking at where resources are invested.

* For more on this strategic initiative, see http://www.innovations.ahrq.gov/content.aspx?id=275

Do you understand the financial case for your strategic initiative? Do you understand how your initiatives fit into the strategic context?

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About Greg Githens

Thought leader who helps others think strategically, make strategy, and turn vision into action. Coach, advisor, board member, and hands-on leader. Seminar leader and speaker of popular offerings "How to Think Strategically & Apply Business Acumen" and "Leading Strategic Initiatives (Program Management)." Experience in driving change in Fortune 500 and mid-size companies through strategic initiatives and business transformation.
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