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Click Here To Order NowConductinganEnvironmentalAnalysis
Conducting an Environmental Analysis
HSA 599 Health Services Administration Capstone
CONDUCTING AN ENVIRONMENTAL ANALYSIS 2
The scenario for this assignment is that I am an administrator of a hospital and as the administrator I am faced with the challenges of declining reimbursements from insurance providers and increasing demands for patient services due to dramatic changes in the external environment. These changes include those imposed by the Patient Protection and Affordable Care Act. I need to evaluate the position of the organization and conduct and environmental analysis. The purpose of this is to determine the organization’s ability to continue to provide quality care and remain financially solvent in the face of these challenges.
Determine two specific forces in the external environment that will have the most impact on the organization.
The external organization comprises of all the entities that exist outside its boundary but have significant influence on its growth and survival. The most common external reason for declining reimbursements from insurance providers from the external environment that has the most impact on the organization are competition and customers. Competition comprises of related industries with similar products and services, their geographic locations and markets. Competition and traditional competition in health care involves one or more elements such as price, quality, convenience and superior products and services. A key role in competition in health care is the potential to provide a mechanism for reducing health care costs (Rivers & Glover, 2008, p. 630).
However, it has been discovered that competition can not enhance efficiency in the health care industry. Since public and private insurance companies are paying for three-quarters of the health care bills. It has been reported that competition in the United States has become
CONDUCTING AND ENVIRONMENTAL ANALAYSIS 3
Zero-sum-based, this is a situation in which a health care organization is actively engaged in dividing value instead of creating value. This type of competition erodes existing value through unnecessary costs. Zero-based competition in health care is associated with bad strategic choices such as incorrect level of competition, focus on cost reduction, incorrect geographic market, focus on satisfaction surveys, and offers of improper incentives to providers (Rivers & Glover, 2008, p.635).
Zero-sum competition divides value instead of increasing it. It takes the form of cost shifting rather than fundamental cost reduction. Costs are shifted from the payer to the patient, from the health plan to the hospital, from the hospital to the physician, and from the insured to the uninsured and so on. Passing costs around creates no net value, instead gains for one participant comes at the expense of others with added administrative costs (Porter & Teisberg, 2004, para. 9). Another issue with zero-sum competition is that it restricts choice and assess to services instead of making care better and more efficient. As the system is currently structured, health plans make money by refusing to pay for services and by limiting subscribers and physicians’ choices. Many health plans pay a health care organization a set amount per admission for a given condition rather than for a full treatment cycle (Porter & Teisberg, 2004, para. 11).
The Patient Protection and Affordable Care Act (PPACA) has had an affect on competition because physicians are being driven to make other arrangements to practice medicine since the current landscape has caused their practice costs to rise and their reimbursements falling. Seeing costs rise among shrinking revenue, physicians are finding
CONDUCTING AN ENVIRONMENTAL ANALYSIS 4
the prospect of working at a salaried position at a hospital leaving smaller health care organizations which helps with the increasing demands for patient services in this organization (Gottlieb, 2012, para. 21).
Another external factor having an impact on the organization is industry regulations such as the Patient Protection and Affordable Care Act. All health care organizations have to abide by the legal system, new laws and regulations that are constantly being added due to political and social changes. Compliance can result in additional, developing new technology, and additional taxes or legal fees.
With new industry regulations such as the Patient Protection and Affordable Care Act there are ramifications for this organization. One ramification is that health care organizations will have to be careful when billing patients on financial assistance since health care organizations must first limit charges to these patients and then do everything they can to avoid collection actions. Medicare and Medicaid patients account for more than 50% of the care provided by health care organizations. The expansion of these programs and the government’s cost-cutting initiatives are now impacting revenues. The decline in insurance reimbursements has affected this organization since health care organizations receive a bulk of their revenue from Medicaid and Medicare and the Patient Protection and Affordable Care Act has cut reimbursements. The increase demand for services due to the Patient Protection and Affordable Care Act is a result of more individuals now being insured with fewer physicians and now physicians will receive lower reimbursements (Sarath, 2010, para. 1-3).
Another cause of lower reimbursements is that performance is now tied to reimbursements
CONDUCTING AN ENVIRONMENTAL ANALYSIS 5
which took effect on October 1, 2012. Value-Based Purchasing (VBP) is a model where incentives payments are given to hospitals that meet or exceed certain performance benchmarks set by The Centers for Medicare and Medicaid (CMS). In 2013, he clinical measures for the incentive payments have to include certain achievements of quality metrics related to conditions such as heart failure, pneumonia, and hospital-related infections. Also, the bundled reimbursement plan is given to a health care organization for an episode of care beginning three days before admission and ending 30 days after being discharged. This is to lower readmission rates and to correct the inefficiency of the “fee-for-service” model (Sharamitaro, 2011, p.1).
Lastly, new regulations will have an affect of more patients needing care since an estimated 34 million uninsured will enter the health care marketplace. This change will result in changing intake procedures based on severity of care, more efficient use of bed space, and lowering readmission rates (Sharamitaro, 2011, p.2).
Determine two specific internal factors that the organization’s leaders need to consider in preparing for the future of health care and the future of the organization.
In the past 10 years, hospital leaders were focused on restructuring and re-engineering their organizations for greater efficiency. They scrambled to cope with cutbacks in federal funding while trying to minimize the effects on health care quality. Today, the leadership skills set that are being sought have shifted greatly. This does not mean financial awareness and operational ability are no longer needed or important but now the shift in “hot” leadership skills are being fueled by rapid technological advancements as well as demographic changes (Dister, n.d., p.1).
CONDUCTING AN ENVIRONMENTAL ANALYSIS 6
One internal factor that the organizations’ leaders need to consider for the future of the organization is having leaders with the strongest potential to develop broad leadership skills. New leadership skills for the organization to survive will have to include:
High-level technological decision-process leadership skills- Health care leaders will have to manage technological assessment and decision-making at a very rapid pace in order to keep the organization current and competitive. Technology options will be many times greater means new technologies impacting the marketplace faster than ever. Leaders will need to know the highest-level skills in order to ask the right questions to external and internal experts to have the best knowledge to select technologies that will be the best investments for the organization (Dister, n.d., p.1).
Clinical connectivity- Due to the increasing depth of physician involvement in management decision-making today’s non-medical executives will have to connect well with clinical management. These leaders will have to understand far beyond clinical issues and how they are impacted by management. Leaders will have to include physicians’ perspectives and integrate them into decision-making. They will need to have effective contributions from physicians and engage physicians in business decisions (Dister, n.d., p.2).
Leadership of diverse management teams- In order for a health care organization to succeed in developing more diverse management teams, leaders will have to be effective in leading diverse groups and using each member’s expertise to advance the organization for the future. Future leaders will have to look beyond racial, cultural, and gender diversity to prepare and organization for success in the future. The more diverse viewpoints, the more effective the idea generation will be, with better outcomes. It will be critical for success not
CONDUCTING AN ENVIRONMENTAL ANALYSIS 7
only to hire such people, but to listen to them. The most effective healthcare management teams of tomorrow will include members with different professional, expertise, knowledge, and educational backgrounds (Dister, n.d., p.2).
Fostering of innovative thinking and problem-solving- The visionary leader must encourage a culture of innovation in the organization. The culture must begin with the leadership team and flow through the entire organization. The innovative culture needs to encourage formation of proactive solutions, services, and processes. The culture should reward risk taking and entrepreneurial thinking and promote knowledge transfer. The organization needs to review in order to identify innovative processes and future trends (Dister, n.d., p.3).
Another internal(and it can be external as well) factor that the organizations’ leaders need to consider in preparing for the future is the shortage of nurses that is happening and will continue to worsen with more patients having insurance due to the Affordable Care Act.
Hospitals have used a mix of short-term and long-term strategies to deal with the nursing shortage. They have used nurse education, competitive compensation, and temporary staff. Interviews with health care leaders indicate that these activities have helped in reducing the shortage; however, hospitals’ actions have increased costs and raised concerns about their potential impact on patient care. A large degree of doubt exists among hospitals about their ability to meet future nursing needs (May, Bazzoli, & Gerland, 2006, p. 317).
CONDUCTING AN ENVIRONMENTAL ANALYSIS 8
Currently, there is a shortage of more than one million nurses and that number is only to worsen as more people are insured. Short-term solutions to fill immediate vacancies include increasing salaries, using temporary staff, and offering sign-on bonuses. Long-term solutions for creating growth in the nursing workforce include providing financial support for nursing education and changing nurses’ work environment.
The internal impact that this shortage will have that the organizations’ leaders need to consider is the financial cost. High costs has been attributed to the loss of revenue in health care organizations because of the use of temporary nurses, increasing nurse salaries, investment in other recruiting and retention strategies such as nurse education. Efforts that improve nurse retention might result in future cost savings through reduced nurse turnover (May et al., 2006, p. 320).
The shortage of nurses will have an internal impact on access and quality. Health care organizations reported an increase in nurse workloads as a result of nurse shortages, which can affect care if nurses are overburdened. Hospitals that rely on temporary and inexperienced nurses are concerned about the impact on patient care. One hospital executive stated “we have bodies, but we don’t have seasoned bodies” (May et al., 2006, p. 321).
Discuss the impact of both the identified internal and external forces on the organization’s ability to develop a competitive strategy.
CONDUCTING AN ENVIRONMENTAL ANALYSIS 9
One key question that the organization’s leaders will have to address when discussing internal and external forces, competition, and customer satisfaction to remain competitive is “what impact will these factors have on our health care quality and customer satisfaction?”
One impact is that these factors will cause increased competition which forces the organization to use cost-minimization strategies to the detriment of the quality of health care provided. This is in turn lowers patient satisfaction levels. Another impact is that the organization can improve the quality of health care and patient satisfaction through investments in hard and soft technologies in order to cultivate and maintain a viable patient base and stay competitive. The last impact will be that the quality of health care delivery is improved and total costs may decrease without negatively affecting patient satisfaction and still remaining competitive (Rivers & Glover, 2008, p. 639).
Recommend one strategy that involves the organization’s managers in implementing and maintaining the momentum of the strategic plan.
One strategy that involves the organization’s managers in implementing and maintaining the momentum of their strategic plan is to have a plan that focuses on these four criteria:
Patient focused excellence- The focus is on the drivers of customer engagement, patient health status, new markets, and market share. These are key factors in competitiveness and organizational sustainability.
Operational performance improvement and innovation- This plan contributes to the short and longer-term productivity growth and cost containment. It builds operational
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capability, including speed, responsiveness, and flexibility. This focus represents an investment in strengthening organizational fitness.
Organizational and personal learning- These are necessary strategic considerations in today’s fast-paced world. Learning and improvements need to be embedded in work processes. The role of strategic planning is to align work systems and learning initiatives with the organization’s strategic direction, ensuring that improvement and learning prepare and reinforce organizational priorities.
Use comparative data- The organization needs to know where it stands in comparison to competitors and to best prices. This leads to a better understanding of the processes and performances of the organization (National Institute of Standards and Technology, 2013, p. 4).
References
Dister, L. (n.d.). The new healthcare leadership culture: key senior leadership traits for the
success of the 21st century hospital. Retrieved July 23, 2014, from http://www.healthleaders media.com/content/137379.pdf
Gottlieb, S. (2012). Healthcare consolidation and competition after ppaca. Retrieved July 23,
2014, from http:/www.aei.org/speech/health/healthcare-reform/ppaca/health-care-consoli-
dation-and-competition-after-ppaca/
May, J.H., Bazzoli, G.J., & Gerland, A.M. (2006). Hospitals’ responses to nurse staffing
shortages. Health Affairs, 25(4), 316-323.
National Institute of Standards and Technology. (2013). Baldrige health care criteria for
performance excellence: category and item commentary. Retrieved July 23, 2014, from
http://www.nist.gov/baldrige/publications/upload/category_and_item_commentary_hc.pdfPorter, M.E., & Teisberg, E.O. (2004). Redefining competition in healthcare. Retrieved July
23, 2014, from http://www.hbr.org/web/extras/insight-center/health-care/redefining- competition-in-health-care
Rivers, P.A., & Glover, S.H. (2008). Health care competition, strategic mission, and patient
satisfaction: research model and propositions. Journal of Health Organization and
Management, 22(6), 627-641.
Sarath, P. (2010). How does the ppaca affect the healthcare sector? Retrieved July 23, 2014,
from http://www.bizmology.hoovers.com/2010/07/06/how-does-the-ppaca-affect-the- healthcare-sector/
Sharamitaro, A. (2011). Healthcare reform: impact on hospitals. Health Capital Topics, 4(1),
1-3.
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