Hospital and medical staff strategic planning: developing an integrated approach

Physician Executive, August, 1994 by Alan M. Zuckerman

Strategic planning in health care organizations, especially in hospitals and hospital-centered health care organizations, has been evolving over the past several decades. Spurred by changes in reimbursement, strategic planning shifted from a facilities orientation in the 1970s to a market orientation in the 1980s. While the shape of strategic planning in the 1990s is not clear, it is evident that market concerns remain strong and deteriorating hospital financial performance requires attention to purely economic concerns. This dual focus is consistent with trends in strategic planning in other industries.

From a market perspective, health care organizations are developing more comprehensive strategic plans. The principal concern of the mid-1980s was inpatient market share; now, there is consideration of ambulatory positioning, product line planning, and a more complete and sophisticated understanding of key market segments--the community and various consumer types, physicians, employers, and managed care entities. This broader view enables strategic planning to become a more powerful tool for health care organizations.

Current Situation

In nearly all not-for-profit hospitals, physicians operate largely outside the formal structure, except for those who are hospital-based. Clearly, the traditional hospital/medical staff organization has only narrowly defined purposes and modest influence over physicians and their practices. The hospital's influence over most physicians, at least as it relates to the majority of "business" concerns, is mostly indirect.

The typical strategic planning process seeks to involve, inform, and influence the physician community in a limited number of ways. Early in the process, physician leaders may be interviewed; a survey of the entire medical staff also may be performed. Usually, some physicians will be asked to serve on the strategic planning committee that will oversee the process. At some point, there may be a retreat involving physician leadership, typically the members of the medical staff executive committee, and possibly additional physician participants. Finally, more physician contact/involvement may be built into the strategic planning process in the form of additional retreats, focus groups, a second round of interviews, and similar activities. Despite the growth of physician involvement in hospital strategic planning, these adaptations alone are inadequate to deal with the complex organizational strategy now required by hospitals and physicians.

Through strategic planning, new mechanisms may be developed to bring the medical staff and hospital together and to facilitate consistent hospital and physician practice development. Some of the common strategies employed today--physician marketing programs, hospital-physician organizations, and medical management service organizations--may be appropriate to a particular health care delivery organization's circumstances, but none deal directly with the issue of joint strategic planning, an important precursor to implementation of these strategies.

The Integrated Planning Approach

There are several underlying premises of the integrated planning approach. * Acknowledgment that a thorough understanding of current physician practice dynamics and future practice trends are critical strategic planning elements. * Desire to reverse the all-too-common situation of reacting to physician needs and proposals, and instead provide leadership and direction for development of physician practices and hospital-physician relationships. * Belief in the need to engage physicians constructively in formal planning for their own practices, for the medical staff as a whole, and for the hospital.

To accomplish these objectives, there must to be a significant increase in the breadth and depth of strategic planning analyses as they relate to the physicians. Even more important, hospitals must enhance physician involvement in strategic planning. An approach for achieving this objective is to create a medical staff planning subcommittee as part of the strategic planning committee. This subcommittee is the main forum for analyzing physician practice and physician-hospital joint planning issues that arise during the strategic planning process. It bears responsibility for a medical staff strategic plan as a component of the overall hospital strategic plan. The medical staff strategic plan includes the traditional subject of manpower development, supplemented by a holistic look at the medical staff as a competitive vehicle for the hospital in the future, with staff interdependencies, staff quality, and physician-hospital relations as key elements.

Membership of the medical staff planning subcommittee generally consists of one to three board members and one to three hospital management members, all of whom are also members of the strategic planning committee. In addition, all physicians who are members of the strategic planning committee should be included on the medical staff planning subcommittee. Other physician representatives should sit on the committee to provide as full representation of medical staff membership as possible. These representatives should be perceived by their colleagues as medical staff leaders or emerging leaders and good communicators.