American Association for Physician Leadership

Problem Solving

Strategic Planning for the Medical Group

Nick Hernandez, MBA, FACHE

August 8, 2018


Abstract:

Strategic planning can be a challenging process, particularly the first time it is undertaken in a medical practice. With patience and perseverance, as well as a strong team effort, the strategic plan can be the beginning of improved and predictable results for the business. At times when the practice gets off track, a strategic plan can help direct the recovery process. When strategic planning is treated as an ongoing process, it becomes a competitive advantage and assures improved day-to-day execution of your business practices.




Strategic planning, when treated as a work in progress rather than as a binder on a shelf, or a file in a computer, provides a medical practice with a real and lasting competitive advantage. A living strategic planning process will help direct the business to where you desire it to be. Strategic planning is your medical practice’s road map to your vision and to achieving a competitive advantage.

Strategic plans are expressions of a physician-owner’s dreams and visions of successful results.

Strategic planning is not the same as operational planning. The former is focused on broad and long-lasting issues that ensure the medical practice’s long-term effectiveness and survival, whereas the latter focuses on achieving objectives and carrying out short-term activities. Strategic planning functions as the “design,” just as a blueprint functions as the “how” to build something. Strategic plans are expressions of a physician-owner’s dreams and visions of successful results. These plans must not be rigid, because as they meet detours and obstacles they must be adjusted as the plan is implemented. The strategic plan, to be of long-term value, must be treated as an ongoing business process. It must evolve and change to reflect changing market and industry conditions. Although you cannot predict the future, the absence of strategic planning usually leads to operating nightmares. Conducting proper strategic planning can reduce those days you’d rather forget. Medical practices that plan strategies are unquestionably more successful than those that do not.

Why Strategic Planning is a Must for Practices

So a strategic plan is essentially a business plan, right? NO. A strategic plan itself consists mostly of words, whereas a business plan is made up of many figures and numbers. Strategic planning is a process that brings to life the mission and vision of the medical practice. As the practice grows and the healthcare environment becomes more complex, the need for strategic planning becomes greater. A strategic plan, well crafted and of value, considers the internal and external environment around the business and ultimately is communicated to all staff members. Everyone in the practice should understand the direction and mission of the organization. After all, the purpose of strategic planning is to set overall aims for your practice and to craft a plan to reach them. Furthermore, consensus also can enhance morale and motivation. This agreement, understanding, and alignment enable the organization to achieve improved practice performance in all aspects (e.g., clinical, business, financial).

Medical practices that consistently apply a disciplined approach to strategic planning are better prepared to evolve as the local market changes and as the healthcare industry undergoes reform. The discipline that develops from the process of strategic planning leads to improved communication among physicians and staff. It facilitates effective decision-making, enables better selection of tactical options, and leads to a higher probability of achieving the physician-owners’ goals and objectives.

Strategic planning can provide an overall strategic direction to the providers and managers of the practice. It gives a specific direction to financial, marketing, clinical development, and recruiting/retention strategies to achieve success. Use of a consultant can help in the process and in the development of a strategic plan. Be leery, however, of consultants who seem to think that strategic planning means planning for the whole organization and who produce vast schedules showing in meticulous detail what is going to happen to every tiny corner of the practice for years ahead. In some ways, strategic planning is a structured form of brainstorming. Because the consultant is an outsider, he or she can provide objectivity and serve as the “devil’s advocate,” as well as a sounding board. In the end, however, the plan must have the authorship and ownership of the physicians and managers who must execute and follow the strategic plan.

Prerequisites for Strategic Planning

Although there is no single formula for successful strategic planning, certain required steps optimize its value. The strategic planning process must mirror the cultural values and goals of the medical practice; the process is very different for solo and small group practices than it is for large medical groups or hospitals. Strategic planning takes the form of many different models and action steps. Attempting to “jump right in,” however, is ill-advised. Undertaking some basic preparation will help to ensure greater success for the strategic planning process.

This section discusses three prerequisites for strategic planning.

Agree on a strategic planning process.

A consultant should provide the medical group with an understanding of what strategic planning is and how it is done, as well as discuss its potential value to the practice, in terms of providing a common vision and focus, with agreed-upon goals and strategies. Consider the costs of doing strategic planning, in terms of staff time and other resources—and what might need to be given up in order to develop a plan. If the practice is in crisis or is financially or organizationally unstable, it may be difficult or unwise to enter into a strategic planning process until the immediate problems and needs have been successfully addressed. Consider whether the practice is ready for a long-range plan or whether it may be best to focus on a short-term plan, perhaps doing a one-year plan to start and then undertaking longer-term planning at the end of that year. If strategic planning seems appropriate, consider what procedures or steps can be used to establish and implement a strategic plan. Next, agree on a process and establish responsibilities for the various steps in the process.

Your practice also may want to include an outside facilitator or consultant who will assist with the process and with preparation of the strategic planning document—or this may be done by staff. Be sure to allocate sufficient staff time to the strategic planning process. Depending on the size of the practice, it may be necessary to reduce the regular workloads or responsibilities of staff and physicians who are expected to play a key role in developing the strategic plan.

Carry out a SWOT analysis.

A SWOT analysis (evaluation of strengths, weaknesses, opportunities, and threats) will provide an understanding of how the practice relates to its patients, community, and competitors. Look at changing demographics, community values, economic trends, and the implications of new or changing laws and regulations affecting the practice—and consider their impact on your practice and the patient population it serves. Consider opportunities and challenges related to practice resources and reimbursement. Also, look at actual and potential collaborators and competitors. Depending on the size of your catchment area, this process may be as extensive as a community needs assessment with interviews, focus groups, and e-mail surveys that is conducted by a consultant, or it may be limited to a small number of informal discussions with referring physicians and key community leaders.

The internal component of the analysis may include a number of components or approaches. You may want to assess current practice performance in terms of financial and staff resources, services offered, and outcomes. Try to understand how patients or stakeholders in the broader community view the practice. Once you have this information, be sure to analyze the reasons for perceived weaknesses further. It may be valuable to identify critical success factors for the practice. This step is not always included in strategic planning, but can be very useful. Try to understand which factors are necessary to the future and continued success of the organization. These factors may include relationships with referring physicians, practice strategies, governance structure, and staff skills and personalities. Depending on the size of the practice, you might want to review or formalize organizational values and operating principles. Some practices have written values and principles that guide their decision-making and their ongoing activities. These can be very helpful in “defining” the practice.

A consultant can be hired to assist with the SWOT analysis, contacting stakeholders to provide an external view and staff to obtain an internal assessment. The result of the analysis should essentially be an investigation of practice strengths and weaknesses and external opportunities and threats. The report may be oral or written, and requires careful review and discussion by those involved in the strategic planning process—everyone should be familiar with the findings before strategic planning decisions are made.

Identify key issues, questions, and choices to be addressed as part of the strategic planning effort.

It may be necessary to specify “strategic issues” or questions that the practice should address, and set priorities in terms of time or importance. If there is little disagreement about issues and priorities, it may be possible to move immediately to the practice vision and then to goals. If there is no agreement on general directions and practice goals, it may be important to explore issue priorities and identify critical choices. This can be done in any of several ways. For example, you may want to ask those involved to identify strategic issues from the SWOT analysis, with individuals identifying a specified number of such issues and indicating why each is strategic, including the benefits of addressing it and the negative consequences of not addressing it. The consultant working with the group might work to identify strategic issues emerging from the SWOT analysis, and then prioritize them in terms of importance, timing, and feasibility. The result should be, first, a set of strategic issues that will be addressed as part of the strategic planning process, and secondly, a set that will not be addressed or will receive only limited attention during the process, but will be considered by physicians or appropriate staff. Whichever method is used, the discussion should generate some level of agreement about issues or choices to be considered and decisions to be made as part of the strategic planning process.

Four Common Strategic Planning Mistakes

The idea of strategy is to focus a physician practice on long-term goals, which usually involves mitigating risk from threats, and leveraging opportunities—as opposed to tactics, which focus on navigating near-term obstacles in order to remain operationally viable. Strategy seeks to create a future context for the physician practice, and the strategic plan acts as a map of activities and investments necessary to reach the future state. Strategic planning is an essential business activity. Several common mistakes must be understood beforehand, however, so that practice leaders can guard against them. Pointing out these mistakes is not a criticism of the process but, rather, an acknowledgement of improper implementation. Medical practice leaders must recognize both the benefits and the potential pitfalls of strategic planning, because it is their responsibility to ensure that strategic planning is conducted properly to achieve the desired goals. Here are four of the most-common planning mistakes we find:

  1. Attempting to forecast and dictate events too far into the future: In part, this may result from the natural desire to believe we can control the future. It is a natural tendency to plan based on the assumption that the future will merely be a linear continuation of present conditions, and we often underestimate the scope of changes in direction that may occur. Because we cannot anticipate the unexpected, we tend to believe it will not occur. In fact, most strategic plans are overcome by events much sooner than anticipated by practice leaders.

  2. Trying to plan in too much detail: This is a not criticism of detailed strategic planning but of planning in more detail than the conditions warrant. This pitfall often stems from the natural desire to leave as little as possible to chance. In general, the less certain the situation, the less detail with which we can plan. The natural response to the anxiety of uncertainty, however, is to plan in greater detail, to try to cover every possibility. Such an effort to plan in greater detail under conditions of uncertainty can generate even more detail. The result can be an extremely detailed strategic plan that not only does not survive the friction of the situation and but also constricts effective action.

  3. Tendency to use planning as a scripting process that tries to prescribe actions with precision: When practice leaders fail to recognize the limits of foresight and control, the strategic plan can become a coercive and overly regulatory mechanism that restricts initiative and flexibility. The focus for staff members becomes meeting the requirements of the strategic plan rather than deciding and acting effectively.

  4. Tendency for rigid planning methods to lead to inflexible thinking: Although strategic planning provides a disciplined framework for approaching problems, the danger is in taking that discipline to the extreme. It is natural to develop planning routines to streamline the strategic planning effort. In situations where planning activities must be performed repeatedly with little variation, it helps to have a well-rehearsed procedure already in place. Two dangers arise, however. The first is in trying to reduce those aspects of strategic planning that require intuition and creativity to simple processes and procedures. Not only can these skills not be captured in procedures, but attempts to do so will necessarily restrict intuition and creativity. The second danger is that even where procedures are appropriate, they naturally tend to become rigid over time. This directly undermines the objective of strategic planning, which is to enable the organization to become more adaptable. This tendency toward rigidity is one of the gravest negative characteristics of strategic planning and of strategic plans.

Strategic planning is an essential part of practice management, helping practice leaders decide and act more effectively. Strategic planning is one of the principal tools used to exercise operational control. Remember, though, that strategic planning involves elements of both art and science, combining analysis and calculation with intuition, inspiration, and creativity. To plan well is to demonstrate imagination, not merely apply mechanical procedures. Done well, strategic planning is an extremely valuable activity that greatly improves practice performance and is an effective use of time. Done poorly, it can be worse than irrelevant and a waste of valuable time. The fundamental challenge of strategic planning is to reconcile the tension between the desire for preparation and the need for flexibility in recognition of the uncertainty of the healthcare industry.


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