The New Pace of
Strategic Planning
With pressures coming from all sides, planning has
become a dynamic, rolling process
W
hen Virginia hospital executive Kay Harrison was
studying health care administration in the early
1990s, she recalls learning to create a strategic
plan with a five- to eight-year outlook. Things
have changed since then.
"After that a three-year plan became the standard," says Har-
rison, vice president of business development for 270-bed Rock-
ingham Memorial Hospital in Harrisonburg. "Now we're creating
a rolling plan and keeping it fresh. We were updating it once a
year, but now it's almost a constant piece of our planning."
As the pace of change in the health care industry accelerates,
nobody can wait five years—or even three years or one year—
to decide how to respond to the next big challenge. That's because
the big economic events are coming fast andftirious,and increas-
ingly unpredictably. Who could have guessed that bond markets
would essentially shut down as the economic meltdown hit, or
that a new president would throw billions of dollars at health care
infonnation technology as part of economic recovery legislation?
For boards of directors, this means that many decades of habit
may be going out the window. The strategic plan is no longer a
dry document that gets dusted off every few years. Instead, strat-
egy is something that needs attention every quarter. In some orga-
nizations, it is being woven into the agenda for every board meeting,
a way of looking at everyday operations through the lens of where
the organization wants to be a few years down the line. "We don't
do strategic plans anymore, it's more like a strategic process," says
BY JAN GREENE
6 Trnstee September 2009
Kimberly McNally, immediate past president and member of the
board for Harborview Medical Center in Seattle.
The change is hitting trustees where they live, given their
responsibility for long-term strategy and ensuring that the hos-
pital's mission and values are carried out.
'*Things are moving much more quickly than we've ever expe-
rienced before, and now we have health care reform on the hori-
zon," says McNally. "If trustees don't provide some kind of
overarching guidance about what's important for their hospitals
or health systems, it makes it very difficult for executive teams
to be successful."
These quick, unpredictable changes in the economic envi-
ronment are requiring trustees to acquire a yogic ability to bal-
ance bold planning for the future with the flexibility to change
course when needed.
"Boards are being buffeted right now," says Larry Walker, a
Lake Oswego, Ore.-based consultant who advises hospital boards
on governance. "Everyone is hoping the economic situation will
turn around. It really is making strategic planning more diffi-
cult because of the uncertainty."
He adds: "I hear boards asking themselves, 'How can we plan
for the future and make capital expenditure decisions during a
time when the economic situation is severely hampering our
ability to respond to community needs?'"
Hospital administrations and boards are trained to plan ahead
for the predictable economic trends—the move toward outpa-
ILLIISTRATION BY T O D D I) A V I D S O N / I M A O E S . C O M
tient care, the boom in consumer demand for quality and trans- of carrying them out. Trustees produced some guiding princi-
parency, the need to digitize medical records. But the past year ples to help the executive leadership create goals for 2010.
has been filled with unpredictable economic and political events When the fiscal 2010 budget then showed a large financial
that have left hospitals scrambling to react. Among them: the loss because ofthe economic downturn., trustees had to respond
credit crisis and bond market slowdown, a federal stimulus pack- quickly. "We were glad to have those guiding principles," says
age with billions of dollars for hospitals in position to take advan- McNally. "There's constant recaiibration almost on a monthly
tage of it, a severe economic downturn that's left hospital beds basis not of those principles, but ofthe tactics and where we
empty, and a health care reform debate focused on cutting the control expenses."
cost of medical care. One specific result was that the board found it had to draw a
clear line between providing medical care to the underserved
Digging Deep Before Looking Ahead within King County and those from other parts ofthe region.
Hard economic times are forcing many hospitals to make diffi- "Our people are incredibly dedicated and in better times you
cult cutbacks, which should be guided by a clear understanding don't have to manage who comes for care," says McNally. But
of their missions. unprecedented state budget cutbacks, along with business lost
"Hospitals will increasingly need to rely on their mission, to the economic downturn, forced the hospital to focus limited
their values and their vision as the anchors for any strategic deci- resources on its core constituency. Reconfirming the mission
sions they make," says Walker. helped the board do that.
High-minded concepts such as values and visions may seem
irrelevant when a hospital is swimming in red ink and leaders need The Strategic Plan Evolves
to focus on immediate tough choices among line items that have Traditionally, the strategic plan was developed every few years
always seemed essential. by a few board members who met as the strategic planning com-
But it's in a time of crisis that bottom-line values are most mittee. And while it may still be useftil to have that group focused
relevant. Walker argues. Otherwise, how can boards and admin- on the issue, strategic planning shouldn't exclude the rest ofthe
istrations make the tough choices if board—everyone should be regular-
they don't know what their organiza- ly thinking about the big picture and
tions stand for? learning about the long-term eftects
"It causes every business to ask of what's going on today. "You don't
themselves 'What is it we are really want to leave out the board members
all about? What is our fundamental, 'Hospitals will increasingly need to who should be engaging in a robust
core purpose as an organization?"' he dialogue about where are we going
rely on their mission, their values and how do we get there," says Walk-
asks. "They really are more than
words on paper. If they are crafted the and their vision as the anchors ior er. "It has to be a balance between
right way and referred to often, they any strategic decision they make." those kinds of discussions and the
are literally the heart and soul of every hard decisions about what's going on
hospital in the country." today."
That's especially the case at pub- After a governance review sever-
lic hospitals, where a mission to care al months ago, St. Luke's Boise Med-
for underserved populations can be a ical Center's board added an external
real strain when budgets are being affairs committee to deal with the
slashed at every level of government. Harborview Medical Cen- increasing number of economic and political issues that are like-
ter in Seattle was facing a "pretty dismal picture" when its part- ly to impact the hospital. The panel tracks goverrunental changes
ner University of Washington Medical School carried out some that could affect reimbursement, such as disproportionate share
economic forecasting as part of its own strategic planning. ftinding and changes to the national bone marrow program.
Because of its close working relationship with the medical school, At Rockingham Memorial Hospital, the board recently adjust-
Harborview's board decided to carry out a parallel strategic planning ed its approach to strategic planning and now has a "rolling"
process. At the start, a consultant interviewed board members and strategic planning. It's built upon a foundation of analysis. The
discovered that not everyone was on the same page about the orga- board developed a list of strategic issues, and then developed
nization's obligations to various safety-net populations. about a dozen assumptions built on those—for instance, that
"That stopped us in our tracks," says board member McNal- consumers will continue to demand more service and transparen-
ly. "We realized we needed to be on board with our mission" cy. Trustees were then asked to rank from one to five how impor-
before moving further with planning. The board held a retreat tant each assumption is to the organization, and how good the
in April to build consensus on the mission-driven priorities. "That hospital is at that particular item. The results were placed on a
was really helpful because you can make an assumption that quadrant graph, so the items that are important and need work
everybody has that shared foundation, but unless you really test get focused on first. !
that periodically you're not planning from a solid place." "We take that list of assumptions and place it in the board
Once everyone was in agreement about the hospital's core notebooks for each board meeting," explains Harrison. "When-
values, the board could move on to look at the practical aspects ever we're discussing an issue we can say, 'Did what we just

8 Trnstee September 2009

learn impact our assumptions?'"
Another way to make strategy a part of regular board work
is to take a little time for a strategic check-in. Walker encour-
ages trustees to ask a strategic question every time they meet—
without going overboard and extending every discussion into a
theoretical think-fest. It's important while making day-to-day
decisions to consider what they mean to the long term, in part
because of the rapid pace of change in the economic environ-
ment that hospitals operate in. "You need to ask, 'What do we
know today that we didn't know the last time we were together
as a board?'" he says. "And does that new knowledge in any way
reshape our assumptions about the future of this organization or
change our strategies?"
He calls this "real-time strategic thinking " and it takes a kind
of flexibility that trustees may not be used to—thinking about
the future while talking about the present.
It's important to balance the two carefully, but it's challenging.
This notion of holding both polarities
means, "We have to be both strategic
with a longer-term perspective and
nimble in the short-term because there
are so many moving parts. It creates
some angst and some ambivalence
sometimes," says McNally. "Every-
one must work at a very different lev-
el because the stakes are so high."
Barbara Stoltzfus, board chair at
Rockingham Memorial, agrees that
the new balancing act is a challenge
for trustees. "We don't have the lux-
ury of time anymore to try to make a
decision," she says. "Sometimes we
have to make them tonight. We have
to look at it carefully and strategically, but quickly."
Her hospital is moving into a new building whose construc-
tion has dominated the board's attention for the past five years.
During that time construction costs rose and the economic down-
turn reduced income from elective surgeries. The board kept a
close eye on the project's finances over that entire period, ready
to adjust when necessary.
"This is the first time this hospital is carrying any sizeable
debt," Stoitzfus says. "Our construction budget is higher than
what we had anticipated but we have not cut out any major things
because of cost. We're just trying to be very cost efficient."
Board meetings are where the balance between dollars and
the mission come into play, she says. "There's a tension between
the financial people and those who want to balance that against
the importance of meeting the health care needs of our commu-
nity and providing quality service and being aware of our patients'
safety."
The board depends on hospital staff to provide the facts and
analysis, and then asks questions that focus on the bigger pic-
ture. "It's important to ask the kinds of questions that tell us how
to get where we want to go," Stoltzfus says. "We don't just take
all the recommendations as they come to us—we need to under-
stand why we make the decisions we do."
It is possible to go too far in focusing on the big picture, warns
10 Trnstee September 2009
Walker. "You can envision yourself right out of business if you're
not careful," he says. "You need a mix of visionary, focus-ori-
ented leaders and people who pay attention to the nuts and bolts."
Even if strategy becomes a regular part of board meetings,
that doesn't mean retreats have lost their value for long-term
planning. "Boards should always have time to step back, whether
it's a mini-retreat or strategic workshop," Walker says. "It's part
of their role, their fiduciary responsibility that hospital leader-
ship takes time to consider the challenges and issues regardless
of how pressing the issues of today are."
Boards, as the keepers of the hospital's values and vision,
need to be able to "think above the noise," says Walker, and
ensure that there is a process to continually analyze what the
future might hold. This includes scenario planning—imagining
how bigger events may affect the hospital. For instance, what if
Congress passes a public coverage plan, what kind of an impact
might that have on the payer mix if it pays at Medicare rates?
What if medical tourism continues
to grow and more people paying out
of pocket choose to go elsewhere?
Other good questions for boards
"You need a mix to ask center on the trend of efficien-
of visionary, cy and effectiveness in health care.
focus-oriented The AHA's Hospitals in Pursuit of
Excellence project can provide help.
leaders and people It is based on six pillars designed by
who pay attention the Institute of Medicine. These
to the nuts and the include: managing organizational
bolts." variation, removing ineficiencies.
eliminating defects, reducing process
variability, providing patient-centered
care and creating a culture that sup-
ports a high-reliability organization.
"The board could ask at every board meeting for a report on
one aspect of what the organization is doing to pursue one of
those aims," suggests Walker. |
The Health Care Industry is Resilient
Even as hospital boards struggle with uncertainty and difficult
choices. Walker is optimistic about the bigger picture. "Health
care is the most resilient field in the world," he argues. "Health
care leaders continue to find a way to make it, whether it's the
Balanced Budget Act or burdensome regulations, they always
seem to find a way to make it work."
Of course, that's in part because of the vital role hospitals
play in the community. "You can't just close up shop like other
businesses and say, 'We're done.'"
Even as the nation takes a long, hard look at the health care
system and considers changing it fundamentally, there are some
essential priorities that won't change for hospitals. Walker pre-
dicts. "The loyalty of medical staff, of employees and of the
community are three things that are vital and critical. These are
the things that hospitals and health systems should be striving
for all the time. And they will become even more critical as peo-
ple have more choices about where they go for care." T
JAN GREENE IS a writer based in Alameda, Calif.