Baptist Outpatient Services Division - Case Study Example

? Baptist Outpatient Services Division Baptist Outpatient Services Division Introduction Baptist Hospital established Baptist Outpatient Services (BOS) in 19888 with a view to provide outpatient diagnostic, as well as laboratory services and reduce overcrowding in Baptist Hospital’s emergency department. Since its inception, BOS has achieved immense growth and expansion, particularly through acquisitions, mergers and expansions of its service offerings. However, similar to other businesses, BOS was hit hard by the economic recession of 2008-2009 and has since faced substantial difficulties, especially with regard to its dwindling revenue margins (Bhushan & Raj, 2004). Presently, BOS faces the pressing dilemma of whether to continue with the high margin low market share approach or adopt a low margin high market share approach. This paper seeks to provide a viable response to BOS’s dilemma while also examining different elements that affect BOS both internally and externally. Consequently, the paper will encompass a SWOT and Porter’s five analyses of BOS’ internal and external environment. SWOT Analysis The conduct of BOS’ SWOT analysis will assist the organization develop and effect strategic decision making through the analysis of the organization’s strengths, weaknesses, opportunities and threats (Armstrong, 1996). Strengths Perhaps BOS’ greatest strength lies in its vast resources ranging from medical professionals to the organization’s impressive bed capacity. Since BOS is a flagship facility under Baptist Hospital, BOS enjoys immense advantages such as the availability of capital to hire medical staff, purchase new equipment and expand its operations to other regions of its competitive market. In addition, BOS’ association with Baptist Hospital’s strong and reputable brand; the pineapple ensures BOS of immense recognition within South Florida. This makes BOS a preferential health care provider in the region. BOS’ renowned corporate social responsibility as an organization that serves the less fortunate members of the community present BOS will massive advantages. This is because customers (patients) always want to be associated with organizations perceived to care for the community (Parnell, 2008). Furthermore, BOS has sufficient resources to train and employ people to offer information to local physicians who refer patients to BOS. This allows local physicians to become acquitted with the superior quality of services offered by BOS. BOS robust organizational objective is a significant strength since it allows the organization to provide not only superior quality services to those in need but also to develop high quality alternative services to augment BOS’ current offerings. Weaknesses BOS’ inability to establish proper plans before entering into new markets is one of the organization’s principal weaknesses. Notably, BOS did not effectively anticipate the risks involved in entering markets such as Broward County. While most of BOS’ businesses continue to thrive, the utilization and market share of its sleep facility is rather minimal. Notably, Baptist Hospital and BOS have poor systems for the recognition of pre-authorized services offered by insurance companies. This places the organization in a precarious position as it incurs undue costs from its non-authorized clients as insurers deny BOS payment for missing authorizations. At present, BOS does not have correct systems in place to adapt to high expectations for efficient operation, which BOS needs to thrive in the current reform era (Bhushan & Raj, 2004). Notably, BOS is relatively inefficient with regard to the recognition of principal risks such as establishing medical plazas in places distant form any BHSF hospital. BOS’ risk assessment inefficiency is perhaps the main reason behind the organization’s current predicament. Opportunities Notably, BOS’ direct marketing strategy creates immense opportunities for the education of Miami Dade’ population regarding the services offered by BOS. Furthermore, the fact that most physicians in the Miami-Dade County are familiar with the operations of Baptist Hospital and its affiliates such as BOS provides profound opportunities for BOS since it does not have to train its physicians afresh. BOS’ clinics are also located strategically within its market area thereby hassle-free medical services to the community. Although BOS is an affiliate of Baptist Hospital, BOS operates as an independent organization with its own Board of Directors thereby deterring the longevity of the bureaucratic process in decision making. This means that BOS can make fast and timely decisions suitable to its needs (Parnell, 2008). Furthermore, BOS’ expansion through the establishment of new centers, for instance, the Breast Center, provides BOS with the opportunity to expand its service offerings thereby not only increasing its market share but its profitability, as well. BOS’ joint-ventures provide opportunities for further positioning within the competitive market, for instance, through a joint-venture; BOS manages two with the Medical Arts Surgery Centers. These joint ventures increase BOS’ profitability. BOS’ reputation as an efficient and timely service provider creates immense opportunities for growth in revenues and market share. Insufficient primary care in the market provides opportunities for the expansion of BOS’ urgent care business. The expansion of BOS’ services portfolio is also a prime opportunity for growth. Lastly, labor expenses offer immense opportunities for the reduction of BOS’ expenses thereby enhancing revenues. Vendor alternatives, as well as the standardization of equipment also offer a considerable opportunity for the reduction of costs related to service and supply. Threats Competition is the greatest threat experienced by BOS. This competition emanates from physician ventures, other regional and national well-established hospitals. In addition, BOS experiences the threat of losing its physicians to other hospitals that offer high call pay and per-case payment. BOS also encounters the threat of health care reforms, which will exert immense pressure on BOS’ diagnostic services business. Industry Competition Analysis using Porter’s Five Forces The examination of Porter’s five forces offers an investigative perspective of the industry, as well as the realization of BOS’ strategic development and growth. The analysis of BOS’ Porter’s five forces shows that while the organization continues to achieve growth, BOS needs to reorganize its organizational strategies, particularly with regard to dealing with the industrial, competitive environment (Bhushan & Raj, 2004). Supplier Power The medical service provision industry has many suppliers, for instance, providers of insurance services, which play a significant role in the effective operation of the medical industry. On the other hand, since BOS is inherently a service provider, its suppliers also include physicians and other professionals who deliver medical services to the organization’s customers. The 2008 global economic recession adversely affected employment rates thereby reducing the number of medical practitioners available for BOS. Notably, the medical industry anticipates a shortage of at least 40,000 primary care physicians by the year 2020. During this period, demand for medical services will spike dramatically. Since there is a low number of suppliers, i.e. with regard to insurance providers and medical practitioners, supplier power is rather high, which poses a serious risk to BOS since it is under threat of supplier power that results in high supplier bargaining power. Threat of New Entrants On the other hand, BOS suffers the threat of new organizations entering the medial industry in the market in which BOS operates. In order to guarantee its survival within the extremely competitive industry, BOS must ensure that its strategies deter the emergence and encroachment of new entrants in BOS’ competitive market. This will deter new entrants from acquiring part of BOS’ market share, which is already relatively low. Through this strategy, BOS will not only retain its current market share but also have the opportunity to enhance its market ownership percentile (Armstrong, 1996). Through its corporate strategy, BOS seeks to enhance its competitive advantage by reducing the amount and intensity of competition. This further exemplifies BOS’ strategic techniques that, when employed in an effective manner, will ultimately reduce the threat of new entrants. From this realization, it is quite clear that the threat of new entrants in BOS’ competitive market is rather low. However, further reductions can occur if the market appreciates BOS’ overall brand and the superiority of its medical services. Buyer Power Since the industry is extremely competitive, market purchasing power is relatively high although there are a number of cases of less fortunate members of the community who seek free medical services from BOS. Nonetheless, BOS’s main strategy should focus on the establishment of practical pricing strategies to cater for the needs of both financial capable and incapable individuals within the community. This will not only increase customer or patient satisfaction but also position BOS strategically in the minds of customers within the competitive market. Threat of Substitutes Despite the notable existence of a vast number of competitors in the health care industry, the threat of substitutes is relatively low since there are no recognizable substitutes for medical services provided by BOS. Although the medical environment has, in the recent past experienced the emergence of alternative treatments such as herbal treatment regiments, conventional treatments primarily encompass manufactured drugs. People in Florida and the entire country essentially uphold conventionalism with regard to health services. This means that hospitals such as BOS are unlikely to face serious competition from substitutes (Bhushan & Raj, 2004). Competition The medical industry environment in which BOS operates encompasses immense competition from growing numbers of private physician practices, large regional and national hospitals and other not-for-profit medical service providers. However, BOS deals with the growing pressure of competition by continually enhancing its service offerings, for instance, through the establishment of new services such as medical services aimed at breast care. The quality of services offered at BOS also allows the organization to remain competitive in an environment that consists of leading national brands such as Mayo Clinic and other nationally acclaimed hospitals. BOS’ competitive environment lies in the Miami-Dade and Monroe Counties although the organization appears to be venturing into other regions outside its conventional market. Despite the immense competition, BOS has been able to attain much acclaim such as 100 best companies for working mothers in 1989. 1991-96, 1999-2002 and 2004-2010. Why BOS management did not Plan for Changes In the modern and ever changing business environment, plans should be living documents that change according to shifts in the market environment. In order to plan effectively, organizational managers must continually develop viable plans and adapt them according to changes in the business landscape. BOS management was caught off guard with the ensuring changes in the competitive environment. One of the most notable reasons why BOS management failed to plan for the noted changes that occurred in the environment is the perceived success without any real form of planning. Since its establishment in 1988, BOS has continually attained immense successfulness in terms of growth, expansion, acquisitions and high revenue margins. However, such success without robust planning systems is difficult to repeat since the responsibilities of company management continually increase. This means that BOS’ management will experience difficulty in repeating the success of yesteryears as their responsibilities in the organizations continue to increase. Planning is essentially a vital function of both middle and senior level management as it executes organizational objectives through employees. In addition, BOS management failed to plan for changes in the organization’s environment because management focused solely on results. It appears that BOS management concentrated on merely performing rather than performing efficiently. For instance, management focused on establishing new businesses and new medical centers rather than designing plans to address requisites for success in the existing centers, as well as the newly established ones. Furthermore, BOS management assumed that crisis management is ultimately inevitable. This perspective holds that managers will inevitably encounter crisis, which demand management’s attention. However, these managers fail to dig deep to uncover the causes of such crises thereby often experience the same organization problem. Lastly, BOS management did not have an effective system for planning to define what should be done and how the organization should achieve the requirement. Senior managers have the distinct responsibility of developing strategic plans applicable to the entire organization. Middle level managers, on the other hand, develop operational plans aimed at the implementation of organizational, strategic plans. BOS management failed to plan for industry-wide changes because they did not have planning tools such as SWOT analysis, resource analysis and environmental scanning. Most managers, for instance, Patricia Rosello receive promotions on the basis of their technical ability without any real management training. This means that such managers lack effective planning skills relevant to deal with changes in organization’s environment. Recommendations of Strategic Alternatives In order to deal with current and future situations in its market environment, BOS should map the strengths and weaknesses of its services, particularly in terms of revenue generation and profitability. Essentially, BOS should manage its cash flow to ensure it maintains the most profitable services in terms of cash generation and usage i.e. regarding its relative market share and rate of market growth. The organizations can make use of derivatives to establish a robust service portfolio analysis. This means that BOS should establish and implement services for information system. BOS can make use of the BCG Matrix when measuring the relative market share, as well as market growth rate of BOG’s services and the entire organization. Under the BCG Matrix, relative market share indicates an organization’s cash generation capacity. When relative market share is high, BOG will generate more cash than it does presently. In addition, BOS should strive to achieve high economies of scale, which enhance relative market share. Since the measure of BOS’ brand’s share is relative to its largest competitor, BOS should incorporate the SWOT and Porter’s five forces analyses in its strategic planning. Therefore, BOS should ensure that the ratio of relative market share between itself and its largest competitor is 1:1 meaning that BOS is at par with its largest competitor. Furthermore, it is imperative that BOS conducts a robust portfolio analysis exercise in which the organization selects the services to include in its portfolio and which market opportunities to continue investment. The GE Matrix is a viable tool, which BOS should use to market its brand and manage its service portfolio. The GE Matrix, also referred to as the Directional Policy Maxtrix requires BOS to map its services, products, potential services and brand as a piechart in relation to the elements’ industry attractiveness, as well as business strength space. The GE Matrix suggests that BOS should only invest in opportunities, which appear worthwhile. This means that BOS should invest in attractive segments in which BOS has some form of competitive advantage, for instance, in urgent care services. The organization should, therefore, make strategic planning, as well as decision making a priority. How BOS leaders can address the organization’s dilemma BOS leaders can address the firm’s dilemma by concentrating on the development of a robust service portfolio that exemplifies the strength of BOS’ brand. The leaders of BOS should establish a system through which the organization can achieve immense growth in market share. This establishment lies on the premise that creating a strong market share will ultimately result in immense profitability and market rate growth. With regard to its competitive position, BOS should enhance the quality of its services thereby enhancing the attractiveness of BOS brand within the minds of its consumers. Furthermore, BOS should conduct a portfolio management exercise in which the leaders establish cost reduction and efficiency strategies to further enhance brand attractiveness. Overall, in order to deal with the organization’s current dilemma, BOS leaders should undertake a number of strategies. Firstly, the leaders should identify BOS services, solutions and brand i.e. BOS strategic business units. Secondly, the leaders should find viable solutions to the question “what makes the market immensely attractive?” Thirdly, the leaders should determine the attributes that position BOS’ business on the GE matrix. Fourthly, BOS leaders should resolve the most suitable ways of measuring organizational attractiveness and the firm’s position in the highly competitive industry. Lastly, BOS should rank all the organization’s strategic business units as low, medium or high in terms of business strength relative to market attractiveness. Essentially, the leaders of BOS must take into account the organization’s services and brand, as well as the attractiveness of BOS brand, in the market in order to establish and implement strategies that will effectively enhance BOS market share and rate of market growth. BOS leaders should launch a flexible marketing plan that aims at the realization of a strong market presence for BOS brand and services. Risk Posed by Expansion into Broward County Although BOS expansion into Broward County could prove quite profitable, it is apparent that the organization will suffer many risks posed by entering new markets. Firstly, BOS has no operating experience in Broward County thereby posing a risk because the new market has different demographic statistics, as well as customer preferences. It will take a long time for BOS to appreciate the intricacies of Broward County’s market and establish robust systems to take advantage of the new market. Customers in different markets from Miami-Dade, which BOS is accustomed to, have different spending abilities that will ultimately reduce BOS revenue earning capacity and curtail the organization’s ability to attain brand attractiveness. In addition, customers in the new market may be unfamiliar with BOS’ brand. This means that BOS will need to create brand awareness in Broward County through higher investments in promotional activities than the organization originally intended. Another notable risk is the fact that it is quite difficult for new organizations in a certain market to hire, sustain and motivate qualified persons with the ability to project the organization’s vision, culture and passion. Establishing a business in Broward County will mean that BOS will have lower average revenues than hospitals presently existing in Broward County. Furthermore, BOS may find it rather difficult to find reliable suppliers and distributors of medical equipment and other substances needed to run the hospital effectively. This difficulty could, however, occur initially or over time. In order to deal with the aforementioned risks in an effective manner, BOS should initiate a robust promotional strategy aimed at creating awareness of BOS and its rich array of service offerings in Broward County. Furthermore, in order to prepare itself for the immense changes associated with entering the new market, BOS should establish a comprehensive plan that takes into account pertinent success factors such as access to customers, suppliers and employee bases. Shifting to Low Margin Services with High Market Share Since BOS has also experienced the repercussions of operating under a high margin and low market share strategy, it is paramount that BOS shifts to services that offer low margins with high market share. In essence, BOS should choose high relative market share rather than simply profitability because market share encompasses other competitive elements other than just cash flow. Market share shows the position in which BOS’ brand is located relative to its main competitors while also showing where BOS will likely go in the long-term (Armstrong, 1996). When analyzed effectively, BOS brand’s can be viable indicator of the marketing activities that can prove effective to the organization. In addition, since all organizations strive for rapid growth in rapidly growing market, BOS should endeavor to achieve high market share, which ultimately requires massive investments. This is because growth in market share emanates primarily from high rates of investment in services that enhance market share rather than revenue margins. Such high investments result in high market share, which ultimately turn into sound investments with regard to futuristic profitability and cash flows. Therefore, a high growth rate accompanies high investment demands. BOS should ultimately choose high market share over high revenue margins because high, and growing market shares not only indicate the brand’s strength but its future potential to attract competitors, as well. This information is vital in the analysis of organizational and brand growth. Effects of expansions, acquisitions and joint ventures on BOS In its early years before BOS began to undertake intense acquisitions, expansions and joint ventures, BOS was quite a small sized medical service provider. However, through numerous mergers, acquisitions and joint ventures, BOS was able to establish itself as one of the largest and reputed affiliates of BHSF, in South Florida. These expansions, joint ventures and acquisitions, have also allowed BOS to enhance its service offerings thereby expanding its product portfolio (Parnell, 2008). For instance, after acquiring a majority stake in Galloway Endoscopy Center, BOS was able to provide endoscopy services, which were previously absent from its product portfolio. These expansions have continually allowed BOS to add to its original, urgent care services and encompass other pertinent services such as ambulatory services. In addition, such acquisitions, joint ventures and expansions have extremely increased BOS’ employee capacities. For instance, Galloway Endoscopy Center’s staff also joined the growing number of employees offering services to BOS customers. With regard to revenues and profitability, BOS expansions, joint ventures and acquisitions also continue to enhance the organization’s profitability and cash flow. Over the years, BOS’ acquisitions, expansions and joint ventures have also enabled the organization to realize high standards of patient care while at the same time operating on high operating margins (Armstrong, 1996). However, such expansions, joint ventures and acquisitions have also resulted in increased costs, particularly with regard to costs of maintaining additional centers and plazas, remunerating employees and acquiring medical supplies to ensure effective operations. Nonetheless, the organization was, until recently, able to maintain high revenues and low costs. Impact of Patricia Rosello on BOS Patricia Rosello has had a profound impact on BOS, particularly due to her impressive ability to restructure BOS into the current multifaceted organization in terms of its service offerings. Rosello’s leadership allowed BOS to explore possibilities such as expanding BOS’ core business outside its traditional urgent care services to encompass other services such as ambulatory services, endoscopy services and diagnostic services. Rosello also initiated BOS expansion outside BHSF’s core service areas such as Miami Lakes, Miami-Dade, Broward County and other regions. This means that Rosello ultimately ensured the expansion of BOS into other services and locations thereby enhancing the organization’s cash flow and market share. In addition, Rosello also managed to change not only the mindset of BHSF and BOS, as well as the customers of the aforementioned organizations in the market areas. Rosello also managed to convince BOS Board of Directors, as well as BHSF’s senior management to allow BOS to step out of the firm’s comfort zone in terms of its service offerings and the location of its centers and plazas (Parnell, 2008). Rosello also noted the risks involved in BOS further expansion north of its core market. This allowed the organization to institute viable solutions to deal with the noted diminishing recognition of BOS’ brand and name. In essence, through Rosello’s input, BOS has over the last years been able to achieve outstanding acclaim and recognition for its superior services and quality patient care. This means that Rosello achieved employee motivation resulting in high levels of productivity and overall effectiveness. Rosello’s effective management strategies allowed BOS to shift its focus from high margin and low market share to high market share and low revenue margin. Critical Success Factors for BOS BOS must establish a number of strategies in order to achieve long term success. These strategies define BOS’ critical success factors, which include establishing effective strategies to deal with the dramatic transformations having an effect on the health care industry. In order to achieve long term success, BOS should implement robust strategies that take into consideration dramatic changes in health care (Parnell, 2008). For instance, BOS should reduce the costs of its services to keep up with shifting demands from insurance companies, which continue to seek organizations that offer cheaper services than BOS. Another critical success factor for BOS lies in the capacity of BOS to make the most of the accessible opportunities at its disposal. BOS’s success centers on its management’s ability to institute strategies that take advantage of opportunities for organizational growth. For instance, the organization should shift its focus from high margins and low market share to high market share and low revenue margins. BOS long term success centers on the organization’s capacity to enhance its brand attractiveness and market share. Currently, BOS’s business strategy focuses on enhancing organizational revenue margins rather than fortifying the firm’s market share. Therefore, in order to achieve success, BOS should develop and implement strategies that exemplify the hospital’s brand’s attractiveness thereby enhancing overall market share proportions (Bhushan & Raj, 2004). Another significant success factor is BOS’ strategic planning, which remain rather pathetic. Notably, BOS is currently unable to anticipate risks effectively and deal with such situations before they culminate in adverse occurrences. In order to achieve long term success, BOS must establish effective risk management strategies and ensure the anticipation and mitigation of potential organizational risks. Effects of Demographics and Payor Mix Running successful businesses requires the appreciation of the organizations’ customers with regard to their demographics, as well as payment abilities. In the current medical environment marked by increasing competition, shifting practice patterns, new opportunities and low reimbursement from insurers, it is pertinent that medical providers perform the payor mix. The payor mix categorizes customers (patients) according to their insurance plans and their financial class. These classes categorize patients according to their insurance plans, which also means that categorization occurs on the basis of payment expectations. For instance, fee-for-service health care plans and contracted plans that have similar payment levels form one category. Therefore, BOS can use the payor mix to ascertain the percentage charges collectable from such a group. Such information allows the medical organization to budget its expenses effectively and to anticipate the amounts of collected revenues and cash flows. In addition, demographics and payor mix enable BOS to define the organization’s performance targets for all economic classes within the region’s demographics (Bhushan & Raj, 2004). The payor mix, therefore, allows BOS to manage its billing strategies and receivables, as well as managing insurance vendor billing. Through accurately anticipating expected collections, BOS will instantaneously notice problems inherent in the billing process. The demographics and payor mix further allows BOG to generate a summary of its accounts receivables in terms of payor class thereby identifying changing patterns in the receivables. Furthermore, the mix provides sufficient information regarding BOS’ customers thereby allowing for intensive, strategic planning and management. In essence, a report of BOS’ charges on a payor-class basis provides information regarding the organization’s customer base. Such information is crucial for organizational, strategic management, which includes the analysis of potential opportunities for the introduction of new services or addition of new practitioners. Recommendations for BOS Long term success In order to attain success on the long term, it is critical that BOS lowers its costs (Armstrong, 1996). Noted dramatic changes in the health care sector will extremely alter the playing fields for both outpatient service providers and hospitals. Therefore, in order to achieve long term success, BOS must adapt to extraordinary expectations with regard to its efficient operation. In order to further reduce costs, BOS should seek cheap vendor alternatives and standardize its equipment to reduce the need for constant repairs and replacement. BOS should also endeavor to reduce its overall expenses in order to enhance its revenue margins. However, despite the levels of revenues that the organization earns, it is pertinent that BOS focuses on strategies that enhance its market share rather than revenue margins. BOS management should concentrate its efforts on achieving the organization’s objectives, i.e. align the organization’s mission, vision and values with quality services offered to customers. However, the management of BOS must realize that regardless of the effectiveness of all the aforementioned critical success factors; the strategies will be inconsequential of the organization’s management does not establish formidable planning strategies. This means that, in order to achieve future success, BOS should establish and implement viable planning strategies to mitigate potential organizational risks and deter low earnings and low market share. The future success of BOS lies in its ability to deal with risks and manage adverse situations before they lead to disastrous results (Parnell, 2008). On the other hand, BOS must take advantage of available opportunities to enhance its market share and brand attractiveness in the minds of customers within the market. References Armstrong, M. (1996). Management processes and functions. London: CIPD. Bhushan, N., & Raj, K. (2004). Strategic decision making: Applying the Analytic hierarchy process (Decision Engineering). New York: Springer. Parnell, J. A. (2008). Strategic management: Theory and practice (3rd ed.). Ohio: Atomic Dog Publishing. Read More