Case Study: Last Chance HospitalLast Chance Hospital (LCH) is a 254-bed, community hospital located in a small, affluent suburb
just outside of San Diego, California. The hospital has historically been well-received by the
local community, which demographically has a higher concentration of older age groups than
most other local areas. The greater San Diego area is densely populated, and over 25 hospitals
operate in the larger geographic area. Historically, LCH had always been financially sound, and
had managed to remain independent as their local competitors joined larger systems. But that
was then, and this is now. About a year ago, Last Chance Hospital undertook a strategic planning
process to encompass the next five years. At the time, the hospital was doing okay financially,
but was starting to dip into their cash reserves more often than the Board of Trustees liked; LCH
was in need of an ideal strategy to bring them ahead of the market before things got out of hand.
As the strategic planner for LCH, Russ Newmarket reported indirectly to the CEO,
Marvelous Marvin, but his immediate boss was Courtney Graveyard—and she had a lot on her
plate. LCH did not have a chief nursing officer, and as COO, Graveyard was responsible for all
of the nursing departments as well as surgical services, facilities, and information technology. A
nurse by background, Graveyard spent the majority of her time trying to find different ways to
recruit much-needed nursing staff.
During the development of the strategic plan, Russ called together the usual group of senior
executives, Board members, and key physician leaders. He diligently developed the SWOT using
their input and applying their assumptions. During his market research, Russ became aware of
some patient-centric trends emerging across the country, but he was also aware that LCH had
always strategically catered more to physicians due to the notion that physicians were the ones
who ultimately referred patients to the hospital. Through the strategy development process, it
became clear that senior management was stuck on this physician-centric mindset. Russ,
ambitious and eager to make a name for himself, found and presented valid information that
concurred with management’s mindset. At the end of the planning process, Marvelous Marvin
felt confident that their physician-focused strategy would give them a market lead—the plan was
to attract more surgeons—and increase OR volumes. Graveyard was under intense pressure from
Marvelous Marvin to make sure the operating rooms were as efficient as possible to handle the
planned increase in volume, as OR efficiency would be a key recruitment issue for surgeons. The
LCH physician recruiter was under the gun as well. The remainder of the executive staff
breathed a collective sigh of relief that their areas were not part of the strategic initiative. Russ
suspected LCH needed more of a strategy than attracting new surgeons, but he convinced
himself that senior management knew best.
After the Board approved the strategic plan, Graveyard immediately met with her OR
Director and charged him with increasing the efficiency of the ORs. She then turned her focus
back to her first love, nursing. The physician recruiter hit the ground running, developing an
elaborate plan to increase surgeon recruitment. From all appearances, LCH was on a roll.
Over the next several months, the OR Director was able to reduce the OR’s operating
budget by 13%, a result that made Marvelous Marvin very happy. At the same time, Graveyard
made great strides in increasing LCH’s exposure to and status in the nursing community, and
was able to decrease the nursing vacancies by over 6%. In a time of nursing shortages, the Board
was impressed with Graveyard’s results. The physician recruiter was having only moderate
success at recruiting surgeons, however, and her targeted volume projections were noticeably
under budget. Marvelous Marvin approved her request to increase her staff, adding
approximately $250,000 to her budget line. Overall, patient volumes were steadily decreasing at
what was becoming an alarming rate, and thus the financial picture for LCH was in critical
condition. Marvelous Marvin couldn’t help but wonder aloud, “Why isn’t the LCH strategic plan
working?”
Discussion Questions
1. In Russ’s role as strategic planner for LCH, what should he have done differently that
would have positively affected the outcome of the strategic plan execution?
2. What should Marvelous Marvin have done differently as CEO in order to avoid the current
situation?
3. Who’s to blame for the bad outcomes of this strategic plan?
4. If you were one of the OR Director’s direct reports/managers, what should your
involvement in the organization’s strategy have been?
CHAPTER 5
STRATEGIC
PLANNING
Objectives (1 of 2)
• Articulate the importance of monitoring the
internal and external environments of an
organization;
• Critique strategic planning and sketch the
strategic planning process;
• Explain the importance of strategic planning as
a dynamic process;
Objectives (2 of 2)
• Analyze health care market powers and trends,
and their potential impact on health services;
• Conduct a SWOT analysis;
• Compare and contrast methods to monitor and
control strategy execution; and,
• Identify the role of the manager in the strategic
planning process.
The Health Care Environment
• Medical breakthroughs
• New technologies
• Big data’s influence and potential
• Increasing costs/new payment models
• Increasing longevity
Figure 5-1: Strategic Planning
Process
Strategic Planning Process
• SWOT analysis
• Strategy identification and selection
• Strategy tactical plans
• Rollout and implementation
• Monitoring and control
• Feedback
Situational Assessment
• Market assessment
– Health care workforce
– Consumers and payers
– Innovations in technology
– Regulatory environment
– Competitive rivalry
– Market volume forecast
Figure 5-2: Market Assessment
Model
Situational Assessment (1 of 2)
• Organizational assessment
– Organizational volume forecast
– Financial condition
– Strategic performance
– Core capabilities
Situational Assessment (2 of 2)
• Mission
• Vision
• Values
Strategy Identification and
Selection
• Scenario exploration
• Assumptions
• Financial targets
• Resource matching
• Outcomes
Strategy Tactical Plans
• Implementation steps
• Timeframes
• Results
Rollout and Implementation
• Board approval/ endorsement
• Operating plan
• Marketing plan
• Facilities plan
• Capital plan
Monitoring and Control
Dashboards
A Sampling of Research Sources
• Dartmouth Atlas of Healthcare
• Center for Studying Health Systems Change
• Sg2 Healthcare Intelligence
• American Hospital Association
• Henry J. Kaiser Foundation
• Society for Healthcare Strategy and Market
Development, to name but a few.
CHAPTER 6
HEALTH CARE
MARKETING
Objectives (1 of 2)
• Explain the critical link between strategic
management and health care marketing.
• Define marketing and the progression to an
organization focused on customer value.
• Explain the framework and major functions of
the marketing management process.
• Define marketing terms including market
segmentation, target marketing, marketing
mix, and positioning.
Objectives (2 of 2)
• Create marketing tactics such as using digital
channels related to the strategic goals of the
organization.
• Describe how health care managers can
integrate ethics and social responsibility into
marketing strategy.
Key Concepts
• Marketing as a critical management function
linked to the organization’s strategic plan
• Approaches managers use to create,
communicate, and deliver value
• Marketing plan, marketing mix and
promotional tactics
What is Marketing?
• The American Marketing Association (2017)
defines marketing as “the activity, set of
institutions, and processes for creating,
communicating, delivering, and exchanging
offerings that have value for customers,
clients, partners, and society at large.”
Source: http://www.marketingpower.com/AboutAMA/Pages/DefinitionofMarketing.aspx
Who is the Customer?
• “…the purchaser of product, services, and
ideas”
• In health care, is the customer the decision
maker, ultimate consumer or payer?
Historical Perspective
• Before the 1980s, marketing in health care did
not exist.
• WHY?
– Unethical?
– Not consumer driven?
– Induces demand?
– Expertise lacking?
– Unclear outcomes?
Why is Marketing Unique in Health
Care?
• Personal and possibly life-altering products
and services
• Altruistic focus
• Weak consumer-driven system
– Patients usually don’t pay for services
– Patients don’t have critical information to
make decisions
• Irregular competition
• Regulated industry
Orientation of a Health Care
Organization
Strategic Management Framework for
Development of a Marketing Plan
Marketing Management
• Marketing management is the art and science
of selecting target markets, creating,
communicating, and delivering value to
selected customers in a manner that is both
sustainable and differentiated from the
competition.
Source: Kotler, P. & Keller, K. (2009). Marketing management. Upper Saddle
River, NJ: Pearson Prentice Hall.
Segmentation, Target Market, and
Positioning
• Segmentation: dividing the total market into
groups or segments that have relatively similar
needs for products and services and results in a
target market.
• Positioning: various techniques used to
differentiate offerings and establish the brand
image in the mind of the target market.
Organizational vs. Consumer
Buying Behavior
• Organizational behavior concentrates on
business buyers (for-profit or nonprofit).
– Example: employers purchasing health care
insurance for employees
• Consumer behavior refers to the influences
on purchase decision making of consumer’s
acquisition of goods, services, time, and ideas.
– Example: person choosing a cosmetic surgeon
Decision-Making Process
Marketing Mix
• 4 Controllable Ps:
– Product: goods, services or ideas
– Price: product value
– Promotion: marketing activities
– Place: delivery route
• 4 Cs (evolution of 4Ps for a digital world):
– Co-creation: customization
– Currency: pricing based on demand and capacity
– Communal activation: word of mouth referrals
– Conversation: hearing the message
Marketing Plan
• Marketing plan is a written document that
serves to guide marketing initiatives across the
organization.
– Part of the broader strategic plan that has a longterm horizon
– Contains specific tactical marketing activities that
are more short-term in nature
Marketing Promotions
• Traditional channels
– Paid media: television, radio, billboards, mailings
• Digital channels
– Owned media: websites, blogs, patient portals,
podcasts
– Earned media: recognition by customers via social
media postings, retweets
Ethics and Social Responsibility
• What is your moral responsibility in
marketing as a health care manager?
– Inducing the use of unhealthy products?
– Influencing children or vulnerable populations?
– Ensuring well-being of patients or society?
– Avoiding conflicts of interest?
Outcomes and Research
• Marketing analytics
• Informed decision making
• Sample research sources:
– Balanced Scorecard Institute
– The Dartmouth Atlas of Healthcare
– American Hospital Association
– The Henry J. Kaiser Family Foundation
– Society for Healthcare Strategy and Market
Development
Conclusion
• The role of marketing in a health care
organization is to create, communicate, and
deliver value to customers through mutually
beneficial relationships.
• Marketing is a discipline in itself.
• Health care managers should seek assistance from
strategic planners, research analysts, advertising
agencies, public relations firms, digital marketers
and other consultants.
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