HPA 332 Case Study
Kelli Eble, Alicia Walker, Mike San Roman, Ben Newcomer (KAMB)
A. Executive Summary
To address the issues currently being experienced at River Oaks Community Hospital
(ROCH), our outside consulting firm, KAMB Consulting Co., has been hired by the executives of
ROCH. Our firm will aid ROCH in advising a strategy that will allow you to best deal with the
problems that you are facing in order to ensure the future success of your organization.
There are many benefits to hiring an outside consulting firm such as ours. The first is that an
outside firm that is separate from the organization itself will allow for an objective and unbiased
assessment of the situation at hand. Often, internal management is too close to the situation to be able
to step back and see the larger picture. This external view of the organization allows our firm to take
in all aspects and elements of the problems faced by ROCH. Another benefit of hiring our firm is the
amount of time that is saved for the department heads and other executives at ROCH. By allowing
KAMB to develop a strategy, the department heads and staff members alike are free to devote their
time to their regular job responsibilities rather than strategizing. The final benefit of utilizing the
services of an outside firm is that KAMB exists specifically to perform assessments and develop
advising strategies. Such tasks constitute the essential job functions at KAMB and, therefore, our
staff is very skilled at creating strategic plans for organizations.
Though there are many benefits to hiring an outside firm, there are some drawbacks as well.
The first potential problem in conducting our analysis is that we may not be familiar with the
intimate details of your organization and its operations. Such a detailed understanding of the day-today operations at ROCH can only be acquired by spending a lot of time there and witnessing
operations firsthand. For example, we could advise the firing of an employee who has a strong repute
with the rest of the staff. The fellow staff members may strongly oppose our suggestion, which will
cause dissension within the organization and ultimately lead to decreased productivity and even
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turnover. Another con of being an outside firm is that we cannot get an accurate picture of the true
history of the organization because we were not there for its inception. We cannot completely
understand the adversities that ROCH has faced and what has been the best means of overcoming
them or strategies that have failed. This is especially an issue if the organization has not kept a record
of previous strategic plans that were implemented, how they were implemented, and the results of
their implementation. Lastly, because our firm must create a plan for ROCH in a timely manner, we
cannot spend a lot of time observing and recording data on the organization. As a result, we must
base our assessment off of short-term observations and limited data.
B. Company Profile and Background
River Oaks Community Hospital is a relatively new facility that has only been established for
10 years. Regardless of its lack of longevity, ROCH has made it an organizational mission to become
the premiere alcohol/drug abuse and mental health treatment center in the increasingly urbanized area
in which it is situated. To this end, ROCH must surpass its many local competitors in terms of the
quality of the services provided, the costs of those services, and the access to care. Because the area
is becoming more urbanized, the population of the surrounding area is likely to increase, resulting in
more potential patients for ROCH. Because urban areas statistically have higher numbers of drug and
alcohol dependencies, a drug and alcohol abuse treatment center is a very useful facility in this area.
The services currently provided at ROCH are both inpatient and outpatient. There are also
separate services and programs for adults over the age of 18 and for children age 3 to 17. A
specialized service that ROCH provides is the Community Residential Center (CRC). The CRC is
unique in that it was created for the purpose of treating violent adolescents within the ages of 12 to
17 years of age. This program also provides its patients with long-term care to ensure their recovery.
The CRC is a unique kind of program that is only offered by ROCH and not by any of its competitors.
The organization also provides educational services to increase awareness of the dangers of drug
abuse and how best to overcome them. ROCH also provides positive outlets for recovering patients
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in the form of recreational and creative activities. Such activities not only entertain patients but also
show them how to do something constructive. All of the programs provided at ROCH are intended to
help patients to overcome their illnesses so that they can become productive and healthy members of
society.
In order to implement the various programs at ROCH, there are approximately 100 staff
members across all of the departments. Due to a three-shift schedule, the facility is able to be open 24
hours a day 356 days a year. As a result, access to care is made easier for patients because there are
more opportunities to seek treatment. However, the hours at ROCH also leave the staff feeling
overworked and burned out as they attempt to keep up with the schedules demanded of them.
Though, the facility seems well-structured, patient volumes are declining in all sectors of
ROCH. As a result of the decrease in the number of patients being treated and services being
performed, the CEO of ROCH demanded staff reductions in every department at a recent emergency
executive committee meeting. The CEO demanded staff cut recommendations from each department
head by the next meeting. Therefore, the department heads must decide which employees should be
fired in order to save money for ROCH. In an effort to develop an alternative strategy to ensure the
future existence and success of ROCH, the executives at ROCH have our consulting firm, KAMB, to
develop a strategic plan for the organization to implement.
C. Major Problems and Secondary Issues
River Oaks Community Hospital is currently experiencing major and secondary problems
that are in need of an effective plan of action to be advised in a short period of time. The Director of
Operations, Debbie Davis, and other hospital directors have hired KAMB to generate ideas to solve
the hospital’s declining success. The issues that ROCH is facing are distinguished as major and
secondary problems since certain problems possess more significance than others.
After reviewing the hospital’s current situation, it is evident that the major problem is the
drastically declining admissions rate. The inpatient occupancy has decreased from 75% to 50% while
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the outpatient occupancy declined from 40 patients to 15 visits per week. The community residential
center is experiencing declining admission rates as well from the usual 90% to 40%. Debbie and her
staff of directors helped KAMB to identify some causes for the declining admissions such as weaker
performances of employees due to burnout and the increased local competition. Another factor
contributing to declining admissions is the recent reimbursement changes faced by ROCH, which
cause many patients to seek treatment elsewhere. KAMB hopes to efficiently develop the best
strategy to handle the hospital’s circumstances.
Even though secondary problems are not considered to be major issues, it is essential to
recognize the possibility that secondary problems can develop into major problems if left unsolved.
The staff established that the reasons behind the lower admission rates are due to the increasing
competition from other new and existing facilities in the nearby area. A second cause resulted from
the recent reimbursement changes as a result of more managed care-type insurers. The current
reimbursement now only allows for 14 days for inpatients whereas before they were given the option
of 21 to 28 days of treatment. Also, this type of reimbursement change encourages physicians to
select cheaper services and procedures while increasing beneficiary cost sharing. Current or possible
patients seeking hospital care may choose a different location if they dislike the reimbursement
adjustments.
The employees expressed that many are behind on a large amount of work because of the
shortage of extra help in the hospital. The scope of their job has become too large for them to handle
individually, which leads to the employees to feeling overwhelmed and at risk for job burnout. If the
workers become too stressed with their work, they will not be as productive with their job. Also,
Debbie mentioned to employees that she was hoping to hire more help for the Joint Commission for
Accreditation of Healthcare Organizations (JCAHO) visit that is approaching in less than a year. A
large amount of time and manpower is needed to prepare for the meeting and the hospital currently
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does not have enough staff to do an adequate job in order to gain positive results from the JCAHO
survey.
Both the major and secondary problems that KAMB is looking to resolve possess a high level
of importance. A difference between major and secondary problems is that solving major problems
can inadvertently solve secondary problems but solving secondary problems does not always resolve
major problems. However, if secondary problems are overlooked by the hospital, they can become
major problems that can negatively affect the hospital in other ways. For example, if the physicians
do not receive enough reimbursement with the new managed care insurance plan, they may choose to
leave and seek for employment in other non managed care facilities. Hiring new physicians is costly
and takes time, both of which ROCH currently cannot afford. Also, the possible burnout employees
experience can create tension or conflicts within team members due to their high levels of stress. This
could lead staff to quit and increase the rate of turnover, leaving ROCH with another major problem.
D. Environmental Analysis and SWOT
The SWOT analysis helped identify the hospital’s strengths, weaknesses, opportunities, and
threats. The strengths provide an internal assessment of the organization while the opportunities and
threats focus on the external environment affecting the hospital. A major strength of the hospital is
the range of diverse services for the patients. Some include educational services, counselors, and
activity coordinators while also offering expertise on mental illness and drug abuse. Also, the 365
days per year availability allows ROCH to see more patients compared to other facilities that may not
be open every day. The hospital’s new addition of Debbie as the Director of Operations gives her the
opportunity to contribute new ideas as a leader. She possesses experience in multiple healthcare
positions and the hospital is relying on her to help improve the ROCH facility.
One major weakness for the organization is that they are relatively new and not as established
as their competition. The marketing department should consider alternative ways to increase the
recognition of their hospital in order to fix the declining admissions problem. In addition, while
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Debbie plays a positive role for the hospital, her lack of experience within the hospital may serve as a
weakness. Additionally, Debbie has been forced to be the sole staff member for two different
departments: Quality Management and Risk Management, which occupies even more of her already
overstretched time and energy. She has been thrown in a crisis situation within the organization and
needs to be updated with the history of the hospital leading up to its downfall so that she can pass this
information along to the members of KAMB. The opposition and tension from other employees has
led to a lack of support during this tough time and may lead to employees quitting. ROCH is already
facing issues with a shortage of employees and an increased turnover rate would give Debbie another
stressful problem.
The external factors that we assess to be opportunities for the organization include its
location, the chance to partner with competing facilities, or the reduction of services offered. The
location in a growing urban area provides the opportunity to attract more patients into the facility due
to the increasing population. Also, the hospital can take advantage of their marketing department
which most hospitals may lack since healthcare marketing is still a fairly new concept in the industry.
Another option to embark on is partnering with various facilities that are located nearby to ROCH.
Partnering with another hospital would improve efficiency by aiming to decrease the amount of work
that is currently overwhelming employees. ROCH can, therefore, gain advanced training and
knowledge from others that are also experts in the healthcare field. Additionally, if ROCH were to
limit the range of services that are provided, then they could eliminate some staff members and thus
labor costs, but still meet the governmentally required ratios of nurses and physicians.
Lastly, the threats to the organization can further worsen the organization’s situation if a
solution is not developed quickly. While the location in a growing urban area provides opportunities,
the hospital is described as “hidden” opposed to an open area that would attract potential patients’
attention. Also, the six closest competing hospitals are within a 10-mile range giving patients a wider
range of choices in terms of which hospital to choose. The reimbursement changes and regulations
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for shorter days were earlier identified as crucial factors for the declining admissions and threaten to
continue this trend. Reimbursement changes now only allows for 14 days for inpatients whereas
before they were given the option for 21 to 28 days of treatment. As a result, this type of
reimbursement change encourages physicians to opt for cheaper services and procedures while
increasing beneficiary cost sharing. These types of changes negatively affect the quality of care
because of the cheaper procedures and, therefore, potential patients may seek treatment from
facilities with different kinds of reimbursement structures. An issue with the regulatory environment
could be mandated overtime pay. Because ROCH is open 24 hours a day and it is understaffed, many
employees may be needed to work beyond their normal hours. Because of overtime rules in the
regulatory environment, ROCH will be required to compensate these employees for their extra time,
which could be a large expense to the organization. A final external issue is the shortages of nurses
and medical personnel available for hire. By 2020 the projected nursing shortage will be 800,000
according to NurseJournal.org. This could be a threat to ROCH because they are already facing an
internal nursing shortage, which is leading to burnout. If nurses quit or retire, it will be very hard to
replace them.
E. Alternatives and Recommendations
Recommendation 1: Specialization
Our first recommendation is for River Oaks Community Hospital to specialize in youth
rehabilitation and psychiatry. ROCH will retain its community residential center (CRC) for treating
violent youths. With ROCH specializing in youth services, it will be able to create a youth-friendly
culture fostering the right environment for their success. This allows room for ROCH to grow to
become the region’s premiere center for youth rehabilitation and psychiatry, in return increasing
patient volumes and service revenues.
This recommendation allows you to make staffing cuts to any ancillary personnel,
particularly the adult-care unit. You will also need to renegotiate/renew contracts for medical
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supplies and equipment as well as liquidate any capital that will no longer be in use; this will bring in
a large amount of cash-on-hand. With the funds from these cuts and liquidation, you will be able to
properly further train your staff. By sharpening/refining your staff’s competencies, you will be able
to increase employee talent potential. With employees operating at their fullest potential and with
their scope of work narrowing, they will no longer be overworking. Work models/workflows will be
streamlined across the organization to increase efficiency and cost-effectiveness. This in turn will
increase the patient’s overall quality of care.
As you may know, there are various costs and provisions associated with this
recommendation. First off, physical construction to the facility will need to take place in order to
create a wholesome environment rather than the already established division of services. You will
also have to refer all adult patients to nearby adequate facilities in order for them to continue their
rehabilitation. After liquidizing obsolete assets, you will need to acquire more youth-related-services
capital and equipment in order to meet the needs of the volume influx. Staff may be hesitant to
narrow the scope of operations as such. The rollout and implementation of this plan can take
anywhere from 18 months to 2 years. Projections show that 18 months is the usual target; where in
that time there is always the possibility you will see revenues fall to the point where you will need to
cease operations and file for bankruptcy.
Recommendation 2: Partnership
Our second recommendation is to form a strategic partnership. This partnership would
consist of partnering with the state owned alcohol and drug treatment facility as well as a private
psychiatric practice offering outpatient programs. The direct impact that this will have is increasing
your market into the secondary and tertiary markets because both facilities are geographically located
in both of those markets (7 and 15 miles away in proximity). This will also allow facilities to directly
refer to one another based on patient needs.
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The most obvious beneficial impact this will have is increasing patient volumes due to inhouse referrals as well as increasing market share. With the increased patient volumes, staff
reductions will not have to be executed. Staff may also be able to be shared among facilities such as
certain technicians. This will increase ROCH’s expertise by combining with new organizations that
have different core competencies. Importantly, raising capital will not be as difficult, no loans or
short-term securities will need to be bought to finance your activities. Also, cost-cutting standards
will be put in place due to the large volumes; this includes purchasing power, shared discounts, and
technology sharing (EHR). This allows ROCH to recuperate lost profits and regain status as a
premiere center for youth rehabilitation and psychiatry in the primary market.
The number one cost associated with constructing a strategic partnership is securing a
double-partnership. Lawyers will need to be hired to construct contractual agreements regarding
profits, liabilities, and capital. Each facility will need to install the same EHRs as well as streamline
policies and workflows. Staff will now have to learn how to operate a different EHR, which can have
negative impacts on quality of patient care at first. Partners may have conflicting mission, vision and
value statements. In order to ensure a smooth transition, an outside contractor and auditor may need
to be hired. The rollout and implementation of this plan can take anywhere from 2-5 years.
Recommendation 3: Health System
ROCH has the opportunity to be a high-stakes innovator. ROCH can follow the national
trend of the creation of multi-specialty health systems. This would require ROCH to partner with the
private for-profit general hospital/inpatient and outpatient psychiatric units; this general hospital will
serve as the central inpatient facility. Once this partnership is established, a recruitment team will be
formed consisting of physicians, administrators and executives accompanied by outside consultants.
This recruitment team will reach out to valuable PCPs, physician practices, surgery centers and longterm care facilities of all specialties to “on-board” them. This will create a regional juggernaut that
will encompass all aspects of care.
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This will increase the scope of patient services provided by ROCH. No longer will drug
abusers and persons with mental illnesses be the target market; simply anybody seeking medical care
will now become the target market. This will exponentially increase patient volumes and revenues.
Referrals will be kept in-house creating a closed referral network. Risk will be virtually non-existent
and cost sharing will be wide spread. Importantly, raising capital will not be as difficult, no loans or
short-term securities will need to be purchased to finance your activities. Policies and workflows will
be streamlined to increase overall efficiency. You will be able to negotiate higher reimbursement
rates as well as increased benefits. Also, in a time of uncertainty and volatility, physician salaries will
be guaranteed increasing their likelihood to agree with this model.
Unfortunately, the up-front costs are monumental. Finding and convincing multiple banks
and venture capitalists to loan millions of dollars will be extremely hard. Securing numerous
partnerships will be also very difficult and if some organizations do not partner, then that might cause
a ripple effect with other ones. Administrative costs would also be extremely high because new
manager positions would need to be created for the system to allow for benchmarking and
profitability standards to be monitored and met. Each facility will need to install the same EHRs as
well as streamline policies and workflows. Staff will now have to learn how to operate a different
EHR, which can have negative impacts on quality of patient care. The duration of the rollout and
implementation steps of this plan could take up to 10 years. If the plan falls through, you may lose
everything and be forced to file for bankruptcy due to collateralized debt obligations.
The strategy that we at KAMB Consulting Co. see as the most feasible and profitable is our
first recommendation, specialization in youth rehabilitation and psychiatric care. It will require the
least amount of regulatory changes, the shortest payback period, and it will give ROCH the best
chance to innovate, grow, and adapt in the future as the healthcare field continuously changes.
F/G. Implementation Plan and Management Dashboard Metrics
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The very first step is to arrange a meeting with mid-level and upper-level managers,
executives, and the board of directors. At this meeting you will introduce this new plan and open up
the floor for discussion as an open forum. Once there is a unanimous decision to go forward with the
plan, the next step is to draft new mission, vision, and value statements. By drafting new statements,
you will create a new pathway for River Oaks. These new MVV statements will guide you through
the transition and keep you on track from deterring from your company culture.
The next step is to contact your lawyers to draw up new contracts. These contracts will
include compensation structure contracts, termination contracts, incentive contracts, shared liability
contracts, compliance contracts, etc. These contracts will establish and outline the new policies and
procedures that ROCH will be implementing. The next step is one of the most important ones, the
staff meeting. You will want to explain to them why ROCH has changed its scope of operations,
addressing the pros and cons of the decisions made. Let them know that they will be as much of a
part during the transition as anybody else and that their feedback is critical.
Now that all staff has an understanding of what is to come, you must lay-off ancillary
personnel. We feel that at minimum, laying off adult counselors would be beneficial as they have
become obsolete. We also believe it would be beneficial to fire one of your cooks, A. Pensa, as she
has received a subpar performance appraisal score. With the new scope of operations, having an extra
cook is unnecessary and if you feel that you would benefit from an extra one down the road rehiring
one is always at your disposal.
You will next have to refer your current adult patients to the local treatment facilities in order
for the continuity of their care. The following steps will require securing one or multiple loans from
banks and or venture capitalists. Your first expenditure will be to enroll current clinical staff in
continued education programs and workshops in order for ROCH to become the premiere center for
youth rehabilitation and psychiatry. Also, the programs will allow clinical staff to specialize in
youth-care and refine their skills. During this time period you will also need to restructure your
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capital. You will need to review all device contracts. In doing so you will terminate/not renew
obsolete device contracts and contract for new youth-care specific equipment. Antiquated devices
should be donated to third-world countries to retain a philanthropic identity within ROCH.
The next step is to restructure and reinvent your marketing campaign as well as physically
altering the interior of the building to foster an unmatchable youth environment. This includes
repainting the walls and purchasing toys and playpens and any other items that you deem acceptable.
The final step is to create metrics in order to benchmark your progress. You will want to
monitor your system operations extremely close for the first few years. It would be very valuable for
ROCH to create a dashboard to track results and hand these out at quarterly meetings in order to get
feedback from staff and managers as to what is and isn’t working. We have created a dashboard for
your organization that we feel covers the essentials. This dashboard contains metric evaluations
covering Quality, Financial, and Scheduling operations. We feel that these three categories are the
most essential to tracking the progress of your transformation.
Please review the example dashboard below:
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Dashboard Example:
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