Background and Overview of the Health Service Organization



Strategy to Improve the Health of Our Community

Team SJMC

External Analysis Subsection of SJMC Strategic Plan Written by:

Suzanne Celmer-Harter

A project submitted in partial fulfillment

of the requirement for the degree

Master of Arts

Siena Heights University

1/27/2017

External Environmental Analysis

Environmental analysis is a type of situational analysis allows an organization to examine the issues in the external environment. Things that cannot be control or change significantly impact organizations, especially ones in healthcare. The knowledge gained from investigating external issues allows for better understanding how to deal with the issues and changes and how to react internally via strategic thinking and planning. Environment analysis is composed of general and industry specific external environments. Both general and industry specific analysis can uncover issues that can be grouped in the following areas: legislative/political, economic, social/demographic, technological and competitive (Swayne, Duncan & Ginter, 2008). The two key general external influences that affect an organization such as Saint Joseph Mercy Chelsea are economic and social/demographic factors. Also, include in the analysis of external healthcare specific issues are technology and competition. Analyzing these factors will provide insight to how an organization can position itself to adapt to these changes and thrive.

General

Economics

Economic factors, such as consumer confidence, employment, interest rates, and inflation, are indicators of the state of the economy. Consumer confidence measures the overall optimism about the economy. When the economy is strong, consumers will spend more money, which results in profits and new opportunities for businesses. To keep up with consumer demands, companies need to hire more workers resulting in people having more money to spend on goods and services. In times of economic turmoil, consumers spend less money, and businesses are forced to decrease the production of goods and services. It is a matter of supply versus demand. An economic downturn results in an increase in unemployment levels, and less money to spend. Interest rates play a role in the economy because as the Federal Reserve increases the rate at which banks can borrow money, the increase is passed on as costs to businesses and consumers. When interest rates are high, businesses and consumers have increased expenses, resulting in fewer funds to spend on goods and services. When interest rates are low or stable, there is more money available to spend. Inflation is the rate at which prices are increasing. Rising costs result in decreased consumer spending, and vice versa (Hamel, n.d.).

Economists term the period from December 2007 – June 2009, The Great Recession. During this time, the housing bubble burst resulting in great economic losses that caused consumers to decrease spending significantly. The stock market recorded new lows, businesses collapsed, and unemployment rates climbed.

Real gross domestic product (GDP) fell 4.3 percent from its peak in 2007Q4 to its trough in 2009Q2, the largest decline in the postwar era (based on data as of October 2013). The unemployment rate, which was 5 percent in December 2007, rose to 9.5 percent in June 2009, and peaked at 10 percent in October 2009. (Rich, 2013, para. 1)

The US government reacted to the downturn by implementing financial stimulus programs including the Economic Stimulus Act of 2008 and the American Recovery and Reinvestment Act of 2009. Recovery from the recession was sluggish but progressed through the past eight years. However, businesses and consumers, which were previously negatively impacted by the downturn of the economy, are now seeing growth and prosperity.

Steady gains in the labor market, including a post-recession drop in the unemployment rate in November, have made the headlines. Personal disposable income and household spending have remained fairly solid throughout 2016, boosted by buoyant consumer confidence, which jumped to a nine-year high in November. In terms of economic growth, after an extended soft growth patch characterized by five quarters of inventory correction, GDP growth in Q3, at 3.2%, was the fastest in two years. (U.S. economic outlook, 2016, para. 2)

According to University of Michigan economists, Michigan is predicted to have two years of growth that will add 4.4 million jobs by the end of 2018 resulting in an unemployment rate of 4.6 percent (O'Connor, 2016). Typically, high employment and job growth result in increased wages (Worstall, 2017). Extra earnings will induce spending on goods and services, and make a significant economic impact on businesses and organizations. The rebounding economy will make it possible for expansion of services offered to consumers, which should be incorporated into a strategic plan.

Industry Specific

Competition

Gone are the days when one went to the family doctor to seek treatment for a variety of ailments and costs were covered entirely by insurance benefits. Today, patients partner with insurance companies and assume responsibility for a portion of the financial burden. Many employers offer consumer-driven health plans that allow employees to make decisions about their insurance coverage (Sultz & Young, 2014). Patients are now becoming consumers of healthcare because they want to choose how they receive medical treatment. Patients are informed consumers because of readily available medical information at their fingertips. They are “gatekeepers” to their own health and assume the responsibility of for the overall status of their health (Jayanthi, 2015). As consumers, people can choose the costs and benefits of health care plans. Providers are now in competition for those health care dollars and must attract healthcare consumers with products and services that offer a service niche. “A movement toward personalized health treatment is also developing through the advancement of genetic, behavioral, and digital tools that are designed to monitor and manage personal health” (Santilli & Vogenberg, 2015, p. 15).

Hospitals are no longer the centralized focus of the healthcare delivery model, as more patients seek care in delivery models such as ambulatory, diagnostic, urgent care, and specialty facilities (Sultz & Young, 2014). Healthcare systems are competing against each other to obtain market share by creating value, quality, convenience, and efficiencies for consumers. “Healthcare corporations will continue to expand into segments that are less regulated and into businesses outside of the traditional health care industry” (Swayne et al., 2008, p. 38). Providing innovative and alternative forms of healthcare will attract well-informed consumers who have money to spend on specialty niches.

Hospitals and health systems must reshape their strategies to appeal to empowered decision makers, especially wholesale buyers and clinical shoppers. As part of developing their new competitive strategies, hospitals will need to evaluate potential market identities that can appeal to the new decision makers using best-in-class acute care destinations; consumer oriented ambulatory networks; full-service population health manager; and financially integrated delivery systems. (Lazerow, 2014, para. 16)

Consumers understand their own needs best and will make consumption decisions based on personal preferences and resources available. Organizations need to develop strategies to expand on consumerism. Offering consumers choices and innovation programs will make organizations more profitable and increase its long-term viability and should be included in a market strategy to offer position an organization successfully against the competition.

References

Hamel, G. (n.d.). Economic factors affecting businesses. Retrieved from The Arizona Republic:

Jayanthi, A. (2015, February 18). Consumers vs. patients: Healthcare's biggest misunderstanding. Retrieved from Becker's Hospital Review:

Lazerow, R. (2014, February 27). Health system growth strategy for the value-based market. Retrieved from Advisory Board:

O'Connor, B. J. (2016, November 18). Forecast sees more jobs for Michigan in 2017-18. Retrieved from Detroit News:

Rich, R. (2013, November 22). The Great Recession of 2007–09. Retrieved from Federal Reserve History:

Santilli, J., & Vogenberg, F. R. (2015). Key strategic trends that impact healthcare decision: Making and stakeholder roles in the new marketplace. American Health Drug Benefits, 8(1), 15-20. Retrieved from

Sultz, H. A., & Young, K. M. (2014). Health Care USA (8 ed.). Burlington, MA: Jones & Bartlett Learning.

Swayne, L. E., Duncan, W. J., & Ginter, P. M. (2008). The nature of strategic management. In Strategic Management of Health Care Organizations (6th ed.). West Sussex, England: John Wiley & Sons Ltd.

U.S. economic outlook. (2016, December 20). Retrieved from Focus Economics:

Worstall, T. (2017, January 6). US jobs growth slows, wages rise: This is normal, don't panic! Retrieved from Forbes:

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