Creating an optimal strategic business plan

For any medical practice, planning can make the difference between success and failure. Nonetheless, many practices don’t endeavor to create formal strategic business plans. This has been especially true during the COVID-19 pandemic, when long-term strategic planning has taken a back seat to more immediate concerns.

Strategic plans are important because they provide practice leaders with a living document they can access at any time. Most notably they establish a time frame for the plan and specify the individuals responsible for carrying out each facet of the plan. Without identifying the mission, values and goals of the organization, practices will likely miss out on opportunities and struggle to develop strategies that serve as a baseline for the foundational aspects of the organization.

As healthcare consultant Owen Dahl, MBA, LFACHE, CHBC, LSSMBB, insists, a strategic business plan “will always help you keep a focus on your priorities and clarify your direction as you move forward … The more you commit to the planning process, the more you will also be committed to your goals.”

Strategic planning models

According to Dahl, strategic business plans provide a snapshot of where you are and where you want to go as an organization. He notes that there are five strategic planning models practices should consider when determining the best fit for their organization:

1. Classic — Use in stable markets with good control of share
2. Visionary — New approach within industry
3. Shaping — Need to control, move forward and lead industry
4. Adaptive — Follow others but maintain strong position
5. Renewal — Economize then pick one of the above.

Dahl points out that these models aren’t mutually exclusive and there may be times when practices will need to come up with the best plan based on their current situation. “Because our industry is so tumultuous today,” says Dahl, “maybe we think about three or four or five or six different alternatives” to be more proactive.

Executive summary

The first component of the business plan is the executive summary, which starts with your organization’s mission statement, or defining the aims and values of your organization. As Dahl states, the one- or two-page synopsis should:

• Identify the goals or objectives to be achieved
• Formulate strategies to achieve them
• Arrange or create the means to accomplish the goals
• Implement, direct and monitor all steps in their proper sequence.

In addition, the executive summary should include information about your operational approach, marketing approach, financial picture and financial controls and reporting. Dahl says this document can be used to share with others internally, while ensuring everyone in your practice is rowing in the same direction. From there, those who want more detail can take a deep dive into the operational plan.

Operational plan

This is the meat of the strategic business plan; it’s here where organizations establish their goals and subordinate objectives, and ways each department contributes to them. This is particularly important for larger practices so that their strategic business plan is “consistent and complementary with the overall strategic objective,” says Dahl. In essence, designing an operational plan provides a launching point to move forward.

As these objectives are defined, Dahl notes that it’s important to also address conflicts to determine what’s most important to your practice. For example:

• Short-term profits versus long-term growth
• Profit margin versus competitive position
• Direct service versus development effort
• Greater penetration of present markets versus developing new markets
• Achieving long-term growth through related businesses versus achieving it through unrelated businesses
• Profit objectives versus non-profit (serve community)
• Growth versus stability
• Low-risk environment versus high-risk environment.

Practice leaders will want to consider each of these in the context of the healthcare landscape, in the short and long term. “As we think about what happens in our industry today with social determinants of health, mental health, population health management, those kinds of things are very critical for us to look at as we think about surviving into the future,” asserts Dahl.

SWOT analysis

A major part of developing an operational plan (along with marketing and financial plans) is conducting a SWOT (Strengths, Weaknesses, Opportunities, Threats) analysis in which you identify key areas that need to be addressed in your practice. This can be done through brainstorming, but Dahl believes this is best done by including a diverse group of staff — not just usual decision-makers — to fully ascertain the practice’s strengths and weaknesses.

“I think it’s very important that you get as many insights as you can from various levels of your business model,” says Dahl. “What do they think? What do they perceive? I want to get some feedback from others that would help me develop a much more in-depth look at what my organization is like.”

When conducting a SWOT analysis, the first two aspects are internal, while the second two are external. Dahl emphasizes that it’s important to determine what sets your practice apart. In other words, “Is there something unique that would fit into your SWOT analysis that either brings you a strength or is a threat because others are actually doing it in your marketplace?” asks Dahl.

In using the initialism TW2ADI, or “the way we’ve always done it,” Dahl suggests that we should always be looking for ways to offer more to our customers. For instance, “Are there any core competencies that you have?” posits Dahl. “Is there a strength there that you could maximize? The services that you offer, do they meet the needs and the demands of your community, in terms of the opportunities that are there or the threats that might be there as well?”

Payer analysis

Another key feature of the operational plan — and the business plan as a whole — is payer analysis, which looks at such factors as your payers’ market share, service area, reputation, solvency, stability and even your providers’ functions as they relate to your payers. Dahl says organizations should ask, “What’s the role of each of your providers, and is there a specialty area where you could do some carve-out work in terms of meeting a demand for a particular payer?”

In considering your payers, Dahl notes that, for example, if you have 3% invested in a particular payer that has a less-than-stellar reputation, you may want to invest your time and money elsewhere. Ultimately, it’s important to establish how your payers fit your practice and your market.

Who are your suppliers?

Suppliers are another group that should be routinely assessed. As Dahl says, you should continually ask if you’re getting the best price and best service from your suppliers. And do you have the best model for the type and size of practice you have? Similar to payer analysis, Dahl contends that you should gauge how solvent they are and whether they are locally owned.

Finally, do your suppliers serve as an extension of your practice? That is, do you have a strong enough relationship that you’re comfortable moving forward with them?

Organizational structure

According to Dahl, having an organizational chart is one thing, following it to a T is something different. A question to pose is whether the functionality of the organization is formal or informal. “From an organizational structure point of view, who makes decisions?” asks Dahl. And “how are they implemented?”

Having a formal business plan, along with a formal set of strategies, can help your practice be better prepared when making decisions and effectively manage accountability.

Implementation approach

Once the operational plan has been implemented, stakeholders need to make it a priority. “Many times we’ll come up with these new, great ideas and get them communicated to everybody, even do a little bit of training so that we think that there’s been some procedural changes that are for the benefit of everyone else,” explains Dahl. “Once we’ve done that, we wipe our hands because we’re too busy doing too many other things that we don’t bother to check on that.”

For accountability, it’s crucial to periodically review your plan, whether it’s every three months or even monthly. Practices also need to consider implementation strategy:

• To whom are tasks being assigned?
• How is data being measured?
• What reporting structure is in place?
• How are staff being held accountable?

Marketing plan

In putting together a marketing plan, practices should identify customers who are looking for the type of services they offer. Next, practices should assess their competitors and answer the following questions:

• How do your competitors perform?
• What is your market share?
• What is the volume of your “sales” compared to theirs?
• How many “customers” do you serve compared to them?
• How functional is your internal organization; that is, are your physicians competing?

The last point is important to consider because practices should optimize functionality. As Dahl notes, “When you have a multispecialty clinic, you’ve got some competitive models where you might be infringing on territory of one physician or one physician group versus another.”

Practices should devote a lot of time to conducting research on their consumers. Dahl says they should take a look at factors such as sex mix, age mix, ZIP codes, referral sources and diagnostic mix, noting that “all of these kinds of data points are very critical for you to have, as you think about what goes on with your patient population.”

By evaluating the above data points, along with patient satisfaction surveys, online patient feedback and census data, practices can get a better handle on where they stand. As Dahl observes, “It’s very important for you to take your time to do this research about what’s happening in your market and how your market fits together.”

Once practices have done their due diligence, they can pinpoint ways to target consumers, assign tasks to staff and have them report results.

Financial plan

When creating a financial plan, practices will want to put together one-, three- and five-year budgets, in which they list all sources of income and all expenses, states Dahl. A key aspect of this is determining your break-even point, specifically the number of patients each provider needs to see each day. “That’s a statistic that helps you look at your operational strategy, helps you look at your marketing strategy,” says Dahl. “Where you begin to say, ‘I need more revenue, I need to control my costs, I need to change my direction.’”

When practices are putting together this plan, high-level metrics, including return on investment (ROI), cash flow and net profit, should be addressed first. Then, according to Dahl, practices should drill down into mid-level metrics, such as customer retention (e.g., customer satisfaction index, compliance with treatment plan), resource management (e.g., turnover rate, inventory), internal business processes (e.g., cycle time, rework) and employee training (e.g., hours/dollars per employee, compliance). “There are so many statistics that will help you create not only a better understanding of your financial picture, but also of your overall operational and marketing perspective,” says Dahl.

As Dahl notes, the healthcare industry is continuously evolving, so it’s important to not rest on your laurels and always view your practice through multiple perspectives. “The whole idea of planning is to say, ‘what can we do to survive, what can we do to thrive, what can we do to be successful?’ That means changing, transitioning, transforming,” attests Dahl.