What's the plan for hospitals' plans?

There are more questions as of late around one of hospital executives' most customary activities: strategic planning. 

COVID-19 and its financial hangover for hospitals and health systems left many scaling back the intensity of their strategic plan, both in design and execution. Organizations paused the initiatives that could afford to wait. During those "strategic pauses," the landscape around health systems continued to shift and financial headwinds — increased labor costs, inflationary pressures and stagnant reimbursement — grew.  

"One prominent CEO in the Southeast told me that post-COVID there was nothing relevant left from his 2019 strategic plan," Ken Kaufman, managing director and chair of Kaufman Hall, wrote this summer. "This is an important point. In past financial turndowns hospitals could afford to ride out the immediate future with a 'less than adequate' strategic plan. But my guess is that, like my friend in the Southeast, many hospitals now find their strategic plans are no longer 'very strategic' and hardly 'plans' at all."

With focus on near-term survival, quarterly or one-year plans are necessary. Ten-year plans can be more like creative exercises. And the mid-term outlook — three years ahead — that can present executive teams with the greatest uncertainty and stakes. One consulting firm recently noted that it has done away with five- and 10-year plans because the rate of change and unknowns can too quickly render them obsolete by the time they are adopted, or even drafted.

Hospitals' financial recovery is not moving in a straight line, but the latest figures from Kaufman Hall suggest some stability and prompt advisors' calls for hospital leaders to brush off the strategic plan and get to work on it in a meaningful way if they haven't already. 

"This period of relative stabilization is the time for hospitals to re-engage in capital planning efforts," Erik Swanson, senior vice president of data and analytics with Kaufman Hall, said. "Hospitals may be feeling reluctant given the last few years, but those that wait may find themselves falling behind their competitors and missing out on key opportunities."

Implicit in Mr. Swanson's remarks is the fact that health systems likely have a lengthier and rearranged list of competitors and challengers, in addition to internal movements in and out of hospital C-suites. Executive turnover raises questions around the continuity of strategic planning and readiness of institutional knowledge. In the first eight months of 2023, hospitals recorded 116 CEO changes — setting the year up to be one of significantly greater turnover than recorded in 2022 or 2021. 

Outside, here are just a few of the shifts worth mentioning: With 70,000 employed or aligned physicians across more than 2,200 locations in 2023, Optum has quietly cemented itself at the forefront of the quickly changing healthcare delivery landscape. This year alone, Amazon acquired One Medical and CVS Health acquired Oak Street Health months after Walgreens acquired Summit Health. Forty-three rural hospitals have closed since 2020, a count that doesn't include shutdowns of urban counterparts, like those in Atlanta and Cleveland. This is the busiest year for strikes since 2019, signaling a new era of union demands, negotiation and action. 

"Planning for the long-term is paralyzed by the tyranny of the urgent: survival and sustainability in 2023 and making guarded bets about 2024 dominate today's plans. That's reality," healthcare policy analyst Paul Keckley, PhD, recently wrote. "Though the healthcare pie is forecast to get bigger, it's being carved up by upstarts pursuing profitable niches and mega-players with deep pockets and a take-no-prisoners approach to their growth strategies."

Dr. Keckley recommends health system boards and executive teams keep big questions front-and-center in strategic planning, including if the status quo is sustainable, if social determinants are a core strategy or distraction, and if technology investments can change how individuals engage with the system. 

"The future does not appear a modernized version of the past for anyone in U.S. healthcare, especially hospitals," he noted. 


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