Like any organization that provides a product or service, healthcare providers have certain framework elements in common. They must have a governance structure establishing and distributing authority and responsibility. They must interact with customers to provide services generated through processes and systems that integrate the required inputs. And all of this must be driven by an underlying strategy. However, not all organizations consciously address all these elements. For example, the ramifications of an existing governance system (which may be in place by default) are sometimes not understood until a problem arises. The outcomes will be better if they are deliberately addressed.
These framework elements, depicted below, must be included in any business plan or business model but each can also be considered separately. Each element is discussed in more detail below the graphic, including project examples.
Governance structures identify the distribution of rights and responsibilities in an organization and outline the rules and procedures for making organizational decisions. While often overlooked by not-for-profit organizations, governance structures provide organizations with the necessary framework for aligning stakeholders’ interests. As a result, these structures are particularly effective at holding stakeholders accountable for their actions.
Successful operations require a good understanding of fixed and variable costs, how to secure reliable supplies, and how to integrate them together in an efficient, high-quality service. Healthcare services can vary along at least three dimensions: chronic vs acute; time sensitivity; and degree of communicability. Also, the most effective operation for one type of service may not work for the others.
Other operations factors to consider include procurement, people, and supplies. For example procurement of capital equipment involves ensuring correct installation, availability of parts, proper maintenance and access to repair expertise. Thus, human capital needs are not only crucial for patient care but also for capital equipment.
Healthcare providers must develop processes for transferring physical products and information. The latter can often be the most challenging. In fact, some of the most successful organizations distinguish themselves through their internal processes for information sharing. Understanding how to develop effective systems requires understanding the nature and timing of information flows and then developing mechanisms that incorporate the right people and incentives.
Sustainable organizations must generate sufficient revenue to cover their direct and indirect costs. Generally speaking, this means identifying, acquiring and retaining customers that are willing to pay the full costs of services provided.
Customers contribute to overall revenue generation and, thus, require articulation of the value proposition. Organizations should also identify all relevant customer groups. Additionally, pricing techniques — such as bundling, price discrimination and tying — can be used to increase revenue from existing services.
Underlying any successful organization is a well-developed strategy. This requires analysis of the market and identification of the organization’s comparative advantage, combined with an understanding of the regulatory, environmental and social landscape. Additionally, services and/or products supplied must be financially viable. Our focus on strategy includes development of both business and growth strategy plans.