ASSURANCE OF LEARNING EXERCISE: CASE STUDY OF SAFETY NET HOSPITAL
For this assignment, read “The Struggle of a Safety Net Hospital” case in the course text.
Identification of strategic competitive situations is important for a health organization to
effectively sustain operations over the long-term. Environmental factors impact the effectiveness
and efficiency of any healthcare business. Businesses must continually assess the strategic
leverage they have over other area businesses; thus, the identification of environmental factors is
essential for the development of a successful strategic plan. This assignment provides an
understanding of the varying nature of competition in the healthcare industry.
You will write a 5–6-page paper in current APA format that addresses the case questions
presented in the assignment. Your paper must be supplemented with research from your
textbook, and at least 5 scholarly, peer reviewed sources published in the last 5 years. You may
use other quality sources in addition to support your analysis. Proper grammar and spelling are
Note: A minimum of 5 scholarly, peer-reviewed references must be used that support your
responses in the paper in addition to the textbook. This is a paper, so your answers must not be
numbered; thus, you must use titles and subheadings to guide the reader through the narrative.
As you read the case perceive the difficulties of aligning strategic decisions with the
organization’s mission; analyze the potential effects of increasing copays at a public hospital;
and, consider other strategic directions (operational improvement) that Wishard might select in
the given market. In your paper include answers to the following questions and prompts:
1. What was Wishard’s competitive situation? Did Wishard have direct competitors? If so,
in what areas did it compete?
2. Provide an evaluation of the environmental factors impacting the management of the
3. What strategic leverage did Wishard have over the other area hospitals?
4. From a societal perspective, what problems occur by having a stand-alone public hospital
with a primary mission of serving the indigent population?
5. What strategic steps would you recommend for Wishard?
6. Recommend at least 3 strategic planning initiatives for the organization that are peer
reviewed source supported, that incorporate a financial analysis, human capital
management, operational improvement, marketing, and legal/regulatory compliance.
7. Include at least 3 environmental factors in the analysis
5. The Struggle of a Safety Net Hospital
The costs of caring for uninsured and underinsured patients are
shouldered by both public and private organizations but often fall
primarily on older, publicly owned facilities. The cost pressures
and demands for care often far exceed the budgets and
resources of many public providers.
Wishard Health Services, located in Indianapolis, Indiana, is an
example of a public provider that has struggled to position itself
strategically to achieve its mission to care for the poor of Marion
County. Its mission, vision, and values are as follows (Wishard
Health Services 2013):
The mission of Wishard Health Services is to:
with special emphasis on the vulnerable populations of Marion
Wishard Health Services will enhance continuously our ability to
meet the needs of the underserved and all people of Marion
County, will be sound economically, and will lead innovatively in
clinical care, research, education, and service excellence.
By 2003, Wishard was under tremendous pressure. The hospital
was owned and operated by the county and, as noted, had a
mission to care for the vulnerable and underserved population of
the county. Although there were almost a dozen other hospitals in
its service area that provided some care to the indigent, the
county hospital was seen as the main provider for this segment of
the population. Although the other hospitals did not refuse to
provide emergency care for the poor, most elective Medicaid and
indigent patients were routinely sent to Wishard’s facilities. Almost
90 percent of its patients were covered by a government program
or had no insurance coverage. As a result, revenues were always
short, operating losses had to be subsidized by tax revenues, and
capital projects were constantly deferred. With no funds to expand
or refurbish its facilities, Wishard Hospital and Wishard’s clinics
were extremely crowded and looked old and worn. The facilities’
condition, coupled with their location in a poor part of Indianapolis,
Indiana, discouraged the patronage of insured patients.
In 2003, the situation seemed to be worsening further. Wishard
was in deep financial trouble, and its executives discussed ways
to reduce the system’s losses. Wishard’s CEO publicly stated a
deep concern about the 144-year-old institution’s future. Wishard
Health Services included its 492-bed hospital, six community
health clinics, and Midtown Community Mental Health Center,
which together served about 800,000 patients per year. According
to Dr. Robert B. Jones, the hospital’s medical director, 50 percent
of those patients were insured by Medicaid or Medicare, and 40
percent had no insurance.
City officials also were worried about the financial health of
Wishard and talked about a potential shortfall of between $20
million and $80 million out of a $385 million budget. The best
estimate was that Wishard was on track to end the year with
spending at $35 million, but it could turn out to be much worse.
The hospital did have cash reserves that could cover this deficit in
2003, according to Wishard’s president Matthew Gutwein. But if
the deficit continued and worsened in 2004 as expected, this
reserve would be completely empty, and Wishard essentially
would be broke by the end of 2004 with even worse years to
Wishard’s ability to survive and fulfill its mission was seriously
challenged. The primary factors contributing to the deep losses
included the following:
Declining reimbursements from the Medicare and Medicaid
programs for the elderly and poor (For every $1 in hospital bills
submitted to the two federal programs, Medicare paid just 82
cents, compared to 89 cents four years earlier. Medicaid paid 70
cents for every dollar of service, down from 90 cents.)
Increasing numbers of patients without insurance to pay their bills
(Nationwide, the number of uninsured had reached 43 million
residents, 700,000 of whom were in Indiana.)
Continual hikes in the prices of drugs and new equipment and in
wages for nurses and specialists, who were always in short
Stiff competition from specialty hospitals and surgery centers that
appealed to well-off, paying patients, whom mainline hospitals
depended on to earn their profits
A weak stock market that sent hospital endowment investment
Something had to be done, and Wishard was seriously
considering almost all of its options, including these:
Closing Wishard’s heavily used and highly respected emergency
Merging with Clarian Health, which operates Indiana University,
Riley Children’s, and Methodist hospitals, or entering joint
ventures, potentially involving construction projects
Building a hospital to replace Wishard facilities, some of which
had been built in 1914
Increasing copayments for outpatients to reduce unnecessary
Wishard’s CEO stressed that construction of a new hospital would
not be likely for another 5, 10, or even 15 years, depending on the
pace at which fundraising set aside sufficient monies for
construction or on the ability to pass a county bond to fund the
construction. The construction would be very expensive;
replacement of the whole facility could cost up to $750 million.
While Wishard was struggling to decide what to do, a construction
boom occurred and competition increased among area hospitals.
Hospitals around Indianapolis were spending lavishly, investing
more than $700 million in new or updated facilities, most with
interior decor and lobbies fit for luxury hotels. These elaborate
new facilities made Wishard appear even worse off.
This new focus on consumerism and profligate spending in the
hospital business gave rise to what Daniel Evans, president of
Clarian Health, called “mindless competition.” For example, the
$60 million Heart Center of Indiana in Carmel, which opened in
December 2002, offered cooked-to-order meals. City-focused
Clarian, the largest healthcare system in the area, expanded its
market to the suburbs by building a $150 million hospital in
Hendricks County and a $235 million hospital in Carmel. The
Hendricks County Medical Center was situated in a parklike
setting that included a half-mile of walking trails in a serene
environment intended to reduce the stress of a visit or stay in the
hospital. To keep patients and attract new ones, both St. Vincent
and Community Hospital took on physician groups as equity
partners in their heart hospital projects, while Clarian sought to
partner with physicians at its two for-profit suburban hospitals. St.
Vincent opened a $24 million children’s hospital in 2003,
becoming the first facility to compete head to head with Clarian’s
Riley Hospital for Children, previously the only children’s hospital
in central Indiana. St. Vincent also opened a $15 million cancer
center, complete with a serenity garden and an indoor waterfall,
while Clarian planned to counter with an even larger cancer
center near IU Hospital.
Area hospitals’ struggle to compete was compounded by the
market entry of national for-profit providers. For example, almost
all local hospitals offering cancer care lost business to an
aggressive for-profit operator, U.S. Oncology, which opened four
cancer treatment centers in the Indianapolis area in the previous
six years under the name Central Indiana Cancer Centers. These
freestanding centers were projected to treat more than 43,000
patients in 2003. The cancer centers could handle patients at a
lower cost because they lacked large hospitals’ overhead
stemming from their big maintenance staffs, parking garages, and
The hospitals also faced competition from OrthoIndy, a large
orthopedics practice that was building a $30 million orthopedic
hospital, and the 60-room Heart Center of Indiana, which featured
a highly trained staff, one of the first all-computerized patient
record systems, and furnishings befitting a Fortune 500 firm.
Other hospital sites also demonstrated opulence. Clarian’s
futuristic $40 million People Mover was designed to ferry doctors
and staff over city streets to its scattered hospitals, and the lobby
of Clarian’s two-year-old, $30 million cardiovascular center
featured a terrazzo stone floor.
Amid all of this change, most hospitals were receiving lower
reimbursements from insurers than they had previously, and the
growing demand for charity care decreased the profitability of
three of Indianapolis’s four largest hospital networks. The
following table shows these three networks’ revenue, earnings,
and full-time equivalents in 2002 and the percentage change in
revenue and earnings from 2001. The figures for St. Vincent, the
fourth network, are from the first eight months of the 2002–2003
fiscal year and include its hospital in Carmel.
Although their reimbursements and profits decreased, all of the
healthcare systems except Wishard still made money in 2002.
What Should Wishard Do?
Some believed that the days of a stand-alone Wishard were over.
Dr. Brater, dean of the IU Medical School, believed that there
were strong reasons to consider bringing Wishard into the Clarian
network in a formal way. Few (if any) inner-city, tertiary hospitals
providing high-level, specialized care could survive within a onemile radius of each other. In 1995 Methodist Hospital merged with
IU’s hospitals, which were located less than one mile from
Wishard. A merger would potentially eliminate duplication of
services and create economies of scale.
Would Clarian agree to take on Wishard’s massive community
burden of indigent care? What effect would this liability have on
the competitiveness of Clarian Health Partners, especially after
the construction and financial commitments it had recently made?
Short of a merger—which was not a foregone conclusion—
Clarian and Wishard discussed ways to collaborate and save
money. They considered options that would be invisible to
patients and the public, such as joint billing and purchasing.
Collaboration on medical initiatives, even joint ventures involving
construction, also was a possibility. Some collaboration already
existed between the two. Wishard did not provide open-heart
surgery, so it sent its open-heart surgery patients to Clarian.
Wishard operated a burn unit, whereas Clarian’s local Methodist
Hospital did not, so Clarian sent its burn patients to Wishard.
Wishard was recognized as an important part of the area’s
healthcare system. The other area hospitals and community knew
that closing Wishard would have a devastating impact on area
healthcare providers in that they would have to absorb the
indigent care. Indigent patients would also have a much more
difficult time finding care.
Mark Mueller, a patient whose perspective on Wishard had
changed with his own fortunes and health problems, exemplified
the struggle of indigent people to obtain care. He counted on
Wishard for almost all of his healthcare—in fact, his life depended
on it. He had been diagnosed with diabetes, and his kidneys had
failed. He had been unemployed for six years and lived on
disability. He had lost his insurance coverage, so Wishard was
the only place he could go for care. “I wouldn’t have any options,”
said Mueller, a widower. “I just don’t see how the poor…well, a lot
of them won’t survive if Wishard goes down the tubes” (Penner
An Interim Solution
Wishard had to do something to stem its losses. Frustrated,
Wishard’s board realized that most of the options it had
considered were too long-term or impractical. However, it
seriously discussed yet another option—increasing and enforcing
copayments. While the overall purpose of Wishard was to care for
the poor, the more poor patients it served, the greater the
hospital’s losses. In an effort to reduce the number of visits by
poor patients, Wishard implemented a new copayment policy on
October 1, 2003, that dramatically increased copayments for
patients visiting physician clinics and using emergency
department services. Although revisions of this policy in 2004
decreased the amount of up-front (time of service) copayment
required of self-pay patients, copayments still ranged from $35 to
$120, a significant amount for most indigent patients.
Collection of copayments also became vigorously enforced. In the
past, the clinics and the emergency department often overlooked
it, understanding that many of their patients had little or no
money. Beginning in late 2003, each clinic, hospital, and
emergency department was required to collect copayments from
all nonemergency patients up front.
Some board members and physicians were concerned that this
policy would discourage vulnerable patients from seeking care.
They speculated that pregnant women might skip physician visits
and wind up rushing to the emergency department at the time of
delivery. They also feared that patients with diabetes and
hypertension might self-treat and seek care only in emergencies,
which could increase hospital stays and the overall cost of care.
Wishard continued to struggle to find its strategic direction. The
only certainty was that the future would become only more difficult
for all healthcare providers, especially those like Wishard that
primarily served poor and vulnerable populations.
Sources: Penner (2003a, 2003b); Swiatek (2003).
What was Wishard’s competitive situation?
Did Wishard have direct competitors? If so, in what areas did it
What strategic leverage did Wishard have over the other area
From a societal perspective, what problems occur by having a
stand-alone public hospital with a primary mission of serving the
What strategic steps would you recommend for Wishard?
BOOK: Walston, S. L. (2018). Strategic healthcare management: Planning and
execution. Chicago, IL: Health Administration Press. ISBN: 9781567939606.
DEVELOPMENT AND EXECUTION OF A STRATEGIC PLAN
You don’t need a strategy. You need strategies.
“What is your strategy?” is the wrong question. The right question is, “What are your
strategies?” No organization can get by with one strategy. You need a handful.
Thomas Aquinas advised, “Beware the man of one book.” The same advice applies to
strategies. That handful of “driving strategies” should be synergistic. They should strengthen
and feed on one another. Each is a linchpin. Remove one driving strategy, and the others suffer;
that one strategy is often reduced to impotence.
A handful of strategies persistently and consistently pursued in support of a compelling vision
unifies, integrates and coordinates the daily work of the organization. According to Rumelt: “The
idea that coordination, by itself, can be a source of advantage is a very deep principle. It is often
underappreciated because people tend to think of coordination in terms of continuing mutual
adjustments among agents. Strategic coordination, or coherence, is not ad hoc mutual
adjustment. It is coherence imposed on a system by policy and design. More specifically, design
is the engineering of fit among parts, specifying how actions and resources will be combined.’”
—Dan Beckham, “10 Surprising Keys to Strategic Thinking for Health Care CEOs,” 2016b
After reading this chapter, you will
understand the basic principles of strategic plan development;
be able to describe the process involved in creating a strategic plan;
have learned how environmental and gap analyses help leaders set strategic priorities;
perceive the importance of stakeholder alignment and the role of communication in achieving
stakeholder buy-in and support;
be aware of various sources of data;
comprehend the basics of effective goal setting;
know how to use project charters; and
recognize strategic planning structures, including personnel responsibilities and governing body
For most organizations, the principal representation of their strategic direction is their written
strategic plan. The plan articulates the organization’s mission, vision, values, goals, and
objectives and the motives behind its decisions and actions. Most organizations use an annual
planning process to formulate written strategies and budgets documents that allocate resources
for the upcoming 12 to 18 months, establish financial and operating metrics, and align
management’s efforts on key strategic priorities. However, as discussed in the quote at the
opening of this chapter, strategies, not a strategy, should be developed into written plans that
should be used as a guideline, not as a blueprint that has to be followed. Strategic plans
ultimately should provide value to their organization by
defining, developing, and sustaining a clear strategic advantage;
producing meaningful differences from competitors;
appropriately allocating and aligning resources;
creating understanding and commitment; and
driving accountability and implementation (Beckham 2016b).
Although there are many ways to construct a strategic plan, to be useful and effective it must
answer the following questions:
Where is the organization now?
What needs to be done to achieve the organization’s mission and vision more completely?
What avenues might the organization take to accomplish the mission and vision?
What specific actions …
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