The primary subject matter of this case concerns strategic management of community hospitals in the United States. This case has a difficulty level of five; appropriate for first year graduate level students. This case is designed to be taught in four class hours and is expected to require twenty-four hours of outside preparation for students. For the graduate student, it should be a half semester long group project with a presentation and report at the end of the semester.
This case study analyzes the turbulent social, legal and technological issues that are affecting today's suburban community hospitals in United States. The soaring health care costs, increasing number of uninsured or underinsured patients, reduced payments by government agencies, and increasing number of physician owned ambulatory care centers are squeezing the lifeline of community hospitals whose traditional mission has been primary care. Furthermore, with the enactment of Patient Protection and Affordable Care Act in March 2010, community hospitals are facing new challenges whose full impact is unknown. This case study would help students learn about Strategy Formulation including Vision and Mission Statements, internal and external analysis, and generating, evaluating & selecting appropriate strategies for a healthcare organization.
COMMUNITY HOSPITAL HEALTHCARE SYSTEM
With the enactment of Patient Protection and Affordable Care Act in March 2010 (Health Act), and President Obama's professed goal of making heath care in the United States more accessible and affordable, the next few years are sure to be very turbulent in the healthcare industry. The Health Act is expected to provide healthcare coverage to 95% of Americans, which will include an additional 32 million persons nationally (New Jersey Hospital Association, 2010). The Health Act goes into effect in 2010 with many of its requirements not becoming effective until 2019. Directly because of the enactment of the Health Act, insurance premiums are expected to increase anywhere from 2% to 9% depending on who is quoting them (Wall Street Journal, 2010). The Health Act requires children to remain on their parents' health plans until age 26, eliminates copayment for preventive care, bars insurers from denying coverage to children and adults (in 2014) with pre-existing conditions, eliminates lifetime caps on insurance coverage, and requires setting up of insurance exchanges in all states (by 2014) through which individuals, families and small business can buy coverage (Adamy, 2010; Pear, 2010).
United States spends approximately $2 trillion annually on healthcare expenses (Underinsured Americans: Cost to you, 2009). This amount is more than any other industrialized country in the world and counts for 16% of the U.S. GDP. This percentage is higher than any developed country in the world (Johnson, 2010). Despite the substantial healthcare spending, access to employer-sponsored insurance has been on the decline among low-income workers, and health premiums for workers have risen 114% in the last decade (Johnson, 2010). Furthermore, healthcare is the most expensive benefit paid by U.S. employers (Johnson, 2010). Despite this outlay, approximately 49 million Americans are uninsured and about 25 million underinsured-those who incur high out-of-pocket costs, excluding premiums, relative to their income, despite having coverage all year (Abelson, 2010; Kavilanz, 2009). Overall, the healthcare industry in America is besieged with high cost, uneven access and quality (Flier, 2009). The intractable issues of high cost, uneven access and quality have made everyone unhappy from patients, hospitals, doctors to employers.
The American healthcare industry is composed of approximately six major interest groups: hospitals, insurance companies, professional groups, pharmaceuticals, device makers, and advocates for poor (Goldhill, 2010) with the Physicians-part of the professional groupshaving the biggest influence on the industry. …