Good Emanuel Medical Center: Crisis In The Health Care Industry Case Study Example
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1. Introduce the case with an overview of Emanuel Medical CenterEmanuel Medical Center (EMC) is 344 bed hospital located in Turlock, California (about 100 miles East of San Francisco). Founded in 1917, by two pastors of the Swedish Mission Church EMC was established to serve the local community regardless of race, or religious beliefs. The three goals of EMC are “caring for their customers and each other; providing clinical, operational, and service excellence; and growing revenue, facilities, and people” (Ginter, Duncan, & Swayne, p. 678). The hospital is divided into three units a 150-bed acute care unit, a 145-bed skilled nursing unit and a 49-bed assisted living unit. The factors affecting the hospital included an expensive emergency department, a reduction in patients with ample health insurance, reduced Medicaid, and the ageing baby boomer generation which includes ageing patients creating an increased need for healthcare and an aging generation adding to a nurse shortage.
2. Conduct a Situational Analysis that incorporates:a) An Environmental Analysis
Exhibit 2-3 Strategic Thinking Map of the Environmental Analysis Process
Political: US hospitals are regulated and affected by a variety of government bodies. The Occupational Safety and Health Administration (OSHA) regulates employee safety and provides guidelines. The Title XXII of the Federal Health and Safety Code structures the policies that regulate patient safety. The Emergency Medical Treatment and Active Labor Act (EMTALA) was passed into federal law in 1986. The law mandates access to health care to any person on hospital grounds regardless of the person’s ability to pay for health services. The law was a response to an incident where a gang member died in front of a hospital in full view of emergency medical staff. In the late 1990’s the law became actively enforced, EMTALA violations carry a fine of $50,000 to both hospitals and physicians. The Emergency Medical Treatment and Active Labor Act turned emergency room departments into free health care clinics. A rapid increase in underinsured and uninsured patients created a situation where the EMTALA caused many hospitals to claim bankruptcy. The political climate continued to worsen for US health-care as the Balanced Budget Act of 1997 decreased Medicare’s compensations. Managed health care became increasingly popular during the 1990’s shifting cost burdens from employers and insurance providers to physicians, HMO’s and hospitals.
Economic: In the US hospitals are regulated and funded by a variety of different government bodies and insurance providers. The US health-care industry accumulated $1.553 trillion in spending during 2002 accounting for 14.9 % of the country’s GDP. Between 1998 and 2002 US spending on hospital have increased by 28.5 %, while spending on physician and clinical services climbed 32%, however the largest growth was in pharmaceutical spending. Between 1996 and 2002 spending on pharmaceuticals has tripled. In 2002, US consumers spent $162.4 billion. In 2002, state and municipal governments operated 1,136 hospitals a little more than 14% less than in 1996. There have been huge decreases in patients with adequate insurance coverage along with laws that require the emergency department to treat patients regardless of their ability to pay. The two factors together have caused the emergency department’s expenses to quickly grow. Making the financial situation worse is the cutbacks in Medicaid.
Social: The population of Turlock is approximately 200,000 as of 2002, 32% of the area’s population is Hispanic. The aging baby boomer generation has created a shift in the demographics of EMC’s service area. The ageing baby boomers have caused a large increase in the demands for health care services. The aging population has also had an effect on staffing. The average age of nurses has also risen along with their salaries furthering a gap between the demand for nurses to provide increasing amounts of health services for an ageing demographic and the available supply of nurses. To compete with the high demands for nurses hospitals have begun creative non-financial benefits such as flex time to maximize the time availability of nurses.
Technological: Health care technology evolves at a fast paced and the value of new technology goes far beyond figures. New equipment saves lives and makes it easier for hospitals to provide quality health care services. Specialized services such as advanced cardiologic care require expensive modern equipment that smaller hospitals cannot afford. The expensive new technology brings it large profits for hospitals that offer the advanced specialized services. As a smaller hospital, Emanuel Medical Center lags behind the industries technological advancements.
The health care related external environment provides an abundance of accurate news sources to monitor. Medical journals offer information about the advancements in technology and official government press releases off up to the minute news about changes in regulations or fiscal sources.
The ageing baby boomer generation will continue to age until mortality rates spike affecting both the demand for health care services and the demand for more nurses. As the generation continues to age their needs will shift to more needs for care services. Their mobility will begin to recede and full service care services will be in high demand. Emanuel Medical is already equipped with various facilities that can accommodate the lack of mobility care services that will be coming in high demand. An alternative method of handling the needs for the aging baby boomer generation will be to increase the ability to lead home care services to allow for more aging baby boomers to receive health care in their homes. The most pressing matter facing EMC is the financial factors. EMC could face bankruptcy if the situation worsens. An immediate review of the hospital’s viability is underway seeking alternatives. The expenses occurring by the ED need to be addressed.
The ED needs to balance their expenses in order for the hospital to remain viable. A closure of the ED would leave the community to suffer. However a merger of the responsibilities of the ED along with the need for free clinics could present a partial merger. If the community and other health care providers in the area came together to share the responsibility of providing emergency services along with free clinics all parties would benefit from the partial merger.
b) Service Area Competitor Analysis - Exhibit 3-1 Service Area Competitor Analysis
The Service Categories: can be defined in three main categories acute-care, skilled nursing care and assisted living. The acute care unit provides a range of services including acute inpatient services, intensive care, surgical services and general medical care services. The acute care unite features 150 beds, that maintain an average 50% occupancy rate. Most of the beds available in the acute care unit are positioned in double rooms. The average patient being treated in the EMC acute care unit is provided with single occupancy of a double room. In the skilled nursing unit or Brandel Manor provides twenty-four hour nursing and physiotherapy to post-surgical and chronically ill patients. Many of Brandel Manor’s patients are unable to care for themselves due to lack of mobility or mental illness. EMC also provides assisted living services at the Cypress of Emanuel location. The services offered at Cypress of Emanuel include medication dispensing, group dinning and social activities while also offering residents an apartment setting. Residents of Cypress of Emanuel are all mobile and care for themselves.
The Service Area: can be defined as the city of Turlock along with twelve small communities in the surrounding area. Sixty-four percent of patients are residents of the city of Turlock, fourteen percent of patients are residents of the secondary service area the twelve small communities located within fifteen miles of EMC, and the remaining six percent of patients are from other service areas.
Service Area Profile: The population of Turlock is approximately 200,000 as of 2002, 32% of the area’s population is Hispanic. The aging baby boomer generation has created a shift in the demographics of EMC’s service area. In 1999, over 40% of EMC’s patients were over the age of 65 and the fastest growing percentages of the admissions from the Emergency Department were Hispanic. January 2001, a report from the California Medical Association (CMA) released a report titled California’s Emergency Services: A System in Crisis. The facts reported by the CMA demonstrated the situation faced by emergency departments in California. The states grossly underfunded emergency health services lacked the resources to respond if a crisis arose.
Service Area Structure Analysis:
Emanuel Medical Center along with other health care facilities within the larger competitive service area are funded by both government funding and insurance providers. The US health care industry creates a massive portion of the government’s spending. The US health-care industry accumulated $1.553 trillion in spending during 2002 accounting for 14.9 % of the country’s GDP. Between 1998 and 2002 US spending on hospital have increased by 28.5 %, while spending on physician and clinical services climbed 32%, however the largest growth was in pharmaceutical spending. Between 1996 and 2002 spending on pharmaceuticals has tripled. In 2002, US consumers spent $162.4 billion. In 2002, state and municipal governments operated 1,136 hospitals a little more than 14% less than in 1996. The massive US health care industry has been challenged with a widespread economic situation that also threatens California’s state of health care. Between 1996 and 2000, 7 % of California’s hospitals closed due to situations similar to the challenges faced by EMC. Decreases in patients with adequate insurance coverage, expensive emergency departments, and nurse shortages have become the county’s health economic situation. Medi-cal, California’s health insurance provider for low-income families increased the reimbursements they provided health providers with by 14 % in 2000 compared to their reimbursements the previous year.
Emanuel Medical Center faces a variety of demographic factors that need consideration. The hospital’s main patients are residents of the city of Turlock. The city’s population was approximately 200,000 in 2002. The area has a 32% Hispanic population. The ageing baby boomer generation has had a double effect on the hospital. Both patients and care providers are ageing in large numbers. In 1999, over 40% of EMC’s patients were over the age of 65 and the fastest growing percentages of the admissions from the Emergency Department were Hispanic. The rate of uninsured and underinsured patients is growing causing rising costs in the emergency department. In the state of California 7 million residents are uninsured.
The hospital’s economic situation only adds to the stresses facing EMC. The nurse shortages have caused employee fatigue. Health care providers have begun using flexible schedules to help nurses maximize their available time. Doctors have experienced increased patient demands and lower salaries. Also, the increased wait times in the emergency departments have caused patients to suffer longer while waiting for health care. The US health industry has felt a widespread multi-layered headache that only adds to the financial situation.
Health Status Indicators
Indicators of the hospital’s service area’s health status include the ageing baby boomer generation, decreases in area residents with health insurance. The large group of ageing baby boomers creates an increase in the need for health services. The ageing group requires more health service providers than any previous generation. The shortage of nurses and the increased demands for health care stretches the resources of many hospitals.
Notifiable Disease Incidence
Conduct Competitor Analysis
Emanuel Medical Center’s four primary competitors are Sutter Health, Catholic Healthcare West, Tenet Healthcare Corporation, and Kaiser Permanente.
Sutter Health: operates Memorial Medical Center, a three hundred bed not for profit hospital, located in Modesto, California; along with a network of health services spanning twenty communities. Memorial Medical center is located 20 miles north of Turlock. Services provided at Memorial hospital include a family birthing center, outpatient surgery and specialized cancer and cardiac care facilities. Sutter Health provided treatment for more inpatients than any other health services provider in Northern California.
Catholic Healthcare West: operates both Mercy Hospital, a one-hundred and fifteen bed not for profit health care facility, located in Merced, California about 30 miles south of EMC; along with St. Joseph’s Hospital, a two-hundred and ninety-four bed not for profit facility, located in Stockton, California about 50 miles north of EMC. The service area of Catholic Healthcare West includes Arizona, Nevada and most of California making it the largest health care provider in the state of California.
Tenet Healthcare Corporation: operates Doctors Medical Center, a three-hundred and ninety-seven bed facility, located in Modesto, California only 20 miles north of Emanuel Medical Center. Tenet Healthcare provides non for profit health care services with a service area spanning the entire country operating 116 hospitals in 17 states employing 113,000 people across the nation. Services provided at Doctors Medical Center include cancer treatment, neurosurgery, cardiac care, and pediatrics. Increasing the action in Doctors Medical Center’s emergency department is a contract to provide emergency evacuations and injury treatment for Yosemite National Forest. Doctors Medical Center’s emergency department had 52,487 patients seeking emergency health services in 2001.
Kaiser Permanente: operates Doctors Medical Center, a seventy-three bed facility, located in Manteca, California; and contracts both Memorial Medical Center, a three hundred bed facility, located in Modesto, California; along with Dameron Hospital, a one-hundred and ninety-two bed facility, located in Stockton, California. Managed health care providers offer a unique strategy for responding to the economic situation facing US hospitals.
In comparison to their competition and the environment faced in the health care industry Emanuel Medical Center is average. Specialized services and managed health care providers are the thriving competition leading towards a recommendation for EMC to either specialize their services or to manage the insurance and financing aspect of the general health services they provide.
c) Internal Environmental Analysis and Competitive Advantage
Exhibit 4-3 Strategic Thinking Map for Discovering Competitive Advantages and Disadvantages
Application of the Strategic Thinking Map
In order To analyse the internal environment of EMC the thinking map below will clarify the analysis.
Strengths of EMC include the small community they serve, the efficiency of their operations and their ability to strategize their response to the situation they are currently facing. Other than the Emergency Department the hospital prides itself on its ability to provide cost efficient services. The small community nature provides a family feel that alleviates the stress felt by the nurse shortage. Strategic resources available for the hospital include the continuous purchasing of new equipment. Service delivery suffers from the nurse shortage just as the quality of services provided by the emergency department suffers from the financial shortcomings.
Soft resources such as doctors and nurses are stretched by the increased demand on the health care system, the reductions in insurance provisions, and the nurse shortage. Emanuel Medical also has limited hard resources such as advanced technology to perform profitable specialized services. The ageing demographic has also affected the staff. Doctors and nurses are aging alongside the population. Though this is often seen as a weakness it does offer an advantage, there are an abundance of experienced doctors and nurses teaching. The hospital is capable of providing a wide range of general health services. The competitive strengths of EMC are their ability to operate efficiently and the small community that offers a great deal of cohesion and team spirit that will be key to the hospitals ability to face the challenges their situation offers.
3. Discuss the strategic options available to President Moen: merge the hospital with a competing health maintenance organization (HMO), sell the hospital, close the ED, close the hospital, or do nothing and try to maintain the status quo while dealing with the hospital’s myriad operational issues.
A merger with a competitor would only create a larger health administrator still facing the same economic problems. Selling the hospital in its current situation would cause a loss for investors. Closing the hospital would cause people to suffer without health services or people would need to travel further to a competitor’s health facilities. Doing nothing, will cause the hospital to bleed into bankruptcy from an expensive emergency department. Closing the emergency department would correct the current financial shortcomings but the small community the hospital serves would suffer. I would recommend that President Moen consider more creative solutions to solve the hospitals financial challenges in a manner that provides the optimum outcome for all stakeholders.
A few suggestions I would recommend President Moen to consider and evaluate as alternatives include:
Merging the emergency department
4. What are the most pressing operational issues President Moen should address?The most pressing issues President Moen should address are the expensive emergency department and the nurse shortage.5. Perform a financial analysis of EMC. What does your analysis reveal? Where is the company the strongest and where is it the weakest?
In 2001, Emanuel Medical Center reported $4.7 million in income. The primary source of EMC’s income came from providing care to both in-patients and out-patients. The hospital had a net margin of 6.3 percent in 2001. However, in 2001 the hospital also lost $4.1 million from rising salaries and wages and HMO capitation programs. The company thrives at lowering the costs of patient care. 6. What strategic option would you recommend to President Moen?I would recommend President Moen addresses the costs occurring in the emergency department first in order to balance the hospitals financial situation. The ageing baby boomers and the nurse shortage will cancel each other out in the near future.
Ginter, Duncan, & Swayne. Strategic Management of Health Care Organizations, 7th edition. San Francisco CA: Jossey-Bass, 2013. ISBN: 978-1-118-46646-9.
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