FACHE Board of Governors Exam Study Group Business Morris R. Fansler, MPA, FACHE Director, Strategic Marketing & Research Main Line Health Agenda Who is Morris? Objective, Purpose and End state Business BOG Module Blueprint Study material on Business Module Additional references Review sample questions 2 Business Module Objective The FACHE study group will use their knowledge and experience to thoroughly study the Business Module of the BOG Exam Purpose To achieve a level of comprehension valuable to both our exam prep and our professional development End state Study group members will be able to pass questions from the Business Module 3 Knowledge Blueprint: Business 20/18 of 200 questions Knowledge of strategic planning process Knowledge of business planning Knowledge of socioeconomic environment in which organization functions Knowledge of marketing principles & tools Knowledge of media relations, advertising & community relations 4 Knowledge Blueprint: Business Knowledge of techniques in negotiating contracts Knowledge of potential impacts of business decision making on operations, healthcare, HR & quality of care Knowledge of policies and procedures 5 Basic Statistical Analysis 6 Basic statistical analysis Statistical analysis provides the empirical tools to make sound decisions. Most basic of these are measures of central tendency: the median and mean. The median is that number above and below which 50 percent of scores fall. The mean refers to the arithmetic average of all scores. The mode is the most common or frequent score or number. 7 Basic statistical analysis Important to have some expression of the spread of scores within any group to evaluate more completely the group of data This distribution of scores is commonly called variability. Range shows the distance between the highest and lowest score in the group However, variability of scores is best represented by the standard deviation around the mean. 8 Basic statistical analysis Another tool is the control chart. It allows one to monitor, control and improve process performance by examining variation over time. The control chart will show the process mean (centerline) and the fluctuation or variation of data. Upper and lower control limits are set to indicate statistical control wherein normal variation is expected. Points outside the control limits may indicate problems that should be studied. 9 Control Chart Example 10 Basic statistical analysis One final tool to consider is that of regression analysis. This technique uses a mathematical equation to show the relationship between sets of data or variables. This relationship is depicted by a regression line that, when extended out into the future, can be used for health planning (e.g., forecasting of patient demand). 11 Regression Analysis Example 12 13 Strategic planning principles Planning is defined as anticipating the future, assessing present conditions, and making decisions concerning organizational direction, programs, and resource deployment. Also known as strategic management because planning must be integrated with other management functions (organizing, directing, controlling, staffing, and decision making.) 14 Strategic planning process AssessmentPlanningImplementation Evaluation and Improvement 15 Strategic planning process Assessment Review or establishment of vision, mission, values, and guiding principles. External assessment of market, competition demographics, environmental conditions, and technology as well as determination of customer or stakeholder needs and expectations. Internal assessment of strengths and weaknesses of the organization, including its financial status. 16 Strategic planning process Planning Development of a plan based on the assessment. The plan would include goals, specific objectives, metrics to assess success in reaching goals and objectives, and a delineation of resources needed to accomplish goals and objectives Enhancement of the plan using the principle of catch all whereby drafts of the plan are reviewed by all major departments and services 17 Strategic planning process Implementation Leaders establish the organizational culture, communication, rewards system, support structures and policies to ensure that the plan is effectively implemented Departments develop their own plans based on the organizations strategic plan Cross-functional teams are established, if necessary, to plan and implement major systems change across the organization Individuals are held accountable for the implementation of plan 18 Strategic planning process Evaluation and Continuous Improvement Measurement of results of plan against goals and objectives Evaluation or analysis of results Change/modification of plan based on the analysis of results 19 Business Plan Development and Implementation 20 Business Plan Development and Implementation A business plan is used as a vital communications and planning tool to channel efforts for a particular project or initiative. A business planning process enables a standardized process for market and data- driven comparisons of existing and proposed programs. 21 Business Plan Development and Implementation Business planning process: 1.Assess your current situation 2.Decide what you want to accomplish by drafting your objectives 3.Ensure all have input into the process 4.Discuss whether your business planning process is meeting objectives 22 Business Plan Development and Implementation Business planning document: Description of the project, situation, target market and objectives. Specific steps needed to accomplish the project or program along with a timetable (milestones) for implementation. 23 Business Plan Development and Implementation (2) All costs relevant for the project should be delineated: Operational, capital, or other resources needed Financial impact of the project: Break-even analysis, net present value, etc Measurement component: Utilization, revenue, expenses, etc 24 25 Basic Business Contracts 26 Basic Business Contracts Contracts occur in a variety of situations: Supplies Equipment Services An agreement between two or more parties that identifies rights and obligations 27 Basic Business Contracts Four elements of a valid contract: (1) An agreement is reached after an offer is accepted (2) There is consideration or something of value in the agreement 3) The agreement is reached by parties who have the legal capacity to contract 4) The contracts objective/purpose is lawful 28 Basic Business Contracts When a party does not perform certain performance requirements of the contract, a breach of contract can occur, usually resulting in a remedy (e.g., money damages) for the aggrieved party. Breaches can be avoided through careful drafting and negotiating of contract provisions. 29 Marketing Principles and Tools 30 Marketing Principals and Tools Marketing is critical to competitive advantage Process of planning and executing the conception, pricing, promotion and distribution of ideas, goods and services to create exchanges that satisfy individual and organizational objectives. Four Ps: Product, Price, Promotion, Place 31 Marketing Principals and Tools Defining key customer groups (market segmentation) and determining customer needs, expectations and buying behavior Segmentation analysis can be done through analysis of socio-demographic variables such as age, gender, ethnicity and geographic location Situational assessment is made often through a SWOT analysis that examines strengths and weaknesses of the organization as well as opportunities and threats in the current or future environment 32 Marketing Principals and Tools Studies of market share, brand loyalty and brand recognition are now regularly done to better understand the competitive position of the organization as well as what changes may be needed in promotion or advertising. 33 Marketing Principals and Tools Modifications in product strategy are often based on a portfolio analysis in which different service lines are evaluated with regard to their profitability, consistency with organizational goals and competitive position in the marketplace 34 Public and Community Relations 35 Public and Community Relations Community or public perception can be a major factor in the survival of the healthcare organization Any loss of support from the community will mean fewer patients, volunteers and donor support. 36 Public and Community Relations Strategies to enhance public image: Focus on personal interaction improving the day-to-day interactions between patients and caregivers Enhance employee morale Pay attention to job satisfaction issues so that employees have a positive attitude about their jobs that, in turn, is conveyed to patients 37 Public and Community Relations Connect with the community Conduct health education programs at community sites Dedicated hotline for patients to express their concerns Public forums where community members can interact with organization leaders Work with the media Send out regular news releases and newsletters Have members of the media sit on advisory panels 38 Public and Community Relations Providing culturally sensitive care Know and clearly understanding the demographics and culture of the different communities served Ensuring a culturally diverse staff Providing an interpreter service and translated materials 39 Organizational Policies and Procedures 40 Organizational Policies and Procedures Policies and procedures provide ongoing guidance for members of the organization Policies are intended to help organizations reach their objectives Must be consistent with and support the organizations mission, goals and objectives. 41 Organizational Policies and Procedures Policies are of two types: General policies apply to the entire organization Operational policies pertain to a specific unit, department or service Procedures define specific actions for organizational members Sequence of steps to complete a task Examples: Admitting, Discharging, Ordering supplies 42 Organizational Policies and Procedures Good policies have a number of characteristics: Consistent with larger organizational objectives Impact is well thought out before they are formalized Flexible so they can be applied in typical as well as unique situations Ethical and legal Reflect the values of the organization Clear and understood Consistent with each other 43 References / Study Materials 44 References Management and Business Haimann's Healthcare Management, Eighth Edition, by Rose T. Dunn, FACHE Haimann's Healthcare Management, Eighth Edition Healthcare Strategic Planning, Second Edition, by Alan M. Zuckerman, FACHE, FAAHC Healthcare Strategic Planning, Second Edition Health Services Management: Readings and Commentary, Eighth Edition, by Anthony R. Kovner, Ph.D., and Duncan Neuhauser, Ph.D. Health Services Management: Readings and Commentary, Eighth Edition The Leader's Change Handbook, by Jay A. Conger, Gretchen M. Spreitzer, and Edward E. Lawler III (This book contains chapters covering several knowledge areas.) Leadership for the Future: Core Competencies in Healthcare, by Austin Ross, LFACHE; Frederic J. Wenzel; and Joseph W. Mitlyng Managing Health Services Organizations and Systems, by Beaufort B. Longest, Jr.; Jonathon S. Rakich; and Kurt J. Darr, J.D., Sc.D., FACHE Mastering the Negotiation Process: A Practical Guide for the Healthcare Executive, by Christopher L. Laubach Mastering the Negotiation Process: A Practical Guide for the Healthcare Executive The Well-Managed Healthcare Organization, Sixth Edition, by John R. Griffith, FACHE, and Kenneth R. White, Ph.D., FACHE The Well-Managed Healthcare Organization, Sixth Edition 45 References All Modules:Exam Prep three-book Study Set: The Financial Management of Hospitals and Healthcare Organizations, Fourth Edition, by Michael Nowicki, EdD, FACHE, FHFMA The Well-Managed Healthcare Organization, Sixth Edition, by John R. Griffith, FACHE and Kenneth R. White, PhD, FACHE Human Resources in Healthcare: Managing for Success, Third Edition, by Bruce J. Fried, PhD and Myron D. Fottler, PhDW1-2115SW1-2115S 46 Sample Questions 47 Sample questions Section A 2. Successful approaches to strategic planning include: A) a well-written mission statement, long range plan, and fiscal plan, plus the history and discussion surrounding them B) avoidance of high-risk decisions C) not paying attention to the competitor's activity D) using rules and past experience as a guide to future action 48 Sample questions 7. Of the four following advertising media, which potentially has the maximum selectivity in reaching defined target audiences? A) Local radio B) Direct mail C) Network TV D) Outdoor advertising 8. To work effectively with the media, healthcare executives must: A) Be accessible at all times to the media B) Increase their knowledge of -and sensitivity to- the media's function C) Employ a public relations officer to control the release of all information D) Issue press releases on a timely basis 49 Sample questions 9. Which of the following is NOT one of the elements that are necessary for a contract to be valid: A) Terms of the offer and the acceptance must be identical B) Some "consideration" must be given (the price paid for the contract, not necessarily in the form of money) C) The purpose of the contract must be legal D) Terms of liability for breach of contract 10. In statistics, the term "median" means: A) The most common or frequent number. B) The number above and below which 50% of scores fall. C) The arithmetic average of all scores. D) (The sum of all of the scores) divided by (the number of scores minus 1). 50 Sample questions 11. Which of the following is NOT one of the "four Ps" of marketing: A) Product B) People C) Place D) Promotion 12. Which of the following is NOT one of the four steps of the business planning process: A) Assess the current situation B) Decide what you want to accomplish C) Ensure all have input into the process D) Implement the plan after ensuring it is communicated to everyone 51 Test Answers Section A 2 A 7 B 8 D 9 D 10 B 11 B 12 D 52 Questions from ACHE Materials Section B In the statistical analysis of data, what is the difference among the mean, median, and mode? The mean refers to the arithmetic average of all scores. The median is that number above and below which 50% of scores fall. The mode, on the other hand, is the most common or frequent score or number. These three measures allow an administrator to evaluate more completely any group of data, giving a clearer picture of central tendency of the data. 2. What is the purpose of a control chart? The control chart allows one to monitor, control, and improve process performance by examining variation over time. The control chart will show the process mean (centerline) and the fluctuation or variation of data. Upper and lower control limits are set to indicate "statistical control" wherein normal variation is expected. Points outside the control limits may indicate problems that should be studied. 3. Define "strategic planning." Planning has been defined by Longest, Rakich, and Darr (2000) as "anticipating the future, assessing present conditions, and making decisions concerning organizational direction, programs, and resource deployment." Strategic planning is now viewed more appropriately as "strategic management" in that planning should be integrated with other management functions (i.e., organizing, directing, controlling, staffing, and decision making). Hence, current strategic planning processes usually consist of the following four phases: assessment, planning, implementation, and evaluation. Questions from ACHE Materials What are the four elements found in most strategic plans? The strategic plan should include: goals specific objectives metrics to assess success in reaching goals and objectives resources needed to accomplish goals and objectives. 5. What can leaders do ensure effective implementation of the strategic plan? 6. What are the four elements of a valid business contract? The four elements of valid contract are: 1. an agreement after an offer is accepted 2. there is consideration or something of value in the agreement 3. the agreement is reached by parties who have the legal capacity to contract 4. the contract's objective or purpose is lawful Leaders establish the organizational culture, communication, rewards system, support structures, and policies to ensure the plan is effectively implemented. In addition, leaders should ensure that departments develop their own plans based on the organization's strategic plan. Leaders should consider the use of cross- functional/interdisciplinary teams to implement change across the organization. Finally, leaders should hold managers accountable for the implementation of plan. Questions from ACHE Materials Define "marketing." The most widely accepted definition of marketing comes from the American Marketing Association, which states that marketing is the "process of planning and executing the conception, pricing, promotion, and distribution of ideas, goods, and services to create exchanges that satisfy individual and organizational objectives." (Berkowitz, 1996). 8. What are the key elements of a market analysis? Marketing usually begins with defining key customer groups and determining customer needs, expectations, and buying behavior. This is usually followed by a segmentation analysis in which one evaluates such socio-demographic variables such as age, gender, and geographic location. In addition, a portfolio analysis is often conducted that examines service lines with respect to their profitability and competitive position in the marketplace. 9. What is the purpose of a business plan? A business plan is used as a vital communications and planning tool to channel efforts for a particular project or initiative. A business planning process enables a standardized process for market and data-driven comparisons of existing and proposed programs. Questions from ACHE Materials What should be included in a business plan? The actual business-planning document should include a thorough description of the project, situation, target market, and objectives. In addition, the plan must include the specific steps needed to accomplish the project or program along with a timetable (or milestones) for implementation. All costs relevant for the project should be delineated (operational, capital, or other resources needed) and the financial impact of the project should be shown (e.g., through a break-even analysis, net present value, etc.). Finally, the business plan should include an evaluation component that shows how the outcome of the project will be measured (e.g., utilization, revenue, expenses, etc.). Questions from ACHE Materials How can you enhance public relations and your image as a healthcare organization? To enhance public image, Chyna (2001) identifies several strategies:. Focus on personal interaction (improving the day-to-day interactions between patients and caregivers) a. Enhance employee morale (paying attention to job satisfaction issues so that employees have a positive attitude about their jobs which, in turn, is conveyed to patients) b. Connect with the community (e.g., conducting health education programs at community sites, having a dedicated hotline for patients to express their concerns, and holding public forums where community members can interact with organization leaders) c. Work with the media (e.g., sending out regular news releases and newsletters, having members of the media sit on advisory panels, etc.). Finally, reputation and public relations can be enhanced by providing culturally sensitive care. This would mean knowing and clearly understanding the demographics and culture of the different communities served, ensuring a culturally diverse staff, and providing an interpreter service and translated materials. Questions from ACHE Materials What are the characteristics of good organizational policies? Good policies have a number of characteristics:. they are consistent with larger organizational objectives a. their impact is well thought out before formalized b. they are flexible so they can be applied in typical as well as unique situations c. they are ethical, legal, and reflect the values of the organization d. they must be clear and understood e. they must be consistent with each other Study Questions Section C The four principles of Marketing are Product/Service, Price, Product/Location and a) Brand b) Promotion/Communication c) Innovation d) Trade Advertising 2. The liability of the "employer" of those who may or may not be in its employ but permitted to provide services to those being served by the "employer" is known as: a) Respondent Superior b) Breach c) Vicarious Liability d) Defamation Study Questions Negligence is a violation of a standard of care. Four elements must be present for allegations of negligence to be substantiated. Which of the following is not included in these 4 elements: a) Duty b) Breach c) Malpractice d) Damages 4. Crafting a response to stakeholder needs that will be effective in the long term defines: a) Environmental assessment b) Surveillance c) Strategic positioning d) Strategy selection Study Questions An organization's "hurdle rate" refers to which one of the following below? a) Interest rate on borrowed funds b) Propensity for debt financing c) Its intangible cost of borrowing added to its interest rate on borrowed funds d) The speed at which it reduces its working capital 6. Which of the following is not a valid physician defense against abandonment? a) Enough notice of withdrawal for patient to find another physician b) Right to limit practice in a certain geographical area c) Referred to seek care from another physician d) Ill health prevents him from treating the patient Study Questions Which of the following is not a required element to prove negligence or malpractice: a) Duty to care b) Causation c) Damages d) Medication administration 8. Which of the following is not a Common Boilerplate provision? a) Attorney fee provision b) Waiver c) Force Majeure d) Rule of Reason Study Questions Which of the following is an uncontrollable factor in a marketing plan: a) Economic environment b) Budget c) Personnel d) Creativity 10. Which of the following is not included in a typical Marketing Plan? a) Marketing Research and Analysis b) Customer Retention c) Merchandise Management d) Marketing Strategies e) Public Relations Study Questions The continuous improvement approach to strategic planning, an effort to link all levels of resource allocation closely to customer needs is called: a) Epidemiologic planning b) Hoshin planning c) Flexibility planning d) Trend planning Study Questions An organization committed to open systems, community-focused strategic management, and continuous improvement is by definition: a) A well managed organization b) A learning organization c) A cost conscious organization d) A non-profit organization 14. Environmental assessment or environmental scanning is a formal surveillance review of the organization and its environment. All but one of the following should taken into account by the planning unit: a) Community demography, epidemiology, and economy b) Trends in physician availability c) Niche strategies d) Patient/community attitudes Study Questions What stage is healthcare strategic planning in it developmental process: a) Mature b) Immature c) Middle d) Beginning 16. How many planning issues can and should be dealt with in the strategic planning process if the planning is going to lead to a successful outcome? a) Limited b) All c) Most d) Some Study Questions Strategic planning has been used by healthcare organizations somewhat sporadically since: a) 1950 b) 1970 c) 1980 d) Hospital systems have many "customers." Of the 4 mentioned groups of people or organization below which is least likely to be listed as key targets in a marketing campaign? a) Buyers b) Caregiver exchanges c) State government d) Patients Study Questions This concept is to design each healthcare project to have the greatest possible benefit to cost ratio and to rank order possible projects, identifying and implementing the ones that have the greatest ratio of benefits to costs: a) Hoshin planning b) Six Sigma c) Optimization d) Surveillance 20. Relative to a for-profit organization, which of the following is perhaps the best distinguishing characteristic of a not-for-profit organization's contribution to its community? a) Bad debts b) Tax exemption c) Protection of intangibles d) Investment in health education Study Questions All of the following define an organizations strategic position except? a) Mission b) Scope of services c) Ownership d) Values 22. Which is NOT one of the four elements found in most strategic plans? a) Goals b) Specific objectives c) Metrics to assess success in reaching goals and objectives d) Financing options e) Resources needed to accomplish goals and Study Questions A thorough description of the market being served, identification of all major trends in demographics and disease incidence, and forecasts to the future are essential to: a) Diversification b) Health insurance buyers intentions c) An environmental assessment Test Answers Section C 1 B2 C 3 C 4 C5 C 6 C 7 D8 D 9 A 10 C12 B 13 B 14 C15 B 16A 17 B18 C 19 C 20 C21 D 22 D 23 C 71