FINAL_Catholic_Health_Initiatives_Food_and_Nutrition_Commercialization_Recommendation

CATHOLIC HEALTH INITIATIVES

This project is to design and develop a standalone Food and Nutrition Support Services Program within the Supply Chain department that can then be

marketed and sold to other healthcare systems. By developing this standalone business services support Program, Supply Chain can then use this model to

create other standalone Programs that will eventually allow it to market a full Supply Chain offering to healthcare organizations.

Evaluation of Food

and Nutrition

Commercialization

Program

JKT2 – MBA Final Project Prepared by: Cheryl J. Clark Student ID: 417037 October 27, 2014 Mentor: Deidre Von Elkerson

EVAL OF F&N COMMERCIALIZATION 1

Table of Contents

1. Organization Background and Current Status .............................................................. 3

2. Food and Nutrition Commercialization Program Summary ........................................ 5

3. Program Background and Analysis ................................................................................ 7

CHI Food and Nutrition Program-Operations ................................................................... 7

Program Staffing ................................................................................................................... 7

Program Development and Design .................................................................................... 12

Reporting and Dashboards ................................................................................................. 16

CHI Food and Nutrition Program-Marketing ................................................................. 17

Customer Base ..................................................................................................................... 17

Marketing Plan .................................................................................................................... 19

CHI Food and Nutrition Program-Finance ...................................................................... 21

Staff Requirements .............................................................................................................. 21

Capital Expenditures .......................................................................................................... 22

4. Recommendations ........................................................................................................... 24

CHI Food and Nutrition Program-Operations ................................................................. 24

Program Staffing ................................................................................................................. 24

Program Development and Design .................................................................................... 27

Reporting and Dashboards ................................................................................................. 28

CHI Food and Nutrition Program-Marketing ................................................................. 29

Customer Base ..................................................................................................................... 30

Marketing Plan .................................................................................................................... 31

CHI Food and Nutrition Program-Finance ...................................................................... 33

Staff Requirements .............................................................................................................. 33

Capital Expenditure ............................................................................................................ 34

Recommendations Summary .............................................................................................. 36

Operations ............................................................................................................................ 36

Finance .................................................................................................................................. 39

5. Program Implementation Plan ...................................................................................... 42

Operations ............................................................................................................................ 42


Marketing ............................................................................................................................. 46

Finance .................................................................................................................................. 49

6. Program Implementation Timeline ............................................................................... 53

7. Commercialized Program Impact to CHI .................................................................... 54

8. Conclusion ....................................................................................................................... 56

9. References ........................................................................................................................ 58


Organization Background and Current Status Catholic Health Initiatives (CHI), a nonprofit, faith-based health system formed in 1996

through the consolidation of four Catholic health systems, expresses its mission each day by

creating and nurturing healthy communities

in the hundreds of sites across the nation

where it provides care. One of the nation’s

largest health systems, Englewood, Colo.-

based CHI operates in 18 states and

comprises 96 hospitals, including four

academic health centers and teaching

hospitals and 26 critical-access facilities; community health-services organizations; accredited

nursing colleges; home-health agencies; and other facilities that span the inpatient and outpatient

continuum of care. In fiscal year 2014, CHI provided $910 million in charity care and

community benefit -- a nearly 20% increase over the previous year -- for Programs and services

for the poor, free clinics, education and research. Charity care and community benefit reached

more than $1.7 billion with the inclusion of the unpaid costs of Medicare. The health system,

which generated revenues of almost $13.9 billion in FY14, has total assets of $21.8 billion.

“Together, as a values-driven work community we can fulfill our mission to bring new life,

energy and viability to our health care ministry today and into the future.”

With the implementation of the new healthcare reform law in America, the Patient

Protection and Affordable Care Act (PPACA) 2010 HR3590, or Affordable Care Act (ACA) for

short, the configuration of healthcare is changing especially as it relates to reimbursements. The

goal has now become keeping the patient population served from entering the hospital and


providing for their health needs in preventative and disease management methods. With the new

method of healthcare coverage established by the ACA, health systems like CHI will be paid a

specific dollar amount for each person they serve in the defined population. CHI will be able to

increase the bottom-line revenues by keeping their patient populations healthy and out of the

hospital. Because this is new and untested and there is no way of knowing if revenues will be

generated, CHI is asking that all business areas determine methods or Programs to increase

revenues for the organization.

Healthcare organization

executives are asking their staffs to

do more with less while continuing to

meet the quality, safety, outcomes

and patient satisfactions necessary to

remain competitive. “The resources

needed to meet these higher expectations are shrinking. People are being asked to do more with

less. The healthcare workplace, never a place for sissies under the best of circumstances, has

become a chronically stressed environment” (Goozner, 2013).


Food and Nutrition Commercialization Program Summary

With the passage and graduated implementation of the ACA, CHI has been working since

2010 to develop programs and service lines that will reduce expenses to improve operating

incomes. Supply Chain has been instrumental in several programs and expense reduction efforts

during this time. For example, a National Office Supplies Program has been developed that is

managed at the national level as well as a Food and Nutrition Program that is currently under

development and system-wide implementation. Business Support Service Lines for

Orthopedics, Cardio Rhythm Management, Spine and Oncology have been developed and are

managing expense by working with the vendor and physicians

to create the optimal solution for patients and the organization.

In addition, CHI Supply Chain has developed and implemented

a commercialized Clinical Engineering support service that has

been sold to several outside health systems. This Clinical

Engineering support service has been classified as world class

by two large health care consulting firms.

With the unbridled environment now occurring, healthcare organizations are becoming

more flexible and moving to outsource those particular services that are not within the core

competencies of the their healthcare system in order to provide the quality they require and the

savings needed to remain competitive. Leadership’s focus will be on clinical patient quality

instead of back door types of services.

This project is to design and develop a standalone Food and Nutrition Support Services

Program within the Supply Chain department that can then be marketed and sold to other

healthcare systems. By developing this standalone business services support Program, Supply


Chain can then use this model to create other standalone

programs that will eventually allow it to market a full

Supply Chain offering to healthcare organizations.

This Program will benefit other systems because it

will allow them to implement processes, procedures and

savings that will improve their operating margins quickly

as well as improving the health of the people and communities they serve. Along with this will

be the financial benefit to CHI Supply Chain permitting them to contribute to the raising of the

additional revenues required for continued solid operations at CHI (Kutscher, 2014).

This project development recommendation will focus on several functional departments

within CHI: Operations, Marketing and Finance.

Disclaimer

The information and analysis contained in this document is the proprietary and exclusive

property of Catholic Health Initiatives and is solely based on the current economic and health

care environment. The risks associated with this analysis are solely owned by Catholic Health

Initiatives. No part of this document, in whole or in part, may be reproduced or used for design

purposes without the prior written permission of Cheryl Clark.

The information in this document is provided for informational purposes only.


Program Background and Analysis

CHI Food and Nutrition Program-Operations

With the reduction in expenses being implemented across the organization, the client is

concerned with having the appropriate amount of staff and time to complete this Program for

commercialization. There are also concerns that the current staff workloads are at a maximum

and the amount of time required to manage this project will impede its progress.

Program Staffing

The client would like to utilize the staff already in place to the degree it is possible and

limit the number of new staff required to manage a successful Program. By successfully

integrating this Program into the current work, the client hopes to reduce the amount of Program

operating expense, increase profits and to ultimately increase the overall revenues for the

organization. The client is also interested in knowing what the ROI will be on the investments

made to operate the Program.

General Considerations

-CHI food and cafeteria spend in FY14 for all facilities was = $26,897,388

-CHI savings generated from this Program in FY14 were = $3,394,300 with a net savings margin

of .13%. Currently 12 out of 96 facilities are utilized the Program for all of FY14.

-CHI currently is partnered with a world-wide food service Program.

-CHI currently has three full time dedicated staff to the F&N Program and one 30 hour staff

person.

-Vice President – 40 hours per week; 52 weeks per year with four weeks paid time off.

-Finance Manager – 40 hours per week; 52 weeks per year four weeks paid time off.


-Sr. HR Manager – 40 hours per week; 52 weeks per year four weeks paid time off.

-CHI Supply Chain has one part-time staff (Director) dedicated to the implementation

and management of the F&N Program. – 30 hours per week; 52 weeks per year four weeks paid

time off.

- Average hourly compensation (wages, bonuses and benefits) = $65.71/hour.

-Average savings produced per average hour in FY14 = $353.12.

-Savings per facility FY14 = $282,858 (12 facilities – one market)

-Projected worst-case scenario average hourly savings produced with full implementation =

$1,026/hr. at $8M projected savings.

Projected best-case scenario average hourly savings produced with full implementation =

$1,923/hr. at $15M projected savings.

-Minimum percentage increase in implementations required to meet best-case average hourly

savings = 77% or 41 facilities for a total of 53 facilities in three markets.

-Minimum percentage increase in staffing required to meet best-case scenario = 75% (additional

three market Food Managers).

Title Base Wage Bonus 9%

Healthcare

10%

Retirement

6%

Total

Compensation Wages/Hr Hours/Yr

VP 150,000$ 13,500$ 15,000$ 9,000$ 187,500$ 90$ 2,080

Director ‐ 30 hrs 110,000$ 9,900$ 11,000$ 6,600$ 137,500$ 66$ 1,560

Finance Manager 80,000$ 7,200$ 8,000$ 4,800$ 100,000$ 48$ 2,080

HR Manager 70,000$ 6,300$ 7,000$ 4,200$ 87,500$ 42$ 2,080

Total 410,000$ 36,900$ 41,000$ 24,600$ 512,500$ 246$ 7,800

Ave/Hr

Compensation

65.71$


Current Program and Implementation Progress

Because CHI is partnered with a world renowned food service organization, the

employment pool is very experienced and knowledgeable in this field. The current F&N

Program employs a Vice President from this food service organization that is also a registered

dietician and expert in her field. In addition, the Analyst currently on staff comes from this same

partner organization so he is well versed in the specifics of food service analytics. The CHI

Supply Chain Director has been with the organization many years and has a very strong

background in implementation and contract sourcing.

The implementation of the F&N Program within the CHI System has been convoluted

and difficult to “sell” to the various divisions. Significant efforts have been made to educate and

supply the supporting financials to show the continued benefit of implementing the Program.

Because the Program takes time to recognize the savings (significant investment in the first

stages of the Program), CHI continues to meet road blocks and implementation delays.

Questions and Analysis

Who will manage this new Program?

Since this commercialization of the Program is new and is a separate initiative from the

Food and Nutrition implementation at CHI facilities, there will need to be an increase in staffing

to market and sell the Program. As the Program grows and more agreements are made, there

may be a need to hire additional Managers of Operations.


What would an org chart look like for this new Program?

Executive AssistantVice President

Food and Nutrition Business Line

DirectorFood and Nutrition

Business Line

Manager OperationsFood and Nutrition

Business Line

Senior Vice President Business Lines

What space requirements are needed for new staff?

Because this is a new Program that will require a few additional staff, the space

requirements will be in the National Office. The Vice President, Director and Manager will all

be new positions that will require seating. The Vice President and Director will have offices and

the Manager a cube since they will likely be traveling a great deal.

What equipment and furniture requirements are needed for new staff?

The new staff will all need computers, phones and furniture for their offices and cube if

none is available.

The equipment and new employee staffing costs would be approximately =

$6000/person.


What will the new staff cost?

- Average hourly compensation (wages, bonuses and benefits) = $68.11/hour.

- Three new staff would cost approximately $500,000/year in wages, bonuses and benefits.

What added operations expenses will be associated with new staff?

Operational expense will include salaries, benefits and all travel associated with the

Program. Significant travel will be required to market the Program and then to implement the

installation once an agreement has been executed.

Marketing and Sales Travel per location = $10,000

Assessment Travel per location = $8,000

Implementation Travel per location = $10,000

Average Travel per location per each executive (3) = $9,334


Healthcare

10%

Retirement

6%

Total


VP 150,000$ 13,500$ 15,000$ 9,000$ 187,500$ 90$ 2,080

Director ‐ 30 hrs 110,000$ 9,900$ 11,000$ 6,600$ 137,500$ 66$ 2,080

Ops Manager 80,000$ 7,200$ 8,000$ 4,800$ 100,000$ 48$ 2,080

Total 340,000$ 30,600$ 34,000$ 20,400$ 425,000$ 204$ 6,240

Ave/Hr

Compensation

68.11$


Program Development and Design

The Program Development and Design will entail some extra efforts as the product

offering will be somewhat different than what is currently available. The client would like a

recommendation as to what and how the commercialized Program will look and what aspects of

the Program will be marketed.


-Because the current Program at CHI is having difficulty in getting implemented, efforts must be

taken to see where the issues are.

-CHI has a custom agreement with their partner that may impact the design of a new Program.

-Implementation (full Program) for each facility = 100/ave number of hours.

-Approximate Operational Costs (wages, travel)/Implementation = $65,000 wages + $20,000

travel = $85,000

-Estimate of Operational Costs for Implementation/for each management staff (3) =$28,333


The current Program contains the following elements:

1. Patient Meal Services – At Your Request – Room Service Dining

2. Nourishments/Floor Supplies

3. Cafeteria Services

4. Catering Services

5. Clinical Nutritional Services

6. Other Meals

7. Physician Dining


8. Meal Distribution (Meals on Wheels)

The implementation of the CHI Food and Nutrition Program is going very slow due to a

lack of leadership commitment. The Program was initially marketed to all senior and executive

leadership and approved as a national Program that was mandatory for all locations to

implement. Since that first approval, the COO and CFO have allowed two divisions to back out

of the national Program and run their own food and nutrition service. The savings projected

included all divisions so this has impacted the yearly results.

In addition, the IT component of the Program has been another issue as the Program is

reliant on IT to assist with the software for the POS, employee discounts, room service tracking,

expense tracking, etc. and IT is in the midst of implementing an Electronic Records Program

throughout the organization so their manpower is limited as well as budgeting.


How will this new Program be designed?

The new Program will need to have several components to be successful. The initial

piece of the new Program will be marketing of the offering, then there will be an assessment

conducted at the site to determine where the savings can be generated, then legal will be

involved for contracting and finally an implementation along with sustainability.

Will the new Program contain all aspects of the CHI F&N?

The new Program will contain all aspects of the CHI F&N Program but the client has the

option to not implement the entire offering at first. The mandatory items for a contract to be

considered are: installation of the software that manages all aspects of the food Program; giving

CHI authority to manage all finances and accounting; installation of the POS and cash registers;

patient meal delivery and the automation of the food production that includes all nutritionals and


recipes. The remaining items will be optional: floor stocks, physician dining, catering, vending,

outpatient nutritional consulting, meals distributions outside of hospital and hospice.

Will the new Program have standard operating procedures?

In order to be cost effective, the new Program will contain standard operating procedures

for the group managing the Program as well as standard operating procedures as part of the

contract negotiations. It will be important that the operations are compliant to procedures at the

facility level in order for the savings to be realized.

What risks are associated with this new Program?

There is a risk that the new Program will cost more than what can be achieved in net

revenues. There is also a risk that under their current agreement, their food service provider does

not agree to be a part of the new Program.

How will the new Program be tested?

In order to determine if the Program is viable and produces the expected outcomes, it will

be necessary to test it at a location that is neutral. One way to test it is to implement it at a JOA

(Joint Operating Agreement) location. This is a location that is not fully owned by CHI but

rather partly owned and managed. This will allow for an unbiased approach and feedback.

How will we charge for the new Program?

The Program will be broken into segments and different options will be available. There

will be a minimum commitment to the software, reporting, supply ordering, cafeteria and patient

ordering system as well as staffing of the food service and its management. The pricing will be

broken down for each location for software, reporting and the ordering system. Each month the

client will receive an invoice for use of each of these items as well as supplies ordered and

management fees. The monthly use fee for the software maintenance, reporting and ordering


system will be prorated at 5% of the value and the management fee will consist of a portion of

CHI management staff salaries and operating expense as well as the full expense for the food

management employees at that location. Trainings, uniforms and other employee benefits will

be prorated per the contract specifications and length. If additional features are included in the

contract, they will be invoiced as a separate line item.

There will be an initial investment by the client in the full purchase of the software and

any IT infrastructure that needs to be put in place.


Reporting and Dashboards

In order to be successful, there must reporting and dashboards available to track and

document expense and progress.


- Analytic reporting monthly for costs, savings and margins.

- Reports provided to each facility Finance leader where the Program is in place through

the software installed.


Labor Savings are currently calculated at 22% of total savings generated.

Revenue Enhancement are currently calculated at 17% of total savings generated.

Supply Savings are currently calculated at 25% of total savings generated.

Capital Savings are currently calculated at 36% of total savings generated.


What IT components are needed?

A complete assessment will need to be conducted to determine what IT infrastructure is

required before installing the tracking and management software associated with the food service

Program. Locations vary on their capabilities so this will need to be included in any Program

charge.

What equipment is needed?

Once again this will depend on the location and their ability to provide the necessary

equipment and capital improvements required to implement a Program. Based on the agreement,

it will depend on how much of the capital improvements are provided by the location and CHI.


What will the Key Performance Indicators be?

Some examples may include:

Floor Stock Costs per Patient Day

Internal Catering Costs

Patient Tray Costs

Along with cost KPI’s there will be Quality KPI’s as well and may include:

Patient Satisfaction

Tray Quality Assessment

CHI Food and Nutrition Program-Marketing

Since this is a new Program that will require a specific marketing plan for

commercialization, investment must be made to create a successful Program.

Customer Base

Since CHI is a healthcare organization, the customers will likely be in a healthcare type

of facility.


-Marketing Materials are available for internal use.

-Significant analysis has been conducted that has focused on where there is opportunity within

CHI.

Current Program

The current Food and Nutrition Program is focused on conducting an assessment at the

CHI facilities and then presenting those findings along with reasons why the Program will be of

benefit to the location.



What are our projected number of Programs to sell?

There currently isn’t a projection on the number of Programs that will be sold however

this will be determined once the financial analysis has occurred and will be included within this

Proforma a worst and best case scenario.

Who will we market as a target first for this new Program?

Our first target will be large systems with many facilities. Being able to sign an

agreement that includes many locations will create financial opportunities. Each location will

have its own Service Level Agreement.

What current CHI staff will be utilized for this new Program?

Because CHI has a strong Communications Department, staff will be utilized to assist

with all marketing materials and communications. The use of current data through the Enterprise

Intelligence Warehouse will continue and the CHI Food and Nutrition staff will work closely

with the new staff hired to create and implement the commercialization plan.

CHI attorneys and their Legal Department will also be accessed for new contracts and

service level agreements.

What are the strengths of this new Program?

The strengths of this Program are extensive and will be used in the marketing and selling

of the Program. The Program will reduce costs, food quality will be enhanced and employee and

patient satisfaction will improve. Beyond the food component, standardized financial,

operational and IT systems will be applied. Along with these items will be the extensive training

that frontline staff and managers receive.


What are the weaknesses of this new Program?

There are a few weaknesses that go with the Program that can be overcome with the right

communications and management. One area of weakness in the Program is the ability to

determine the culture at the facility and what it will take to move people to change and adapt to a

new way of doing things. Food is a very emotional subject that impacts everyone in the facility.

Understanding the emotions and expectations may be a weakness. Understanding the IT

infrastructure can also be a weakness if a thorough assessment has not been completed. This

piece of the Program is essential to its success.

What is the benefit of this new Program to the end user?

The final Program will provide a supplier to end user turnkey process that gives patients,

staff and guests high quality service and nutritional foods and competitive prices.

Marketing Plan

Designing an effective Marketing Plan will be paramount to a successful launch of the

commercialized Program. The Plan should include the pricing, product, projection and research

of contracts to execute along with all communications and platforms to be used to introduce and

sell the Program.


CHI has created several documents to utilize or build upon that were used to sell and

market the current Program to its facilities. CHI has resources for website creation and printed

and electronic documents.


Current Program

The Current Program did not require a complete marketing plan since it is designed for

implementation at the CHI facilities. The analysis conducted was for internal use only and all

information and communications as well are designed for CHI locations.


How will this new Program be advertised?

Once a complete analysis has been conducted on the market and potentials have been

determined, a marketing of the product will be determined that best fits the analysis.

How will new clients be approached?

There are several options to approaching clients that may include face-to-face meetings,

trade shows and conferences, telephone calls and advertising in medical and food publications.

Who will determine what new clients to approach?

Once again after the analysis is complete, it will be determined where the sales Program

should start. This will be predicated on the research done through the market analysis.

Who will manage this new Program marketing?

In the Program’s initial stages, it would be cost effective to have the Vice President

manage the marketing and sales of the Program. Once the Program grows, it may be financially

beneficial to hire a marketing/communications staff member to manage all publications and

communications.

Who will manage this new Program’s communications?

Because there is no specific person hired to manage communications during the initial

stages and years of growth, CHI should utilize the current Communications Department to assist

with their needs.


CHI Food and Nutrition Program-Finance

The success of the Program will stem from the data that can be provided to track and

manage. Finance management and expense management are imperative to the new Program’s

success.

Staff Requirements

The new Program will utilize staff already available at CHI with a bare bones structure to

start. As the Program grows, additional staff will be added to provide benefit to the overall

success of the commercialization.


Utilizing the CHI Food and Nutrition Program’s current staff will be important as the

Program is developed and designed. The staff that have been involved with the CHI Program’s

success will be valuable as the new Program is under construction. Recruitment of the initial

staff will be conducted by the CHI HR Department to save additional expense to hire recruiters.

Current Program

Currently the F&N Program has one staff member dedicated to hiring and managing the

HR function of the Program. As the Program develops and grows, additional staff will be

considered and utilized by the new commercialized Program.

Recruiting and retaining qualified and competent staff is costly and if done correctly and

employees managed well, will reduce the amount of turnover.


Will locations be responsible for hiring their chefs and management staff?

No. As part of this Program, CHI will manage the staff required to run the Program. In

order to manage the success of the Program, its implementation and daily production, it is


important that CHI manage the Program at a high level with specific accountabilities and

expectations.

Will specific HR benefits be provided for staff employed by CHI and the facilities?

Yes. There will be significant trainings on the operations, diversity and quality

management. Along with this for example, there will be rewards for goal achievement and a

Program to encourage excellence as well as uniforms being provided.

How much will CHI need to contract for to experience a profit with their employee

investment?

The following provides an example of a full Program implementation yearly cost to the customer

and the net profit estimate for CHI based on one system with 230,000 patient days per year:

Capital Expenditures

In most cases, the facility location will need some redesign, updating and new fixtures to

promote and sell the additional quantities needed to justify the investment in their new Program.

One Year

Per Patient

Day

Food Suppl ies 2,816,000$ Cost of food suppl ied through CHI Vendor. 12.24$

Ful l Program Cost 690,000$ Ful l Program Implementation 3.00$

Management FTE's 300,000$ Director of Food Service, Dietician, Chef 1.30$

Total Billable 3,806,000$ 16.55$

Food Vendor Rebates 240,000$ Rebates received through CHI vendor GPO relationship. 1.04$

Less Food Supply Expense (2,816,000)$

Total Gross Revenue 1,230,000$ 5.35$

Tota l F&N Employee Expense 425,000$ Three new management staff hired. 1.85$

Travel Expense 80,000$ $2000/trip at 40 trips per year 0.35$

Marketing Expense Year One 20,000$ Website, trade show, printed materia ls 0.09$

Adminis trative Expense 18,000$ New staff equipment 0.08$

Total Gross Operating Expense 543,000$ 2.36$

Net Revenue Year One with One Location 687,000$ 2.99$

Based on one Facility with 230,000 patient days per year.



Capital improvements are costly and there must be a benefit to the organization if

improvements are made. Since capital is depreciated over time, the determination of who pays

for the capital improvements will need to be a part of the agreement.


- Capital Improvements are conducted by the CHI food service provider in place if they are

kitchen or point of service related.

- CHI Capital Improvements occur when there is updating to the design or interior of the

cafeteria.


Is it financially beneficial to CHI to own capital in locations where they have no vested

interest?

No. Capital requires management and if CHI owns it, they will be responsible for its

upkeep, depreciation and sale if necessary.


Recommendations

The following analysis is based on the assumptions previously provided with the

parameters that are available.

CHI Food and Nutrition Program-Operations

The CHI Operations of the F&N Commercialization Program are predicated on the use of

current staff running the CHI F&N Program as well as utilization of the CHI departments that are

already in place such as Communications, Legal, Supply Chain and Operations.

Program Staffing

The staffing of this new Program will require investment by CHI to recruit and obtain the

strong talent needed to sell, operate and manage this complex endeavor. The initial investment

will be recouped quickly once sales are obtained. Depending on how long it takes to recruit and

get the new staff up to speed with the current CHI F&N Program.

A best and worst case scenario have been analyzed and if the worst case is achieved,

there is still benefit to implementing the Program. The worst case scenario is based on one

system sale in year one and because much of the expense is absorbed by the National CHI

budget, it provides a strong case to move forward with the Program and the hiring of additional

staff to manage the sales and operations.

Observations

The cost of recruiting is absorbed into the CHI National HR Recruiting expense since this

department is already in place and can function as a partner to the new Program. The costs of the

new staff; Vice President of the Food and Nutrition Business Line; Director of Food and

Nutrition Business Line Operations and the Manager of Food and Nutrition Business Line will


cost approximately 425,000/year. Not included in these costs is the utilization of the current HR

and Finance Managers in the CHI F&N Program. In the initial stages of the Commercialization

Program these two staff can be utilized to assist with the necessary reporting and staffing of the

new employees required at the client level.

The ROI on hiring three additional staff will be achieved with one system client

contracting with CHI. This is based on the conservative analysis conducted showing that net

revenues for CHI are increased by ~$687,000 and $2.99/patient day if a system of over 200,000

patient days per year is contracted.

TOTAL INPATIENT DAYS OF CARE - Sum of each daily inpatient census for the time

period examined. For instance, if the time period examined was a week, and the daily inpatient

census was as follows: Day 1=30, Day 2=28, Day 3=26, Day 4=35, Day 5=35, Day 6=25, Day

7=25, then the total inpatient days of care for that week would be 30 + 28 + 26 + 35 + 35 + 25 +

25 or 204 total inpatient days. As opposed to discharge days which count all days the patient was

in the facility regardless of the date of admission, inpatient days of care are days of service for

those patients admitted during a specified time period.

“Total patients in 2010 were 1,140,000 with an average of 4.6 days per stay” (CDC

Government United States, 2010). Total patients = 1,140,000 at 4.6 days per stay in one year for

all hospitals. This data is based on 2010 and hospital admissions and days per stay have

decreased due to implementation of the American Affordable Care Act and reimbursements

available. “Inpatient admissions declined across all age groups. Overall inpatient utilization at

Chicago-area hospitals dropped by about 4.6 percent from 2010 to 2012” (Herman, 2014). There

are 5,723 hospitals registered in the US according to the American Hospital Association (AHA)


as of 2012. Assuming that patient admissions have fallen by 5% (1,083,000), and the average

hospital stay fallen to 3.8 days, the total patient days is equal to 1,502,121,000 (365 days per year

times 3.8 and 1,083,000). With 5,723 hospitals registered through the AHA the average number

of patient days per facility is approximately 262,470 per year. Of course this is just an average.

Many facilities have more and many have less than this number of patient days per year.

The marketing and contracting with systems containing several facilities will be key to

the success of this Program.

CHI currently has an effective Just In Time (JIT) method of distribution which helps to

keep their costs down and it will continue to be utilized as the Program moves forward.

Recommendations

The decision to move forward with the commercialization Program is predicated on the

success and credibility of the Program implementation to CHI’s full system. Before CHI takes

this leap to invest in a commercialized Program, they must make sure that their house is in order

and that the CHI Food and Nutrition Program is implemented in at least two-thirds of their

locations. This will allow them to market their experience and success to others.

Prior to implementation in two-thirds of their facilities however, they can make the

investment to begin the commercialization Program so when the organization is fully

comfortable with commercialization they can hit the ground running. The staffing of this new

Program will need to put in place several months before the actual marketing of the product.

Recommendations are to begin hiring the commercialization staff when the CHI system

is at half implementation of all facilities. By the time the commercialization is ready to go into

production, the CHI system should be implemented to the two-thirds mark.


Program Development and Design

The Program Development and Design will have the benefit of CHI already having their

Program in place in several locations. The expansion or decrease in their current Program will

be the basis for the Commercialized offering.

Observations

The current Program has encountered some setbacks with its development and design due

to some unexpected and unplanned roadblocks. IT implementation and approval of the food

service and point of service application took a significant amount of extra time to process and put

in place. This was due to an incomplete assessment based on the IT requirements.

Furthermore, the culture and the emotional attachment to food were not taken into full

consideration especially with the initial facility. Because this is a CHI Program, there was a

significant amount of pushback and not enough push to get the Program implemented. This

stemmed from the lack of upper leadership support and enforcement.

The Program is a partnership with a world class food management company and together

CHI has a world class food delivery system in place. CHI has created an efficient model that

drives the highest quality of food at the lowest costs. CHI also has very good supplier contracts

through their Group Purchasing Organization (GPO) that allows for cost reductions that can be

passed on to each facility. This Program allows CHI to own the food delivery process and to

drive the Program from the highest leadership levels.

CHI has developed a Just in Time (JIT) delivery system that is the most cost effective and

requires the least amount of labor that adds to the overall benefit of implementing this Program.


Recommendations

In order to develop a world class commercialized Food and Nutrition Program to market

to other systems, CHI must fully understand their product, its costs and its benefits to the

consumer. As part of this, extensive analysis must be conducted to determine the amount of time

it takes to implement the Program with different levels of implementation and different scenarios

that could be encountered.

In order to be successful, a clear understanding of the assessments must be put in place

with clear directions and communications as to the accuracy of the analysis conducted at a site.

The increased revenues are linked to an accurate and full assessment. Cost adjustments to the

client must be based on where they stand currently and what it will take for CHI to implement a

Food and Nutrition Program. As part of this, an operations manual should be developed based

on best practices that can be revised as necessary once a commercialized Program is sold. There

needs to be a starting point with the operations of a commercialized Program.

Reporting and Dashboards

Without good data, it is just someone’s opinion. Data is key to the success of the current

CHI Food and Nutrition Program and the implementation of a Commercialized Food and

Nutrition Program. Dashboard reporting is important communication with clients and CHI.

Observations

CHI does not currently have dashboard reporting for the facilities that are running the

Program. Reporting is taking place that provides the necessary information by location to show

the savings that the Program is generating. The current Program is not a revenue generating

Program and Food Service is classified on the Income Statement as an Operating Expense.


Recommendations

It is recommended that for the time being CHI continue with its method of reporting that

will include a daily dashboard showing the expenses incurred through the current F&N Program.

Since clients are required to install all software applications that are pertinent to the food

delivery and management Program, the collection of the data won’t be an issue. The dashboard

should be expanded to include a separate dashboard for the new Business Line of F&N. In order

for the organization to understand the financial status of the Program and the profit making at

specific facilities, there will need to be a heavier emphasis on reporting.

The savings portion of the reporting will be important to share with clients to justify the

Program in their facilities and the financial expense to CHI will also be necessary to see which

locations are the most profitable. This data will be used in marketing to other locations and will

tell the story for the F&N Commercialization.

CHI should take advantage of their current Enterprise Intelligence Department as well as

their Supply Chain Data Management Department to develop specific dashboards and reporting

for the current F&N and the Commercialized F&N.

CHI Food and Nutrition Program-Marketing

Marketing of the current and new Program is a continual process and requires significant

effort to tell the entire story of the benefits of the Program. Because the benefits of the Program

aren’t felt instantly, there can be some apprehension to implement a Program. CHI is in a

continuous mode of telling the accurate story of the current Program and communicating specific

expectations and a clear articulation of what the Program entails.


Customer Base

“One-quarter of hospitals lose money on operations and the average operating margin is

5.5 percent. In non-profit hospitals, these margins are used to make capital investments to ensure

that hospitals keep pace with technological change such as adoption of electronic health records,

meet myriad government regulations and have the resources and capacity to meet the growing

demand for care from our aging population” (American Hospital Association, 2014). The

customer base will be determined by researching the hospital systems operating at a margin of

5.0 or more in the United States. These systems will be the ones to target because they will be

looking for any possible Program that will reduce their costs but keep them competitive while

improving their patient and employee satisfaction.

Outsourcing non-clinical business is a cost saving move for many systems and if the

product provided reduces operating expense, it will be that much more appealing.

Observations

CHI currently has a full Communications and Promotions Department and the World

Class Food Service Program they are partnered with can be utilized to assist with any marketing

needs the new Program may require.

CHI has a robust internet presence as well as printers and marketing staff stationed

throughout the organization in different locations.

Nationally, lessons can be learned from the CHI Commercialized Clinical Engineering

Program that has been in place for a couple of years. They were able to develop their marketing

through the use of existing National staff with the employment of design contractors for their

internet and marketing logos and standard verbiage.


Recommendations

It is recommended that CHI continue to utilize their existing Marketing and

Communication professionals in the immediate stages of the F&N Commercialization Program.

As the Program develops and as more clients are contracted, they should look to hiring a

communications and marketing staff member. The extent to which the current National CHI

staff can contribute may be limited so relying on them should also be limited.

It is also recommended that the use of contracted staff be utilized during the pre-sale of

the commercialized offering. These contracted staff can fill in the gaps where CHI staff don’t

have the knowledge or the time to help. Leaning on the Commercialized Clinical Engineering

Program’s experience will be beneficial to the Food and Nutrition Commercialized Program

designers.

Marketing Plan

Understanding the market and where the Program will be of benefit is paramount to the

success of the Commercialized Program. A marketing plan consists of several elements.

Industry, industry availability, industry demand, pricing and awareness.

Observations

The healthcare industry currently does not have a Program available to purchase that

provides the offerings of the CHI Commercialized Food and Nutrition Program. The partnership

between the food service group and CHI is unique and is the only one in the healthcare industry.

Because of this, CHI is leading the way in the development of quality, cost effective and efficient

food service at their facilities.

The amount of time and energy it has taken to develop the current Program is significant

and the partnership agreement took over two years to complete. Now that the current design and


development of the Program are in place, emphasis can shift to commercializing the Program

and providing this same level of quality to other systems.

Recommendations

It is highly recommended that CHI review the current implementation plan and have a

clear understanding of what information can be marketed to the outside systems.

CHI must create a full marketing plan that will contain several components based on the

client they are trying to reach. For example, a nursing home will need a very different product

that the acute care hospital and the marketing materials must reflect this. Significant analysis

must be conducted to determine the pricing around different packages and what the limitations

are to each of them.

As stated above, it will be important that CHI has implemented their Program in at least

two-thirds of their locations to have the credibility to sell to other systems. While this is taking

place, efforts can be made to design a commercialized Program with marketing appeal so when

the switch is turned on, the marketing can begin.

The initial marketing plan should include the design and development of a website that

promotes the new venture. Obtaining consumer interest will be beneficial, however, the site

should not go into detail as to what the product is and what is being offered. Too much

information sharing can result in a competitor creating their own commercialized Program and

stealing the business.

Word of mouth and conducting an anonymous survey are also a good ways to get a feel

for the climate and to understand if the product to be marketed is viable. Since CHI is such a

large system, utilizing the executive level staff to ask their competitors about interest could

provide benefit down the road.


CHI Food and Nutrition Program-Finance

Creating a financial benefit to CHI is the ultimate goal of developing a commercialized

F&N Program. CHI is aware that in order to accomplish this, monies must be invested in staff to

manage, design and develop a successful Program.

Staff Requirements

Additional national management staff requirements will be needed to create, implement

and monitor existing Program sales.

Talent must be researched and recruited for individuals that are willing to take on new

challenges and new business lines. Understanding the change management process and the

development of clear understandings of culture and the emotional emphasis that food has on

individuals will be important to their success.

Observations

Staffing of the current F&N Program at CHI is complete with a Vice President, part-time

Director, Financial Manager and an HR Manager.

The staff underestimated the amount of difficulty they would encounter with

implementing the CHI Program. This wasn’t all of their fault as the leadership did not fully back

the current CHI Program and did not encourage divisions to implement even though they had


Healthcare

10%

Retirement

6%

Total


VP 150,000$ 13,500$ 15,000$ 9,000$ 187,500$ 90$ 2,080

Director ‐ 30 hrs 110,000$ 9,900$ 11,000$ 6,600$ 137,500$ 66$ 1,560

Finance Manager 80,000$ 7,200$ 8,000$ 4,800$ 100,000$ 48$ 2,080

HR Manager 70,000$ 6,300$ 7,000$ 4,200$ 87,500$ 42$ 2,080

Total 410,000$ 36,900$ 41,000$ 24,600$ 512,500$ 246$ 7,800

Ave/Hr

Compensation

65.71$


fully committed themselves when the Program was presented and approved. This has caused

major delays, employee satisfaction and frustration on the part of staff and locations that did not

fully understand the expectations.

Data was not available prior to the implementation of the Program and collecting it has

been cumbersome. Because each locations was able to run their own food service Programs,

there is not the detail available in all locations to fully complete an assessment or to track and

communicate savings once the Program is in place. By implementing the F&N Program, it has

created a national standardization, reporting and accountabilities to each location based on the

service level agreement that the facility has entered into with CHI.

Recommendations

Hiring qualified and competent staff to assist with the design, development and then

management of the Commercialized Program is necessary. Utilizing the current CHI HR

Recruiting staff and thus having the expense absorbed nationally, is to the best economic benefit

to the organization. Utilizing the talent of the food service organization that CHI has partnered

with will also keep the cost of recruitment to a minimum.

Keeping the salaries and benefits in line to CHI standards is important to keep the costs

of the Program as an economic benefit. The current rate of $65.71/hour per staff member is

slightly high, however, it is understood that in order to recruit the best talent, it may be more and

seen as a long-term investment.

Capital Expenditure

“Capital costs are fixed, one-time expenses incurred on the purchase of land, buildings,

construction, and equipment used in the production of goods or in the rendering of services. Put

simply, it is the total cost needed to bring a project to a commercially operable status. Whether a


particular cost is capital or not depend on many factors such as accounting, tax laws, and

materiality” (Wikipedia, 2014).

Observations

The capital expenditures for the current CHI Food and Nutrition Program are minimal.

The food service company that has partnered with CHI has taken on the capital expense for

updating the food service Programs in each facility. The cost is then absorbed into the Program

fee that the facility is charged.

CHI does not have a warehouse and distribution Program in place for food or any other

aspect of their business.

CHI invests a significant amount of capital into facility improvements and the building of

new facilities across the country.

Recommendations

Capital expenditures should continue to be kept minimal as CHI implements a new

Commercialized Food and Nutrition Program. The location that is contracting with CHI should

either invest or follow the current business plan with the food service provider to make the

necessary improvements and then bill back to the facility the expense of the improvements.

CHI would also benefit and have a higher rate of return if they invested in a warehouse

and distribution system instead of relying on their current methods. Having a third party conduct

the distribution and warehouse the product adds to the expense of the supplies. Of course this

would not be a solution just for the Food Service Program but would have a tremendous impact

on the entire organizations finances.


Recommendations Summary

Operations

The decision to move forward with the commercialization Program is predicated on the

success and credibility of the Program implementation to CHI’s full system. Before CHI takes

this leap to invest in a commercialized Program, they must make sure that their house is in order

and that the CHI Food and Nutrition Program is implemented in at least two-thirds of their

locations. This will allow them to market their experience and success to others.

CHI should also investigate the legalities of implementing a Commercialized Program of

this nature and understand the liabilities that may go with it. CHI’s legal department is extensive

and if time isn’t available for this task, they have contracted attorneys that can be utilized.

Recommendations are to begin hiring the commercialization staff when the CHI system

is at half implementation of all facilities. By the time the commercialization is ready to go into

production, the CHI system should be implemented to the two-thirds mark.

The implementation of a basic Program in one system where the patient days per year are

estimated at 200,000 will recoup one full year of investment in staff.


In order to be successful, a clear understanding of the assessments must be put in place

with clear directions and communications as to the accuracy of the analysis conducted at a site.

The increased revenues are linked to an accurate and full assessment. Cost adjustments to the

client must be based on where they stand currently and what it will take for CHI to implement a

Food and Nutrition Program. As part of this, an operations manual should be developed based

on best practices that can be revised as necessary once a commercialized Program is sold. There

needs to be a starting point with the operations of a commercialized Program.

It is recommended that for the time being CHI continue with its method of reporting that

will include a daily dashboard showing the expenses incurred through the current F&N Program.

Since clients are required to install all software applications that are pertinent to the food

delivery and management Program, the collection of the data won’t be an issue. The dashboard

should be expanded to include a separate dashboard for the new Business Line of F&N. In order

for the organization to understand the financial status of the Program and the profit making at

specific facilities, there will need to be a heavier emphasis on reporting.

One Year Based on one Facility implementing Basic Plan

with 230,000 patient days per year. Total

Food Suppl ies 2,816,000$

Ful l Program Cost 690,000$

Management FTE's 300,000$

Total Billable 3,806,000$

Food Vendor Rebates 240,000$


Total Gross Revenue 1,230,000$

Total F&N Employee Expense 425,000$

Travel Expense 80,000$

Marketing Expense Year One 20,000$

Adminis trative Expense 18,000$

Total Gross Operating Expense 543,000$

Net Revenue Year One with One Location 687,000$


CHI should take advantage of their current Enterprise Intelligence Department as well as

their Supply Chain Data Management Department to develop specific dashboards and reporting

for the current F&N and the Commercialized F&N.

Marketing

It is also recommended that the use of contracted staff be utilized during the pre-sale of

the commercialized offering. These contracted staff can fill in the gaps where CHI staff don’t

have the knowledge or the time to help. Leaning on the Commercialized Clinical Engineering

Program’s experience will be beneficial to the Food and Nutrition Commercialized Program

designers.

It is highly recommended that CHI review the current implementation plan and have a

clear understanding of what information can be marketed to the outside systems.

CHI must create a full marketing plan that will contain several components based on the

client they are trying to reach. For example, a nursing home will need a very different product

that the acute care hospital and the marketing materials must reflect this. Significant analysis

must be conducted to determine the pricing around different packages and what the limitations

are to each of them.

The initial marketing plan should include the design and development of a website that

promotes the new venture. Obtaining consumer interest will be beneficial, however, the site

should not go into detail as to what the product is and what is being offered. Too much

information sharing can result in a competitor creating their own commercialized Program and

stealing the business. The design and development of a full site can be in production during this


time. In order to fulfill the revenue assumptions, CHI will need to invest the $20,000 in their

marketing plan.

Word of mouth is also a good way to get a feel for the climate and to understand if the

product to be marketed is viable. Since CHI is such a large system, utilizing the executive level

staff to ask their competitors about interest could provide benefit down the road.

Finance Hiring qualified and competent staff to assist with the design, development and then

management of the Commercialized Program is necessary. Utilizing the current CHI HR

Recruiting staff and thus having the expense absorbed nationally, is to the best economic benefit

to the organization. Utilizing the talent of the food service organization that CHI has partnered

with will also keep the cost of recruitment to a minimum.

Hiring competent staff and retaining them is financially beneficial to CHI and will allow

them to move forward according to schedule. The cost of replacing and re-training staff is costly

and could set the project back significantly if a newly hired staff person leaves or must be

replaced. “Replacing a manager or executive who leaves for another job, or one who turns out to

be a bad hire or promotion, can be costly. It costs an average of 2.5 times an executive's salary,

and 2 times a manager's compensation, to replace them, according to the survey of 262

companies by OI Partners-The Brighton Group” (Foote, 2008).

Keeping the salaries and benefits in line to CHI standards is important to keep the costs

of the Program as an economic benefit. The current rate of $65.71/hour per staff member is

high, however, it is understood that in order to recruit the best talent, it may be more costly and

seen as a long-term investment.


Capital expenditures should continue to be kept minimal as CHI implements a new

Commercialized Food and Nutrition Program. The location that is contracting with CHI should

either invest or follow the current business plan with the food service provider to make the

necessary improvements and then bill back to the facility the expense of the improvements.

CHI would also benefit and have a higher rate of return if they invested in a warehouse

and distribution system instead of relying on their current methods. Having a third party conduct

the distribution and warehouse the product adds to the expense of the supplies. Of course this

would not be a solution just for the Food Service Program but would have a tremendous impact

on the entire organizations finances. “There is not a simple answer; this is a significant business

undertaking! As I look at it, there are several things you need to be considering, all related, some

simultaneous, some sequential: Staffing, Facility, Inventory, Transportation, Inventory, Supply

Chain Partnerships, Technology and finally Implementation” (Tecsys, 2014).

Recommendation Conclusion

CHI has great potential to implement a successful and revenue generating Food Service

Plan if every effort is taken to analyze and design and develop a Program that produces the

desired outcomes. Based on their success at their locations, they will be able to market a quality

product and provide healthy and appealing food and nutrition to the healthcare industry. Once

this is fully developed, they may choose to reach out and include other types of industries in their

consumer base such as schools, businesses, etc.

It is imperative that the highest leadership in the organization emphasize the importance

of implementing the current F&N Program. Without full executive leadership support, the

Program and the future commercialization of the Program is in jeopardy.


Because the data that is currently available does not supply the information to fully

analyze the effect of a commercialized Program, CHI must give themselves some additional time

to determine if the Program they design and implement is of value. Once CHI has fully

developed and implemented their Program in a majority of their locations they will be ready and

appropriately qualified to offer a commercialized Program that effectively meets the needs of the

healthcare industry and add to the CHI profit line.

This work will then be applied to other areas of business that can be commercialized at

CHI. For instance, the Environmental Services Program, the Linen Utilization and the

development of a linen coop at large locations such as Houston. As CHI develops each of these

business lines to commercialize, the final result will be a fully commercialized Supply Chain

Business Service Lines company that can generate significant revenues for CHI.


Program Implementation Plan

The implementation plan is predicated on the successful implementation of the current

F&N Program at CHI in half of its facilities. Without this history of success and experience

documented, the CHI F&N will have a difficult time selling and implementing a full

commercialized Program. Based on the CHI timetable of implementation the start date to begin

the design and development of the commercialized Program is January 1, 2015.

Operations

The implementation of the Operations Plan will be done with the combination of the staff

that are currently employed at CHI in the National Food and Nutrition Program as well as with

possible contracted personnel and the hiring of a small leadership team. The CHI Legal team

should be consulted to determine any liabilities or issues that may arise once this commercialized

Program is put in place. The development of an operations standards manual and a full detailed

assessment plan along with improved reporting through the Enterprise Intelligence group are

recommended before the Program is set in motion.

IMPLEMENTATION PLAN Operations Legal Review Lead Person: Current VP of F&N Program

Questions to Answer Response

What is CHI’s legal response to a commercialized Program?

Current VP of F&N Program consults with current CHI legal to determine if commercialization Program is viable and if there are any liabilities surrounding current agreements.

What resources are being used to answer?

Current VP of F&N Program and CHI Legal Team

How much time is required? This research should take about two months.

What tools are needed? CHI Legal employs interns in law school. This would be a great project for them.

Budget – hard or soft dollars?

This is soft money since the intern is already employed by CHI and the cost will be absorbed into the Legal budget.

Time and Effort Required? The intern will need to explore the current GPO laws, the liabilities surrounding the food industry and whether or not this can be done under the current contract with the food service


provider or if a new one will need to be established. Medium-high effort.

Costs versus the Benefit?

The benefit to implementing a commercialized Program will far outweigh the costs incurred by the Legal team at CHI. The costs associated with this research, will be recouped within the first year of production if one or two sales are made to systems that have 200,000 patient days or more per year.

Timeline? This should be started immediately and completed within two months.

IMPLEMENTATION PLAN Operations Contracted Staffing Lead Person: HR Manager of F&N Program


If contracted staff are needed, what is required?

HR Manager to work closely with the VP and Director to determine what contracted staffing is required prior to the hiring of permanent employees.

What resources are being used to answer this?

The current food service Program staff can assist with determining what additional help is needed in the preliminary stages of the Program development.

How much time is needed? This should require two to three one hour meetings to discuss and come to a conclusion on the need.

What tools are needed? Computer, phone, conference room. Access to current reporting system.

Budget hard or soft dollars? Soft dollars since this is current staff.

Time and effort required? This will require three weeks to discuss and determine the need and then another three weeks to put the contracted staff in place. Medium-high effort.

Cost versus benefit? The cost of this will be absorbed into the current Program and the benefit will be reaped once the commercialized Program is in place.

Timeline? Once the legal review is complete, this must be started and completed within two months.

IMPLEMENTATION PLAN Operations New Hire Staffing Job Descriptions

Lead Person: HR Manager of F&N Program


What staff are needed, what is required?

The current HR Manager can work closely with the current F&N leadership, the food service organization and the CHI recruiting teams.


HR Manager to work closely with the VP and Director to determine what the roles and responsibilities of the new staff should entail as well as working with the current food service, and the CHI recruiting teams. Template job descriptions are available to start from when creating these descriptions for the


new positions. How much time is needed? Two months What tools are needed? Computer, Microsoft software, templates Budget hard or soft dollars? Soft dollars since HR Manager is already employed.

Time and effort required? HR Manager will need to spend time creating these outside of their normal responsibilities so this may take some additional time and effort to complete. Medium effort.

Cost versus benefit? The cost versus the benefit will be reaped when the new Program is implemented.

Timeline? Start this immediately once the legal review is completed.

IMPLEMENTATION PLAN Operations New Hire Staffing Lead Person: HR Manager of F&N Program



The new VP and Director will need to be hired first and the Ops Manager hired once the Program is ready to sell.


CHI Recruiting, Taleo Recruiting software in place

How much time is needed? Three months minimum. What tools are needed? Computer, software Budget hard or soft dollars? Soft dollars since this is already in place at CHI.

Time and effort required? Hiring the appropriate staff always takes time and effort. Depending on the quality of clients to interview, it may take up to three months to hire. Med-high effort.

Cost versus benefit? The benefits of hiring good employees that will stay, far outweighs the cost put into acquiring them.

Timeline? Once the new job descriptions are complete the new VP hiring process should begin. Once CHI has implemented current Program in half of their facilities the hiring may take place.

IMPLEMENTATION PLAN Operations New Hire Staffing Lead Person: HR Manager of F&N Program



The Ops Manager hired once the Program is ready to sell.


CHI Recruiting, Taleo Recruiting software in place

How much time is needed? Three months minimum. What tools are needed? Computer, software Budget hard or soft dollars? Soft dollars since this is already in place at CHI.

Time and effort required? Hiring the appropriate staff always takes time and effort. Depending on the quality of clients to interview, it may take up to three months to hire. Med-high effort.

Cost versus benefit? The benefits of hiring good employees that will stay, far


outweighs the cost put into acquiring them.

Timeline? Once the Commercialized Program is functional and ready to market and sell.

IMPLEMENTATION PLAN Operations Assessment Manual Lead Person: Current Director



The current F&N Director along with a contracted staff person adept at writing procedure manuals.


Contracted staff, current F&N staff and experiences.

How much time is needed? Two months What tools are needed? Computer, previous assessments completed

Budget hard or soft dollars? Hard dollars for contracted staff and soft dollars for current Director’s time.

Time and effort required?

This will require some dedicated time to determine the best way to design and develop the manual. Effort will be required by the contracted staff to understand what the project entails and what the expectations are for a completed assessment manual. High effort.

Cost versus benefit?

The cost will be minimal (contracted labor at $50/hour, four weeks=$8,000) and the benefit will be that going forward, the assessments will be completed correctly and with the appropriate information so the implementation can go without surprises. This could ultimately save thousands of dollars in time.

Timeline? This can begin once half of the CHI facilities are implemented. IMPLEMENTATION PLAN Operations Standard Operations Manual Lead Person: Current Director



The current staff will be utilized and the new Ops Director as well as a contracted person to create and write and manual.


Current Food Directors that have implemented the current Program. Food Service Company information and documentation already created.

How much time is needed? Two months

What tools are needed? Computer, Microsoft Word, Implementation Notes and Documentations.

Budget hard or soft dollars?

Hard dollars for contracted staff with the remaining being soft dollars. The cost will be minimal (contracted labor at $50/hour, four weeks=$8,000) and the benefit will be that going forward, there will be standards for operation of the commercialized food Program.

Time and effort required? Three months to collect information and work with contractor


to complete. High effort.

Cost versus benefit? The cost is minimal to the standardized and most cost efficient way to operate a food and nutrition Program.

Timeline? This can be started along with the assessment manual and they can be done in tandem.

IMPLEMENTATION PLAN Operations Improved Reporting and Dashboard

Lead Person: Current Financial Manager



Representative from the Enterprise Intelligence Program and Supply Chain Data Management.


The current dashboard reporting capabilities.

How much time is needed? Six months to one year. What tools are needed? Lawson Software, Food Service Software, Computer

Budget hard or soft dollars? Soft dollars since these departments and staff are already in place.

Time and effort required? Significant effort will be necessary to develop, design and test any new reporting or dashboards. High effort.

Cost versus benefit? The cost will be absorbed by CHI and the benefit will provide good data and reporting to track and manage a successful Program.

Timeline? Once Legal has given the okay to move ahead this work could begin development. It may take a budget cycle to get it started.

Marketing

The implementation of the Marketing Plan will be done with the combination of the staff


possible contracted personnel and the hiring of a small leadership team. CHI must create a full

marketing plan that will contain several components based on the client they are trying to reach.

A full analysis should be conducted to determine the best price to charge based on the Program

features contracted. Along with this analysis, the potential consumer pool should be analyzed

and surveys conducted to see if the Program is one that would be purchased.

The Marketing Plan will also include investment into a website and printed materials.


IMPLEMENTATION PLAN Marketing Program Analysis and Offering

Lead Person: New Vice President



Current Vice President, Current Director, Current Finance Manager


Data from implemented CHI facilities, experiences, observations, food service provider data base, industry data

How much time is needed? Three months What tools are needed? Computer, internet, data bases, CHI data Budget hard or soft dollars? Soft dollars, data is already available

Time and effort required? 2-3 hours per week until completed; several meetings. Med-high efforts.

Cost versus benefit? Benefit outweighs costs. New Program offering complete and fully analyzed so the charge is appropriate and the expectations are appropriate.

Timeline? Once new VP is hired.

IMPLEMENTATION PLAN Marketing Market Analysis and Demand




Current Finance Manager


Internet, current CHI data, Food Service provider data, Industry Data

How much time is needed? Four months What tools are needed? Computer

Budget hard or soft dollars? Soft dollars for staff and hard dollars for industry data if purchased.

Time and effort required? 2-3 hours per week and significant research. Med-high efforts.

Cost versus benefit? Benefit will be that market is researched and it will be determined whether a Program is viable in specific locations and with specific systems.

Timeline? Initial work to be completed once New VP is hired and Legal has given the okay to proceed.

IMPLEMENTATION PLAN Marketing Market Survey Lead Person: Current Director



Current Finance Director


Internet, Computer


How much time is needed? 2 months What tools are needed? Survey Monkey Budget hard or soft dollars? CHI has corporate membership with Survey Monkey Time and effort required? One week – 6 hours to complete survey

Cost versus benefit? Benefit will be to determine what the market is looking for and whether or not the product is in demand. Medium effort.

Timeline? Conduct this survey once the Legal team has given okay to proceed.

IMPLEMENTATION PLAN Marketing Pricing Analysis Lead Person: New Vice President



Current Vice President, Current Director, New Director


Food Service Provider data base, current CHI financial information – profit/loss; time analysis to implement; demand analysis

How much time is needed? 4 months What tools are needed? Computer, Internet Budget hard or soft dollars? Soft dollars- staff

Time and effort required? Significant analysis will need to be conducted to determine the best pricing model. Med-high efforts.

Cost versus benefit? Beneficial to long-term success of Program. Timeline? Conduct analysis once new director is hired.

IMPLEMENTATION PLAN Marketing Marketing Communications Lead Person: New Vice President



Current Communications staff assigned to CHI Food and Nutrition Program, New Director


Printers, designers and staff currently employed by CHI Communications department.

How much time is needed? 6 months

What tools are needed? Internet, brochure designer Program, computer, graphic designer software

Budget hard or soft dollars? Hard dollars for actual printed documents.

Time and effort required? Design and production of product will require significant time and effort to accomplish. New product logo, name and communication productions. High effort.

Cost versus benefit? Benefit to long-term success and immediate sales of Program. Timeline? Begin this process once the New Director is hired.


IMPLEMENTATION PLAN Marketing Website Lead Person: New Vice President



Current CHI Communications staff; graphic designer, web designer, New Director


CHI web design team, SharePoint web design

How much time is needed? 6 months What tools are needed? Computer, Internet, SharePoint

Budget hard or soft dollars? Hard dollars to build and turn on the website that is built exclusively for the CHI Commercialized F&N Program

Time and effort required?

This will require significant time and effort to create and since the efforts are needed from a staff that already are working full time on other projects, this could take significant time. High effort.

Cost versus benefit? Benefit will outweigh costs.

Timeline? This work will begin once the graphics have been designed and the color scheme for the new business.

Finance

The implementation of the Financing Plan will be done with the combination of the staff


possible contracted personnel and the hiring of a small leadership team.

Since CHI manages to a fiscal year of July 1st through June 30th, the current Vice

President and staff will need to make sure that the new fiscal year budget contains the

appropriate amount of dollars to get the commercialized Program started. This will include the

staffing and some of the marketing and communications work.

The staffing of the new business will take place with limited resources and it may take

significant time for position fulfillment. The pool of candidates to pull the best employees from

will be determined by the current food service provider and the internet.

The capital purchases required by CHI in this commercialized business in the initial

phases of the implementation will be zero with significant capital needed later on when CHI


makes the move to warehouse and distribute the food supply as another expansion of their

business model.

IMPLEMENTATION PLAN Finance Staffing Lead Person: Current Vice President



Current HR Manager, Current Director, New Vice President


CHI HR Recruitment, Food Service Provider talent pool and resources; Taleo Recruitment

How much time is needed? 6-18 months since hiring will be gradual and dependent on work progress

What tools are needed? Taleo Recruitment; Computers Budget hard or soft dollars? Hard Dollars for recruitment expenses

Time and effort required? 2-3 hours every week until staff hiring is complete. High effort.

Cost versus benefit? The benefit will be far outweighed by the cost if staff are qualified and retained.

Timeline? Begin once Legal gives the okay to proceed and continue until sale of first Program.

IMPLEMENTATION PLAN Finance Capital Expenditures Lead Person: New Vice President



New Director, Vice President, Director and Finance Manager; CHI Financial Operations SVP; CHI New Business Lines SVP; Chief Supply Officer; VP Supply Chain Operations


CHI Financials; CHI Operations; CHI Supply Chain; CHI Real Estate and Construction; Contracted Consulting; Current Partnerships; Research other IDNs

How much time is needed? 2-3 years What tools are needed? Computer

Budget hard or soft dollars? Hard dollars once the decision is made to move forward with distribution center.

Time and effort required? Significant time and effort will be required to move forward with this distribution/warehouse implementation. At least two years of planning and implementation. Very high effort.

Cost versus benefit? The benefit in the long run will outweigh the costs because CHI will no longer be paying a third party for warehousing and distribution.

Timeline? Begin this process 1 year into the start of commercialized Program.


IMPLEMENTATION PLAN Finance Fund Staffing Lead Person: Current Vice President



CHI Operations Finance, New Hire Vice President


Budgeting

How much time is needed? 1 month What tools are needed? Computer Budget hard or soft dollars? Hard dollars for budget Time and effort required? Medium effort Cost versus benefit? NA Timeline? Begin this process prior to the upcoming fiscal year.

IMPLEMENTATION PLAN Finance Fund Marketing Plan Lead Person: Current Vice President



CHI Operations Finance, New Vice President


Budgeting


IMPLEMENTATION PLAN Finance Fund Marketing Communications




CHI Operations Finance


Budgeting

How much time is needed? 1 month What tools are needed? Computer Budget hard or soft dollars? Hard dollars for budget Time and effort required? Medium effort Cost versus benefit? NA

Timeline? Fund this once the work begins in the design and publications of materials.


IMPLEMENTATION PLAN Finance Fund Operations Plan Lead Person: Current Vice President



CHI Operations Finance, New Vice President


Budgeting



Program Implementation Timeline

Task Lead Start Finish

# of

Days 1/1/2015

2/1/2015

3/1/2015

4/1/2015

5/1/2015

6/1/2015

7/1/2015

8/1/2015

9/1/2015

10/1/2015

11/1/2015

12/1/2015

1/1/2016

2/1/2016

3/1/2016

4/1/2016

5/1/2016

6/1/2016

7/1/2016

8/1/2016

9/1/2016

10/1/2016

11/1/2016

12/1/2016

1/1/2017

1/1/2018

1030

Legal Review Current VP F&N 1/1/2015 3/1/2015 60

Contracted Staff Hired and Utilized Current HR Mgr 3/1/2015 6/1/2015 90

New Hires Job Descriptions Current HR Mgr 3/1/2015 6/1/2015 90

New Hire Staffing ‐ VP Current HR Mgr 3/1/2015 6/1/2015 90

New Hire Staffing ‐ Director Current HR Mgr 6/1/2015 9/1/2015 90

New Hire Staffing ‐ Mgr Current HR Mgr 9/1/2015 12/1/2015 90

Assessment Manual Current Director 4/1/2015 6/1/2015 60

Standard Operations Manual Current Director 4/1/2015 6/1/2015 60

Improved Reporting and Dashboard Current Finance Mgr 3/1/2015 10/1/2016 400

960

Program Analysis and Offering New Vice President 6/1/2015 9/1/2015 90

Market Analysis and Demand New Vice President 6/1/2015 10/1/2015 120

Market Survey Current Director 3/1/2015 5/1/2015 60

Pricing Analysis New Vice President 9/1/2015 1/1/2016 120

Marketing Communications Design New Vice President 9/1/2015 3/1/2016 180

Marketing Communications Printed New Vice President 3/1/2016 4/1/2016 30

Website New Vice President 2/1/2016 8/1/2016 180

On‐going Website Management New Vice President 8/1/2016 1/1/2018 180

2835

Fund Staffing Current Vice President 1/1/2015 7/1/2015 180

Fund Contracted Staff Current Vice President 4/1/2015 6/1/2015 60

Fund New Hire Staffing ‐ VP Current Vice President 7/1/2015 7/1/2016 365

Fund New Hire Staffing ‐ Director New Vice President 9/1/2015 7/1/2016 300

Fund New Hire Staffing ‐ Mgr New Vice President 1/1/2016 7/1/2016 180

Fund Marketing Plan Current Vice President 1/1/2015 7/1/2015 180

Fund Marketing Communications New Vice President 9/1/2015 5/1/2016 270

Fund Website Current Vice President 2/1/2016 8/1/2016 210

Fund Sales Plan Current Vice President 1/1/2015 7/1/2015 180

Fund Operations Plan Current Vice President 1/1/2015 7/1/2015 180

Future Capital Expenditures ‐ Warehouse New Vice President 1/1/2016 1/1/2018 730

Operations

Marketing

Finance


Commercialized Program Impact to CHI

has the opportunity to create significant revenues from the creation of this Food

and Nutrition Commercialization Program. Based on this Program’s design and the research

taken to find out the required needs to implement a new Program, this work will benefit any

future business lines the organization desires to put in place.

The basis of the revenue generation will be determined by the implementation of the

current Program in at least half of their facilities. The desired revenues will be predicated on the

success of the current Program and the data, learnings and financial savings generated from these

facilities and the data and long-term savings determined by the facilities that were initially

implemented.

Because this Program is not available in the industry to purchase, systems will likely be

very interested in learning more and implementing the Program if CHI can determine through its

data collections in their own system, the savings that can be generated for systems that

implement the commercialized food and nutrition Program offered.

The ROI that is possible with this Program is significant if it is managed and built to

reflect the savings that can be generated with one system install. One install at this level will

cover one full year of expense for the staff so further installations will be revenue generators for

CHI.


For example, if one Program install generates $687k in revenue another install within the

same time period will generate an additional $1.15M in revenues. Of course as the Program

grows, additional staff will be required so the costs will be higher, however, the revenues

generated far outweigh the operating costs for two full Program installations.

At an organizational level, if this Program is successful and generates the desired

revenues, CHI will need to evaluate the implementation of warehousing and distribution to save

additional monies. This work will be very labor intensive and will require CHI to invest a

significant amount of capital to fund the warehousing requirements at a division level and the

transportation needs that go with the self-distribution. “Every operational transaction of self-

distribution must be identified and analyzed in terms of people, processes, services, technology,

and facility requirements and their upfront and ongoing costs” (http://www.hida.org/, 2014).

The success of this Program will impact other areas of the organization because there will

be investments made to create other business service lines to generate revenues. The Program

design and the work done to develop a successful roadmap will be utilized by Supply Chain to

create other methods to increasing the revenues of the organization. The Environmental Services

Program will be the next business line to develop into a revenue generating operation.

One Year Based on one Facility implementing Basic Plan

with 230,000 patient days per year. Total

Food Suppl ies 2,816,000$

Ful l Program Cost 690,000$

Management FTE's 300,000$

Total Billable 3,806,000$

Food Vendor Rebates 240,000$


Total Gross Revenue 1,230,000$

Total F&N Employee Expense 425,000$

Travel Expense 80,000$

Marketing Expense Year One 20,000$

Administrative Expense 18,000$

Total Gross Operating Expense 543,000$

Net Revenue Year One with One Location 687,000$


Conclusion

In conclusion, the data required to fully analyze the expense and revenues that can be

generated by a commercialized Program is not currently available. Based on the data that is

available and the savings that have been generated in the handful of facilities that are currently

running the Program, there is strong evidence that this can be a profitable business line for CHI.

The planning for the commercialization of this Program should not be delayed but should be

carefully monitored to make sure that the planning coincides with the success of the

implementation into at least 40 CHI facilities.

The importance of the assessments cannot be under estimated for the success of the

commercialization. Continued efforts must be taken to fully understand the needs for each

assessment and carefully documented. This includes the physical attributes, electronic needs and

the human and culture needs of the facility.

The hiring of individuals should be predicated with the fact that this is an experimental

Program that may not be found to be financially viable until further into the Program

development and design. Essentially it should be treated as a start-up company that could be

very successful or could possible fail so there is risk to their continued employment. The staff

hired for the positions available should be entrepreneurial spirited and willing to take this risk.

Ultimately the success of the current Program and any future Program will be determined

by the support given by the executive leaders in the organization. “High Trust Leaders are

managers of choice who understand the impact trust always plays on two key outcomes—speed

and cost—and how low or high trust either extracts a tax or produces a dividend on every

activity and dimension within a relationship, team, or organization” (Covey, 2014). If facilities


are not mandated to implement the current CHI Food and Nutrition Program, the savings that can

be generated will be limited and the reporting of those facilities where there is no standardization

will impact the overall success of the National Food and Nutrition Program.


References

American Hospital Association. (2014). AHA responds to Time Magazine Article. Retrieved from Seton Medical Center: http://seton.dochs.org/2013/02/american-hospital-association-responds-to-time-magazine-story/

CDC Government United States. (2010). Discharges of inpatients from nonfederal hospitals. Excludes newborn infants.

Covey, S. (2014). THE 13 BEHAVIORS OF A HIGH TRUST LEADER. Retrieved from http://www.coveylink.com: http://www.coveylink.com/documents/13%20Behaviors%20Handout%20(wtihout%20contact).pdf

Foote, L. (2008, June 9). COMPANIES GROWING CONCERNED ABOUT GOOD EMPLOYEES LEAVING AND THE COST TO REPLACE THEM. Retrieved from The Brighton Group: http://www.brightongrp.com/downloads/pdf/GoodEmployeesLeaving060910.pdf

Goozner, M. (2013, October). Healthcare Business News. Retrieved from Modern Healthcare: http://www.modernhealthcare.com/article/20131025/SUPPLEMENT/310259983

Herman, B. (2014, March 11). The Decline of the Inpatient: 5 Observations.

http://www.hida.org/. (2014). Evaluating Self-Distribution. Retrieved from http://www.hida.org/: http://www.hida.org/App_Themes/Member/docs/Self-Distribution-White-Paper.pdf

Kutscher, B. (2014, June 21). Modern Healthcare. Retrieved from Modern Healthcare: http://www.modernhealthcare.com/article/20140621/MAGAZINE/306219968/fewer-hospitals-have-positive-margins-as-they-face-financial-squeeze#

Tecsys. (2014). Healthcare Self Distribution: Early Considerations. Retrieved from Tecsys Your Supply Chain Matters: http://www.tecsys.com/blog/2012/04/healthcare-self-distribution-early-considerations-2/

Wikipedia. (2014). Capital cost. Retrieved from Wikipedia: http://en.wikipedia.org/wiki/Capital_cost

Documents

FINAL_Catholic_Health_Initiatives_Food_and_Nutrition_Commercialization_Recommendation