Emanuel Medical Center
A hospital is a complex, independent decision-making unit, with capabilities and power to take strategic decisions. Very often, strategic decisions are taken under an umbrella of corporate and federal management. This is particularly the case of hospitals, which work in alliance or surrender themselves to mergers and acquisitions by other hospitals and HMOs. Rapid changes in U.S. healthcare environment demand fast choices. Health expenditures are constantly rising. Healthcare organizations fail to cope with the growing number of uninsured patients and lack staff to provide everyone with timely, quality medical assistance. In this situation, hospitals are willing to resolve their operational complexities without losing their organizational independence. The case of Emanuel Medical Center suggests that being independent and efficient is possible. This paper reviews the case, identifies the main operational issues within EMC, strategic alternatives available, and the best strategic option to be used by President Mohen.
EMC case study: A brief background
Emanuel Medical Center (EMC) was founded in 1917 in Turlock, California. Turlock is situated in about 100 miles from San Francisco. The hospital was initially created to serve the medical needs of local community members, irrespective of their gender, socioeconomic, or religious status. Since the earliest years, the hospital served a Christian mission of providing quality medical assistance, to create a healthier community. The core values, on which EMC’s organizational culture was built, included life, justice, stewardship, excellence, collaboration, and integrity. Throughout its history, the hospital had been unchangeably committed to exceeding customer expectations. Today the hospital runs three units – acute care, skilled nursing, and assisted living facilities. Coupled with a well-equipped emergency department, EMC used to exemplify the triumph of quality and efficiency in medical care. In the meantime, the EMC’s emergency department was one of the major cornerstones in achieving better operational efficiency. It almost always operated beyond its full capacity. However, EMC’s operational issues were not limited to the emergency department. The latter was merely a sign of the major operational complexities pressuring EMC. In its current state, EMC is facing a number of operational challenges, which require immediate attention.
The case of Haley Eckman and her adventures in the EMC’s emergency department have brought the most pressing operational issues to the surface. First, understaffing is a serious challenge faced by EMC. Upon arriving to the emergency department, no one came to see Haley Eckman and assess her health state; the patient had to wait what seemed like forever, until a triage nurse came to her. That a triage nurse was first to see Haley is another sign of understaffing – the hospital has been largely unsuccessful in hiring and retaining professional, experienced physicians. Difficulties with bed availability and long waiting times present another challenge, which can be particularly problematic in the emergency department. The Eckmans saw a few empty beds across the hall, but they were not allowed to take any of them, which was suggestive of the low operational efficiency in hospital bed management. The emergency department lacks critical care monitor beds. The growing number of emergency department admissions and nurse shortage put considerable pressures on hospital bed management. As a result, the costs of operations are rising. These, however, are not the only operating issues within EMC.
EMC fails to balance its expenses with revenues. In light of the new federal regulations, EDs are required to accept and manage all patients, irrespective of their insurance status. The flow of patients constantly grows, exceeding the basic capacity of the emergency department. Added to this, reimbursements from government programs and HMOs have shrunk dramatically. EMC’s profits are decreasing. Operating margins have been negative for a period of time, causing significant pressures on the hospital capital flows. It comes as no surprise that the main hospital operations are misaligned from the organization’s values, mission, and vision. The growing influence of managed care organizations is becoming a serious issue for EMC: mergers and acquisitions have become a common way of dealing with competition in the healthcare market. EMC remains the only independent hospital in its service area. Yet, that the hospital is at the edge of survival does not mean that nothing can improve the situation. Several strategic options are currently available to EMC.
Strategic options faced by EMC are numerous and varied. EMC can be closed. This however is not the best strategic option, given the consequences it will cause to the community. The fact is that EMC’s service area covers the city of Turlock and another eight towns, with eighty percent of EMC’s patients comprised by the residents of this service area. The majority of EMC’s patients are Turlock residents. Without EMC, these patients will have fewer chances to obtain quality and, more importantly, timely medical care. EMC also serves 12 small towns, between 5 and 15 miles away from the hospital. In case of EMC’s closure, these residents will also lack access to quality medical care. Eventually, the situation is not as bad as it seems, and closing either the emergency department or the entire hospital will not help. Here, EMC should also consider a possibility of being acquired by Kaiser.
Kaiser Permanente, despite the lack of strategic experience, has proved to be the major market success in Californian healthcare. With aggressive marketing strategies and an emphasis on cost-efficiency, Kaiser covers more than 60,000 people in Stanislaus County and operates under contract in other service areas. Being acquired by Kaiser has a number of strategic advantages. First, it will give EMC financial and staff resources needed to cope with its operational issues. Second, it will eliminate the need for another hospital in EMC’s primary service area. As a result, EMC will retain its patients and improve its efficiency, whereas Kaiser will expand its presence in the service area. However, EMC does not want to lose its independence and Kaiser with its market aggressiveness will, most likely, impose new values and expectations on EMC.
Closing the emergency department will not help EMC to resolve its operational issues. On the contrary, the closure is likely to cause major problems in EMC management. The ED is responsible for fifty percent of all hospital admissions. The most profitable hospital areas, namely general surgery and inpatient care, are also closely linked to the ED. Closing the ED may help EMC address its over-capacity and staff shortage problems, but it will hardly raise the hospital’s efficiency. In a similar vein, becoming a federally funded hospital will help to address the gap between insured and uninsured, which is only a part of the bigger problem. Moreover, the clinic lacks capital needed to expand its ED. None of these options is entirely satisfactory. The hospital is facing a number of operational issues, but its financial state is not as bad as it may seem. Its long-term debt slowly decreases, with total net assets constantly rising. EMC needs a solution which will help to increase its operational efficiency without sacrificing independence. In this sense, alliance coupled with enhancement strategies will give EMC a chance to enhance its efficiency without losing its independence.
Enhancement and alliance: Towards better operational efficiency
Enhancement is a viable option for organizations, which face an operational efficiency crisis. This is particularly the case of EMC, which does not need to either expand or contract its services. Enhancing operating efficiency is possible via the implementation of various quality programs, like Total Quality Management (Swayne, Duncan & Ginter 2010). These programs have a potential to raise the quality of operations and products/ services and add flexibility to the hospital’s product and organizational design. However, EMC needs capital and resources to launch its quality enhancement projects. Purchase strategies may not be appropriate, as they result in the loss of independence. Here, cooperation could give EMC another chance. Strategic alliance is the best choice for EMC. It is a cooperative arrangement between organizations, aimed at achieving a long-term purpose. Alliances can facilitate the development of healthcare networks, giving EMC capital and staff resources required to enhance its efficiency and help the hospital retain its independence. Resources available from EMC’s alliance partner will help the hospital to alter and improve its strategic position. Certainly, unrelated cultures and differences in strategic vision can impede the creation of productive healthcare alliances. However, this option is associated with fewer risks for EMC, compared to other strategic alternatives. For example, EMC can create an alliance with physicians, to deal with the issue of physician shortage. EMC alliances can successfully contract with the HMOs, and therefore improve their competitiveness under the growing pressure of managed care.
Emanuel Medical Center (EMC) was founded in 1917 in Turlock, California. Turlock is situated in about 100 miles from San Francisco. Today the hospital runs three units – acute care, skilled nursing, and assisted living facilities. Understaffing is a serious challenge faced by EMC. The hospital has been largely unsuccessful in hiring and retaining professional, experienced physicians. EMC fails to balance its expenses with revenues. The growing influence of managed care organizations is becoming a serious issue for EMC. Alliance coupled with enhancement strategies will give EMC a chance to enhance its efficiency without losing its independence. EMC alliances can successfully contract with the HMOs, and therefore improve their competitiveness under the growing pressure of managed care.