Healthcare Horizons

Healthcare Strategic Planning: Forget the 5 Pillars

Healthcare strategic planning is very different from operational excellence – and conflating the two is especially dangerous in an era of rapid transformation. Here are three ways to know the difference: Think bucket lists, fingerprints, and barometers.

By Dawn Carter

Quint Studer’s Five Pillars are probably the most commonly used tool in healthcare strategic planning – which is baffling to me because they have almost nothing to do with healthcare strategic planning.

I know that’s a very negative statement, and I’m not a negative person. In fact, when I first started talking to a colleague about the idea for this paper, he visibly flinched. “That’s not you,” he said to me. “It’s so negative. It’s not your brand.”

I’m not sure I actually have a “brand,” but I do have a passion for securing the future of effective, affordable, and equitable healthcare. We serve a wide variety of clients at Ascendient, but the ones that seem increasingly at risk are independent hospitals and smaller systems – place-based providers, I like to call them, with deep local roots and uncertain future.

I want to see those providers survive and thrive in the midst of healthcare transformation, and that means helping them work out a strategic plan that positions them for long-term success in a changing environment amid fierce competition.

In other words, everything that the Five Pillars can’t do.

Getting Started with Studer

By way of review, Quint Studer enshrined his Five Pillars in the 2003 book, Hardwiring Excellence. Over the previous decade, he had risen to prominence as a hospital executive with an obsessive focus on workplace culture and patient satisfaction. At Holy Cross Hospital in Chicago, Studer boosted patient satisfaction scores from the 5th percentile to the 94th. At his next post in Pensacola, Florida, Baptist Hospital achieved the 99th percentile for patient satisfaction and eventually won the Malcolm Baldridge Award.

After leaving Baptist Hospital to launch his eponymous consulting firm (which would be sold to Huron in 2015), Studer promoted the Five Pillars with such success that many healthcare executives can now rattle them off without thinking:

• Service
• Quality
• People
• Finance
• Growth

Nearly 20 years after Hardwiring Excellence made its debut, the idea of Five Pillars – with attendant goals – is omnipresent in healthcare strategic planning. I hear it all the time: “We have a Five Pillars strategy,” or maybe, “I’m not sure how that fits with our Five Pillars.”

I realize that ideas can take on a life of their own, but after re-reading Hardwiring Excellence, it seems clear to me that Studer never intended for the Pillars to play such an outsized role in the strategic planning process. In fact, the first time he dives into the Pillars in his book, the subheading is this: “How to Align an Organization into Operational Pillars” [p. 48].

Those last two words have been largely overlooked for the past 20 years. What started as an operational framework has somehow morphed into a template for healthcare strategic planning ­­– with disastrous consequences, in my view.

What Strategy Is and Isn’t

Strategic planning is too important to define in the same way that Supreme Court Justice Potter Stewart famously defined pornography: “I know it when I see it.” I’d venture to say that some healthcare leaders might not know a true strategy when they see it, based on the widespread adoption of the Five Pillars as a strategic planning tool.

Here’s a definition that we like at Ascendient, adapted from the Association of American Medical Colleges:

Strategic planning is a process that outlines the direction of an organization. It identifies how an organization will allocate resources to achieve a desired future state while positioning itself to be competitive within the industry.

There are at least three important concepts here that help to distinguish a strategic plan from an operating plan. First, a strategic plan is selective because it deals with the allocation of finite resources. Next, a strategic plan is distinctive because it recognizes the existence of competitors and the need to set one organization apart from the rest. And finally, a strategic plan is predictive because it scans the environment to anticipate the future.

Because the Five Pillars were conceived to promote operational excellence, they don’t check any of the essential boxes for healthcare strategic planning, as we’ll explore in the sections that follow:

A Bucket List, Not a Laundry List

The undisputed beauty of the Five Pillars is that they are broadly comprehensive, making it easy to group and track disparate goals that can help an organization achieve operational excellence. “What will it take under each Pillar to be excellent?” Studer asks on p. 54 of Hardwiring Excellence. “The goals set under each Pillar – Service, Quality, Finance, People, and Growth – are desired targets.”

The problem is, most organizations find themselves with a lot of desired targets because the Pillars are so broad and there are so many ways to measure progress. Take Quality for instance: Ask 10 managers how to quantify it, and you could easily get 20 different answers. That’s tricky even at the operational level, where managers are expected to track their Key Performance Indicators (KPIs) on a daily or weekly basis. But at the executive (and board) level, where strategy lives, dozens of KPIs become untenable.

When Studer presents a sample of the Pillars in practice (p. 51), he includes a total of 26 distinct goals – far too many for busy, volunteer board members to evaluate. This kind of “laundry list” encourages your board to get down into the operational weeds, where they can lose sight of the big picture (and drive management crazy, incidentally).

Instead of the laundry list approach, you want a strategic plan with just three to four high-level goals that indicate the organization is on track to survive and thrive in the future. Think of it as a bucket list question for your board chair: “If you were to leave the board tomorrow, what are the achievements you’d be most proud of?”

No one is going to answer that question with “improved collections” or “reduced advertising costs,” to cite two Pillar examples from Studer. Instead, a thoughtful board chair might say, “I’d like to see a 60/40 split in value-based payments versus fee for service,” or “I’d like to see our ambulatory footprint grow by 20% to expand our market reach and improve patient access.”

Those bucket list items are big, high level, and long term. Three or four such goals would be plenty for most organizations. Five or six might be doable for a high-performing organization with outstanding leadership. But ask your board to focus on any more than that, and you’re back in laundry list territory, back to the Pillars that are better suited to operations management.

A Fingerprint, Not a Template

There is something undeniably positive about Quint Studer’s approach to operational excellence – I’d call it generous, even. As a consultant, Studer refuses to sign non-compete agreements because they would “not be consistent with our mission to make health care better everywhere” (p. 57). Instead of competing, he and his team actively encourage hospitals within a region to work together toward improved results.

Should all patients receive excellent care, no matter whose doors they happen to walk through? Absolutely! Excellence isn’t a zero-sum game, and all providers should be equipped with the tools to deliver the care that patients deserve.

That’s why the Pillars approach is so template driven. Flip through Hardwiring Excellence, and you’ll find reference to dozens of templates, from charts to calendars, diagrams to diagnostics. This kind of off-the-shelf, fill-in-the-blank approach is hugely helpful if the only goal is delivering a consistent standard of excellent care.

But let’s face it: Excellence on its own is not enough to ensure survival for all providers. America’s healthcare landscape is undeniably competitive, especially for smaller, nonprofit hospitals and health systems. Despite their deep local roots, these providers are facing enormous pressure from national and regional for-profit chains with an insatiable appetite for growth by acquisition.

This is why it’s naïve for a hospital to claim excellence as its strategy, just like every other hospital out there. Excellent operations don’t give you any advantage when faced with a competitor that has equally excellent operations but 100 times your budget. (In fact, I could make the argument that a small, independent provider with excellent operations is more attractive as a takeover target, because revenues become accretive more quickly when there are fewer problems to fix.)

True strategy has to be competitive, which means it has to be unique – a fingerprint, not a template. The healthcare strategic planning process always starts with deep awareness of the competitive environment, including the strengths, weaknesses, opportunities, and threats (SWOT) that set your organization apart.

That process doesn’t lend itself to a standardized, off-the-shelf approach, because the variables are literally infinite. So, save the templates for operations, and make sure that your strategic plan recognizes the unique role that your organization plays within a competitive landscape.

A Barometer, Not a Thermometer

When it comes to strategy vs. operations, this may be the biggest differentiator of all. As a diagnostic tool, the Five Pillars function like a thermometer, evaluating the health of a hospital by “taking the temperature” within its four walls. The logic goes like this: If you set and achieve quantifiable goals in Service, Quality, People, Finance, and Growth, then you will achieve excellence for your organization – and excellence, apparently, is all that matters. It’s the end goal.

Under the Pillars framework, every goal is internal, as if external factors had nothing to do with the health of the organization. To cite just a few examples of the internal goals listed on p. 51 of Hardwiring Excellence: reduced claims (service), reduced medication errors (quality), reduced overtime (people), improved operating income (finance), increased physician activity (growth).

There’s nothing wrong with setting internal performance goals but doing so within a strategic vacuum can be extremely dangerous. For example, Studer suggests “reduced advertising costs” as an indicator of excellence under the Finance Pillar. That’s all fine unless a competitor is opening primary care clinics on the fringes of your market area. In that case, financial excellence might come at the cost of long-term viability.

By the same token, Studer offers “higher volume” as a goal under the Growth Pillar. Again, that’s a valid goal in the fee-for-service world, but high volume can be a financial liability under the growing push for value-based payments. As more and more patients are covered under accountable care regimes, “excellent” volume numbers will likely create a drag on margins.

These examples highlight the problem with a “thermometer” approach to healthcare strategic planning. A thermometer might help diagnose what’s going on inside and right now, but it can’t tell you anything about the environment or the future. It’s great to know that your temperature 98.6 degrees, but what about the lead in your drinking water, the gun violence in your neighborhood, or the new virus that just emerged halfway around the world?

Your temperature, in other words, can be excellent even if your outlook is grim.

Rather than a thermometer, a true strategic plan functions more like a barometer, gathering data from the external environment in order to make predictions about the future.

While some factors in the external environment will be the same for nearly all health systems (Medicare regulations, for example), there are many others that differ from organization to organization, including:

• Economic factors – Local, state, and regional economic conditions vary widely. A strategic organization must consider the economic environment in which it operates.  An organization located in a high growth, more affluent market will have different strategic alternatives than an organization in a declining rural market with little to no economic base.
• Regulatory factors – Though most all health systems operate under the same federal regulations, state regulatory environments can vary significantly. Take Certificate of Need regulations, for instance. Texas operates with no CON laws, which means health systems are able to enact strategies quickly. In contrast, North Carolina requires CON approval for about two dozen different services, limiting providers’ ability to take advantage of strategic opportunities while simultaneously limiting the threat of new entrants.
• Competitive factors – Clearly, a market leader with excellent operations and growing revenue has strategic options that are dramatically different from those of a smaller provider with too much leverage or shrinking operating margins.

The point is environmental factors are at least as important as internal operations when it comes to the long-term sustainability of any healthcare organization. Obsessively “taking your temperature” with operational measures won’t help one bit in understanding and preparing for the changes happening outside your walls. Only good strategic planning can help ensure that you’ll still be around five or ten years from now to continue offering excellent care in your community.

Excellence + Staying Power = Healthcare Strategic Planning

Excellent operations are imperative for today, but they have little bearing on your future prospects. History is littered with excellent organizations that missed emerging changes in the environment and subsequently shut their doors or were gobbled up by more strategic, more adaptive competitors. That’s fine if you’re selling a commodity like airline seats or telecom services – someone else simply takes up the slack and customers eventually get used to it.

But healthcare is different; it’s the opposite of a commodity. No two providers are alike because no two communities are alike. When a local hospital closes its doors, there are real, enduring costs to the community, ranging from life expectancy to economic development. To serve your community for the long term, you need excellence plus staying power – and that’s only possible with a strategic plan that sets you apart, makes the hard choices, and looks outward to anticipate the future.

In other words, everything the Five Pillars can’t do.

For nearly 30 years, Ascendient has been a national leader in healthcare strategic planning. Please contact us to learn more.

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