Scenario planning is applied to the health-care industry, the nation's largest economic sector.

© Dr. Terry J. van der Werff, CMC

Last month we looked at scenario planning as a technique for successfully leading your company into an uncertain future.  This month we apply the technique to health care, which affects every man, woman, and child, and is the country's largest economic sector - 14% of GDP.

Imagine you are CEO of your city's largest hospital, which has two other hospitals.  The public hospital is a comprehensive medical center and handles most of the region's trauma patients.  The private hospital has a strong geriatric unit, though few other specialized facilities, and owns a dozen feeder clinics throughout the city and the near suburbs.  Your hospital has more specialized medical units than the others and traditionally handles the city's “difficult” medical cases.  You have no feeder clinics, though some free standing clinics tend to refer patients to you.  Your State is politically quite active with respect to health care reform.

Decision faced.  Your primary concern is long-term positioning strategies, which you recognize cannot be simple extensions of those which worked well in the past.

Key drivers.  Of all the external forces on health care, you and your senior team determine the three key drivers most affecting your decision are (1) demographics, especially the aging of the local population; (2) the advent of new drugs based on biotechnology research; and (3) the shifting role of government.  Demographics is a predetermined element - it is predictable to a high degree of accuracy and therefore becomes part of every scenario.  Biotechnology and government's role are the critical uncertainties around which you develop your scenarios.

Two scenarios.  Since time is limited, you choose to have your team develop only two scenarios.  One you label “Wonder Drug” - it presumes that the great promise of biotechnology is realized.  The other you label “Aunt Angie” - it presumes the steady rise in health care costs and government intrusion into health care cannot be sustained and, in fact, are reversed.  Your truncated scenarios are as follows, written from the vantage point of 2010.

Wonder Drug.  Just as the Salk polio vaccine swept across America a half century ago and banished polio as a crippler of the young, so too the biotechnology wave swept over the country and the world at the dawn of the 21st Century.  Many infectious diseases were successfully conquered.  The debilitating effects of chronic diseases, notably arthritis and rheumatism, have been contained, once their onset has been diagnosed and the appropriate drugs prescribed.

The implications of the Wonder Drug scenario for your hospital are two-fold.  First, new drugs give you powerful weapons in your fight against disease.  Second, significant reductions occur in your in-patient populations and out-patient visits.

Your Wonder Drug positioning strategies follow three paths.  You de-emphasize diseases successfully fought by the fruits of biotechnology.  You develop a center for biotech drug information for doctors and patients alike, whether or not they are yours.  You establish a subsidiary to be the region's primary biotech drug distribution center.

Aunt Angie.  In the late 1990’s patients rebelled against the constraints implicitly placed on them by govern-ment policies.  They insisted on greater freedom in choosing their own physician and health care modalities.  Recapturing these freedoms came at a price - a much larger responsibility for direct payment of their medical services.  Soon, like Aunt Angie, they became quite prudent in their use of medical care and in their maintenance of good health practices.

The implications of the Aunt Angie scenario for your hospital are three-fold.  Patients access health care where they feel wanted; where costs are reasonable; and where payment terms are easily understood.

Your Aunt Angie positioning strategies follow four paths.  You create a “user friendly” environment, eliminating those aspects of your hospital's culture which appear cold or overwhelming to your patients.  You develop close relations with the family practitioners in the region.  You aggressively institute cost control measures.  You build a receivables system focussed on the patient, not on third party payers.

Indicators.  The future that does unfold may not be embraced by your two scenarios; but it might.  To help determine if you are on the right track and when to make strategy decisions, you select several indicators to track for each scenario.

Your Wonder Drug indicators are biotech patents awarded; biotech drugs in clinical trials; biotech company formation, growth, and investment funding; and FDA approvals of biotech drugs for clinical use.

Your Aunt Angie indicators are health care fringe benefit packages for the major employers in your region; government decisions on Medicare and Medicaid; and patients covered and reimbursement policy changes for your local “Blue's.”

What's Next?  Scenarios are not predictions.  They are management tools to expand your thinking and to prepare you and your associates to respond flexibly to the future.  They lower the likelihood that you will be surprised by the future and raise the probability that you will thrive.