Centro Escolar University

Mendiola, Manila
A.Y. 2018-2019, 1st Semester

PLANNING A FUTURE FOR METRO MERCY HOSPITAL (MMH): Choosing the Best
Business Strategy Support System for Secured Profit
(A CASE STUDY)

Submitted to:
Dr. Margarita E. Peros
Professor

Submitted by:
Arillo, Marie Jana M.
Muli, Ramanne Aryl C.
Pagurayan, Gabriela P.
(Strategic Management with SRGG - TTH 11:30-1:00)

September 20, 2018

 PLANNING A FUTURE FOR METRO MERCY HOSPITAL (MMH): Choosing the Best Business
Strategy Support System for Secured Profit

Metro Mercy Hospital (MMH) has been in a downward spiral, resulting in losses in the
past few years and a tenuous cash position. Although a new management team has recently
been put in place and a turnaround begun, the board of directors is unclear as to whether the
hospital can and should remain independent now and in the future

MMH is a Catholic-sponsored, freestanding, 200-bed hospital with annual operating

revenues of $125 million, located in the western end of a city in a large metropolitan area. The
hospital is a relatively undifferentiated, general acute care facility with the typical range of
medical, surgical, obstetric and gynecologic, and pediatric services. It has a very busy emergency
department and owns a network of physician practices in the area it serves; these practices
provide mainly primary care services and constitute a significant portion of the primary care
medical staff of the hospital.

MMH is located in a rapidly changing community. The population it has historically

served, primarily second and third generation Italian and Polish Americans, has moved to the
suburbs and/or aged. These groups have been replaced by African Americans and, more
recently, Hispanics, particularly immigrants from Mexico. Although the service area population
was expected to decrease from 1990 to 2000, Census Bureau data indicate that the population
—especially Hispanic—actually grew. Recent estimates suggest continued slow growth and a
transformation of service area demographics.

MMH faces very stiff competition due in part to the number of competitors in and
around its service area and the general “overbeddedness” in the region. Its main competitors
include St. Luke’s Hospital, the 600-bed flagship of a very successful multihospital system,
located a few miles west of MMH in an affluent suburban area; a nationally recognized teaching
hospital located within five miles of MMH; a number of other tertiary teaching hospitals located
in and around the downtown area of the city; and one large for-profit community hospital and
two large system-affiliated community hospitals all located within three to five miles of MMH.

MMH has experienced downward trends in utilization and financial performance since
2004. In 2006, the hospital had an operating loss of $10.9 million (total loss of $10.6 million)
after an operating loss of $10 million (total loss of $10.2 million) in 2005. The financial situation
led to the resignation of the previous CEO and an interim management arrangement for about
12 months until a new CEO was named and who began work in early 2007. The board was also
reorganized, and a new board chair and other board members with strong business skills were
added in 2006–07.

The new management team’s first priority was to restore the organization to financial
health. By fall 2007, operating losses had been trimmed substantially to $6 million, and the
organization was on target to be at break-even on a monthly basis by the end of fiscal year
2008.

As the turnaround proceeds, the new CEO and board leadership believe it is imperative
that the hospital develop a new strategic plan. Although much of the financial improvement
that is occurring is a result of internal operating changes and managed care contract revisions,
and leadership believes that tighter operations and financial management can bring the hospital
to break even, the hospital needs to make significant improvements on the market and revenue
side if it is to become truly viable. Therefore, while management continues its operational
changes, a strategic planning effort needs to commence to help position MMH for long-term
success. A key question to be answered in the strategic planning process is whether MMH
should remain freestanding, become an affiliate, or join a system.
I. Time Context

2004

II. View Point

Management Consultant

III. Vision-Mission-Values Statement

VISION

To be the hospital of choice for patients, physicians and employees in America.

MISSION

To deliver excellent healthcare through caring and highly competent professionals,

utilizing world-class technology and research, in the most viable way without losing sight of our
primary purpose - to be of service to God and mankind.

VALUES

· Excellence

· Compassion

· Competence

· Integrity

· Teamwork

· Transformational Leadership

IV. Current Operational Plans

Management
There is a hierarchy that is followed mostly based on the tenurity or seniority.
Marketing
 Client-eccentric company where the firm puts patients’ interests before their own.
Operations
The doctors and nurses are ranged as Head doctors, resident doctors, head nurses, and
more.

Finance
Financial matters are handled by financial managers and accountants as same as most
companies.
Human Resource
Recruitment and handling of employees are handled by the human resource
department.

V. Social Responsibility Applications

· Gives free consultations for indigenous people and urban poor.

· Conducts medical missions sponsored by the government.

· Provides medical awareness and health seminars to chosen areas in the city.

· Implements The Green Rebellion, an environmental program that promotes

recycling and creates clean and green spaces in parks, communities and school.

· Has the advocacy and resource generating program Men Caring for Women,
spearheaded by the male officers of the hospital, focusing on three major women-
related issues - Human Trafficking, violence against women and children, and cervical
cancer.

VI. Statement of the Problem

What business strategy support system does the hospital need to implement in order to
secure profit?

VII. Statement of the Objectives

Short-Term:

To restore the organization's financial health, break even, and eventually gain profit.

Long Term:

To continuously increase revenue while serving patients better.

VIII. SWOT Analysis

Strengths:

· Differentiation through Catholic identity

· Catholic-base, caring organization

· Strong history

· Several younger, well-trained, entrepreneurial physicians on staff

· Primary care business

Weaknesses:

· Limited response to neighborhood diversity

· Inability to compete as a stand-alone provider

· Poor financial performance

· Large proportion of admissions through the emergency department (few patients

choosing MMH)

Opportunities:

· Neighborhood growth, economic revitalization

· Most immigrants from Mexico are Catholics

· Medical staff development

· Increase in the number of immigrants

Threats:

· Weak market position

· Continued erosion of volumes and market share

· Significant numbers of providers in the market

 · Outsiders skimming business from local hospitals

· Payer Mix

IX. Alternative Courses of Action (ACA)

ACA #1: Be affiliated to a bigger and more stable health institution

ACA #2: Remain as a freestanding company

ACA #3: Enter into merger

X. Analysis of ACA

ACA #1: Be affiliated to a bigger and more stable health institution

 Advantages:

o The financial health of the hospital will be sustained and supported by

the other entity.

o Being able to be adaptive of the institution being affiliated to will result to

a stronger force in the medical industry.

o The hospital will have the chance of growing more with the help of
another management.

o Securing profit due to this business strategy will be foreseeable in the

future.

o Connections and different accesses will expand as to the upper hand of

the hospital.

 Disadvantages:

o Cultural and religious incompatibilities may occur.

o Does not address capital needs.

o This may only be a short-term solution for it may lead to merging with
other companies.

o There will be a transition period in order to adjust to the new system.

o The hospital will lose its independence and will be under the affiliating
entity.
ACA #2: Remain as a freestanding company

 Advantages:

o The proud tradition will withstand.

o The area of the hospital has a growing number when it comes to

Catholics.

o In 2007, the operating loss of the company was trimmed down in more
than 30%. Therefore, it has a chance to continue to do so.

o The emergency room is an extremely busy area which suffice the fact that
they continue to have patients.

o No transition phases will be held inside the operations of the hospital.

 Disadvantages:

o Improvements are urgently and badly needed.

o The weak cash position of the hospital remains unresolved.

o The competition is strong and the hospital cannot cope yet because they
are facing operating losses that has to be solved immediately.

o There will be no room for expansion for they will be solely focused on the
financial health of the hospital.

o Securing profit will definitely a huge amount of time.

ACA #3: Enter into merger

 Advantages:

o The support system needed will be provided for.

o Potential Catholic and Non-Catholic options; wider coverage

o Management agreements will be easy since both merging companies are

hospitals.

o The professionals will be combined resulting to being able to produce the

best outcomes and competitive services; they will have the ability to compete as
a stand-alone provider.
 o Profit will be secured easily as long as the management knows the right
path.

 Disadvantages:

o Potential loss of community focus.

o Equity in capital might be an issue since MMH has operating losses and
debts which will lead to a smaller share in the said capital.

o Excessive number of employees; might require them to cut loose others.

o Administrative costs will occur.

o Medical records will not be brought in the new hospital; no traces or

history will be followed in each and every patient.

XI. Decision Statement

Upon careful and critical analyzation of the given alternative courses of action, we have decided
to implement the 3rd ACA which is to enter into merger. Entering into a merger will produce
better outcome and competitive services and the merger hospitals would still be able to
compete as a stand-alone provider.
The purpose of a merger is of an economic/industrial nature. The merger of the two or more
allows for the generation of cost synergies, as well as greater geographical coverage with a
positive impact on revenues and the possibility of further growth.
XII. Implementation Program

Short Term: MMH must minimize time and cost, retain customers and Retain Key employees.
The Merger will capture and integrate the best products and systems of the merging companies.

Long Term:

1st: Select set of industries which meet strategic conditions outlined by the company for
mergers.

2nd: Choose a merger, Potential companies are carefully looked at with respect to competitive
environment in which they operate.

3rd: consider the financial obligations associated with mergers and assess the suitability of the
merger.

4th: merge in the right time where they can afford to spare out time for caring out all the
processes properly.

5th: Negotiation

6th: Approval

7th: Implement and execute integration plans, including the enrolment of the merger deed in
the Company Register.

XIII. Proposed Operational Plans

Current Operational Proposed Operational

Plans Plans
Management There is a hierarchy that is followed mostly The organizational structure of the
based on the tenurity or seniority company will still be followed although
there will be a reassessments and re-
evaluations.
Marketing Client-eccentric company where the firm The clients’ interest will best be
puts patients’ interests before their own concentrated on and will be given better
and more efficient service than before.
Operations The doctors and nurses and ranged as All of the doctors and nurses will still
head doctors, resident doctors, head be ranged as head doctors, resident
nurses, and more. doctors, head nurses, and more.

Finance Financial matters are handled by financial Still, financial matters are handled by
managers and accountants as same as financial managers and accountants as
most companies same as most companies.

Human Recruitment and handling of Recruitment and handling of

Resource employees are handled by the human employees are handled by the human
resource department. resource department.

XIV. Other Problems and Recommendations

The top management particularly the CEO, has been changed, and the board has been
reorganized and some has just been recently added. Although they are chosen for that
particular position because they have strong business skills, they should still know the hospital's
history and operations and align themselves with its values. Also, they are not familiar with the
employees yet and it is specially important that they become aware of the rank and file because
they are the one that are hands on to the business.

They should conduct a meeting to introduce the new members of the institution and
inform the employees of the current position of the company and their goals and eventually,
have a team building so strong relationship among all can be established.

XV. Management Lesson Learned from the Case

Without careful long-term planning (strategic), implementations have a greater propensity of

failure. We need time to clarify our strengths, identify our gaps, and brainstorm possible pitfalls.
Then we began looking for potential candidates that is suitable for merging. If cultural
integration isn't properly addressed, it can not only hinder morale, but it can also lead to
plummeting productivity, higher turnover rates, and sabotage. It’s important to remember that
the integration could take longer than anticipated. The transition may not be seamless or swift,
but by crafting a deal that makes strategic sense for both parties, communicating openly, and
working to retain key players, you'll be much more likely to succeed as a united force.