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CHAPTER 5 • STRATEGIES IN ACTION 163

Medical Organizations
The $200 billion U.S. hospital industry is experiencing declining margins, excess capacity,
bureaucratic overburdening, poorly planned and executed diversification strategies,
soaring health care costs, reduced federal support, and high administrator turnover. The
seriousness of this problem is accented by a 20 percent annual decline in use by inpatients
nationwide. Declining occupancy rates, deregulation, and accelerating growth of health
maintenance organizations, preferred provider organizations, urgent care centers, outpa-
tient surgery centers, diagnostic centers, specialized clinics, and group practices are other
major threats facing hospitals today. Many private and state-supported medical institutions
are in financial trouble as a result of traditionally taking a reactive rather than a proactive
approach in dealing with their industry.
Hospitals—originally intended to be warehouses for people dying of tuberculosis,
smallpox, cancer, pneumonia, and infectious diseases—are creating new strategies today
as advances in the diagnosis and treatment of chronic diseases are undercutting that earlier
mission. Hospitals are beginning to bring services to the patient as much as bringing the
patient to the hospital; health care is more and more being concentrated in the home and in
the residential community, not on the hospital campus. Chronic care will require day-
treatment facilities, electronic monitoring at home, user-friendly ambulatory services,
decentralized service networks, and laboratory testing. A successful hospital strategy for
the future will require renewed and deepened collaboration with physicians, who are
central to hospitals’ well-being, and a reallocation of resources from acute to chronic care
in home and community settings.
Current strategies being pursued by many hospitals include creating home health
services, establishing nursing homes, and forming rehabilitation centers. Backward inte-
gration strategies that some hospitals are pursuing include acquiring ambulance services,
waste disposal services, and diagnostic services. Millions of persons annually research
medical ailments online, which is causing a dramatic shift in the balance of power between
doctor, patient, and hospitals. The number of persons using the Internet to obtain medical
information is skyrocketing. A motivated patient using the Internet can gain knowledge on
a particular subject far beyond his or her doctor’s knowledge, because no person can keep
up with the results and implications of billions of dollars’ worth of medical research
reported weekly. Patients today often walk into the doctor’s office with a file folder of the
latest articles detailing research and treatment options for their ailments.

Governmental Agencies and Departments
Federal, state, county, and municipal agencies and departments, such as police depart-
ments, chambers of commerce, forestry associations, and health departments, are responsi-
ble for formulating, implementing, and evaluating strategies that use taxpayers’ dollars in
the most cost-effective way to provide services and programs. Strategic-management
concepts are generally required and thus widely used to enable governmental organizations
to be more effective and efficient. For a list of government agency strategic plans, click on
Strategic Planning Links found at the www.strategyclub.com Web site, and scroll down
through the government sites.
Strategists in governmental organizations operate with less strategic autonomy than
their counterparts in private firms. Public enterprises generally cannot diversify into unre-
lated businesses or merge with other firms. Governmental strategists usually enjoy little
freedom in altering the organizations’ missions or redirecting objectives. Legislators and
politicians often have direct or indirect control over major decisions and resources.
Strategic issues get discussed and debated in the media and legislatures. Issues become
politicized, resulting in fewer strategic choice alternatives. There is now more predictabil-
ity in the management of public sector enterprises.
Government agencies and departments are finding that their employees get excited
about the opportunity to participate in the strategic-management process and thereby have
an effect on the organization’s mission, objectives, strategies, and policies. In addition,
government agencies are using a strategic-management approach to develop and substanti-
ate formal requests for additional funding.