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Clinical Enterprise Subcommittee Home
Dec 12 Agenda and Minutes

Clinical Enterprise Strategic Plan Subcommittee
Key Issues and Options Discussion
December 19, 2002 

Current Strategy Model and Key Issues

• Our strategy as a public clinical enterprise is “Do It All” (note attached analysis)

• Maintaining this model and ascending to “First Third” presents two issues

1. Our overall competitiveness for better-reimbursed clinical business is poor, and market share and volumes in these sectors are deteriorating

• Critical given government budget pressures, growth of no-pay sector

2. Our clinical margins are being squeezed by reimbursement cuts (independent of ability to maintain market share), impacting our financing capacity

• Hospital capacity to replace the clinical facilities questionable

• Faculty capacity to maintain competitive compensation questionable

Upshot:  We must increase our competitiveness and margin opportunities to maintain let alone improve our position with our current strategy model

Strategic Options for achieving “First Third” positioning

1. Continue “Do It All,” improving competitiveness and deepening resource base

• Build market-leading specialty service lines in sophisticated procedure areas in new facilities

• Size down programs with negative financial contributions

• Develop a major capital financing plan involving increased State funding, increased University funding, and increased margin production

2. Migrate away from full “safety net” positioning, conserving resources

• Charter a second (new) University hospital in a new location, transferring existing facilities to public “Authority” status as the community shield provider

• Redistribute low-payment business via the ER and clinics to other community providers (UC Irvine case – attached)

• Exit the children’s hospital business, transferring educational programs to Louisville or Cincinnati

3. Seek other superior hospital partners (exit own teaching hospital business)

• Louisville only other State-based candidates (out-of-state models viable?)

• Unclear if Louisville sufficiently superior, and/or if any type of deal possible even if the case

Upshot:  Moving into the “First Third” requires more focus, more market leadership, and more money than we currently have.  Regardless of implementation, strategies must increase funding and/or ease expenditures, i.e. low-pay business

* * * * *

Discussion Attachment: Overview of Competitive Strategy Models: Public Academic Clinical Enterprises

Academic Clinical Enterprises (ACE) stratified according to:

• “First, Second, and Third One-Third Rankings” based on KSA national experience

• Further stratified by underlying market role and teaching hospital(s) organization into three strategic models

1. “Do It All,” models, characterized by having own major teaching adult hospital, caring for all as the major “safety net” facility (no other adult and/or children’s “shield” provider)

2. “Do It w/Nets,” characterized by having own major adult teaching hospital in a market including (an)other public “shield” hospital and/or a freestanding children’s facility serving all

3. “Do It Through Major Partners,” characterized by not having own major (may have smaller secondary) hospital facilities

Rankings of public ACEs by thirds (alphabetized, not rank ordered)

• “First Third” Representative 10

Institution	Strategy Model
Alabama	Do It w/Nets
Colorado	Do It w/Nets
Florida	Do It All
Michigan	Do It All
North Carolina	Do It All
UT Southwestern	Major Partners
UCLA	Do It w/Nets
UCSD	Major Partners
UCSF	Do It w/Nets
Washington	Do It w/Nets

• “Second Third” Representative 10

Arizona	Do It All
Kentucky	Do It All
Maryland	Do It All
MUSC	Do It All
Ohio State	Do It All
OHSU	Do It All
Oklahoma	Do It All
Vermont	Do It All
West Virginia	Do It All
Wisconsin	Do It All

• “Third Third” Representative 10

Arkansas	Do It w/Nets
East Carolina	Major Partners
LSU	Major Partners
MC of Wisconsin	Major Partners
Mississippi	Major Partners
Missouri	Do It All
South Carolina	Major Partners
South Florida	Major Partners
Tennessee	Major Partners
Texas A&M	Major Partners

Observations relative to rankings versus strategy model

• Having own major teaching hospital(s) associated with higher rankings
  - exceptions: hospital “partners” are very superior on own merit

• “Do It All” models do not dominate the top tier

• “Do It All” competitors who do make top tier have very deep fiscal resources