Strategic Planning Processes and Hospital Financial Performance

The purpose of this study was to provide evidence on the extent of strategic

planning practices and the association between hospital strategic planning processes and

financial performance. The independent variable was strategic planning process that

measured by 6 variables : availability of strategic plan, extent to which the strategic plan is

fully developed, extent of actual implementation of the strategic plan, person that assigned

responsibility of the strategic plan, extent of involvement of the governing board, and

extent of involvement of the physician. The dependent variable of the study was the

hospital performance, that was focused on the financial performance. Three outcome

measures were employed in analyzing the financial performance of hospital : net income,

profit margin and return on assets (ROA). The mediator variable were organizational

ownership, system membership, location, and hospital size.

Two main souces of data were Texas hospital financial data in 2003 obtained from

Centers of Medicare and Medicaid Services and strategic planning process survey conducted

in Texas between May – June 2006. The samples was consisted of all 390 general acute care

hospital in Texas in 2006. Survey were mailed to CEO of those hospitals. Association

between the strategic planning process characteristic and net income (model 1) and profit

margin (model 2) were examined using multiple linear regression analysis.

The major conclusion to this study was that strategic planning is a basic management

function undertaken in most hospitals. Having a strategic plan, assigning the CEO
responsibility of the plan, and involvement of the governing board in the planning process in

2006 were all associated with higher financial performance.

However in this study we cannot assess whether strategic plan leads to better

performance. Longitudinal research design, with performance data before and after

strategic planning are needed to find the causality of those variables. Future research is

needed to include additional measures of financial performance and other measures of

hospital performance, such as quality and employee satisfaction. Having multiple

respondent for each organization for the strategic planning survey and having more

objective measures of the planning process is required for improvement. Finally measures

of the market environment, such as degree of competition, may give clues to additional

sources of systemic variation in planning processes.

References

Goldin-Meadow, S., Cook, S. W, Mitchell, Z. A. (2009). Gesturing gives children new ideas

about math. Current Directions in Psychological Science, 17(5), 313-317