Overview

There will come a time when the primary care center, together with the community, will want to consider adjusting its services. The decision to adjust services and/or expand the facility will be made based upon criteria established during the strategic planning process and supported by detailed feasibility studies of the market and the financial requirements.

Remember, strategic planning is a dynamic, ongoing interactive process that helps your organization plan for the future in a rational manner. The process involves assessing your current situation, analyzing how you are doing business, creating a plan of action for achieving the next stage of development, implementing the plan and evaluating the outcome. During the initial strategic planning process, the board, together with the community, sets the goals and establishes the criteria and key milestones that define the stages of growth envisioned for the center. Each year thereafter, activities should be reviewed in light of these goals to determine if:

• they are still reflective of the community's health care needs;
• your center is on target for meeting these needs; and
• a key milestone has been reached triggering consideration of the next stage in the growth of the center.

WHERE DO WE GO FROM HERE

This is the time to carefully assess your progress and where you are in the development stage of your center. If your goals have changed or, for some reason, you are not on target for meeting these goals, this is the time to set more realistic goals for your center.

If you have reached a key milestone in the development stage of the center, you may be ready to take the next step. Once your new goals are identified, the framework for beginning the service adjustment can be established. A checklist of items to be considered in this framework includes:

• Who will benefit from the intended change?
• Where should the new or expanded service/program be located?
• Will it involve additional resources (staffing/space/equipment)?
• Is there any timing advantage (funding or legislative activity)?
• Is there support for the change outside the center (cooperative ventures, partnerships, sponsors)?

This process of reviewing the health needs of the community and how best to meet these needs, also has the benefit of renewing the commitment and enthusiasm of the community and your staff.

At some point in this process, your board and administration will agree that one of the key milestones has been reached. This is the time to consider your next stage of growth, e.g., expand existing services, add additional services, enlarge the facility and/or add a satellite facility(s). Both the center and the community should work together cooperatively to review changes in the health status and identify the next logical steps for ensuring progress toward improvement. The strategy could include expansion of existing services, addition of a new program, or focus on a specific health problem, such as low birth-weight infants.

Exhibit 16-1 presents an example of staging criteria originally developed by the Bureau of Primary Health Care for modifying and monitoring primary health care programs. Exhibit 16-2 presents one example of an analysis format that can be used as a model to structure your program/service analysis. This type of analysis can be an ongoing activity throughout the year to record service demand and program satisfaction.

MARKET STUDY

Once a strategy for adjusting services has been agreed upon, the first step is to determine if the strategy is feasible in terms of your target population's health care needs, the financial requirements and the impact on existing programs and services. You will need to undertake market analysis to determine:

• The current service utilization:
  • What is your current relationship with the community?
  • Are your services accessible to the majority of the target population?
  • If not accessible, will this change with the proposed strategy?
• The size of the population to be served:
  • Is it growing?
  • Is there a sufficient number to justify a new program or expanded service?
  • Is there anything unique about the population to merit the new service?
• The projected utilization:
  • If you are considering a new service or program, where is the target population currently going for treatment?
  • If they do go out of the area, what is the rate of utilization (e.g., visits/population)?
  • Are there any barriers, geographic, cultural, financial or educational, impacting on the current utilization patterns that would change if you offered the service?
  • What is the estimated utilization of the new service?
• Unmet needs in the community:
  • Is there another provider in the service area offering the same service?
  • Are there services that currently not provided that you should be considering for your center?

This market study will help focus the proposed strategy in terms of what is realistic for the target population.

FINANCIAL FEASIBILITY STUDY

If the market study indicates that there is an opportunity for expansion, the next step is to conduct a financial feasibility study. This analysis tests all of the financial assumptions involved in developing a new service or expanding the existing operations and the center's ability to remain viable if undertaking the proposed strategy (refer to Exhibit 16-3 for an example of the financial elements to be included in this analysis).

Information to be analyzed as part of the financial feasibility study:

• Projected utilization (visits/procedures)
• Expected reimbursement
  • payor mix
  • discounts
• Other revenue sources
  • pharmacy
  • medical equipment
  • other
• Salaries and benefits
  • staffing needs (additional)
  • recruitment costs
• Operating costs
• Financing costs
• Debt service

The objective of a financial feasibility study is to determine if the proposed expansion/addition will be financially viable. If a new or expanded service cannot generate a sufficient cash flow to cover expenses, no matter how badly needed in the community, it would not be practical to move forward on the project. However, if a needed project is marginally feasible, there may be grant funds to help initiate or expand the service.

Another aspect of the feasibility study is to trigger your Board and/or community to devise alternative approaches for meeting the need, e.g., cooperative or collaborative efforts to help offset some of the financial impact.

The components of the financial feasibility study include:

• Capital Costs: Does the proposed strategy involve the purchase of land, construction/expansion of a facility, or addition of any major medical/dental equipment?
• Financing Costs: If there are capital costs involved, how will you finance it and what are the costs involved in obtaining that financing?
• Pro Forma Operating and Expense Projections: It is always a good idea to develop five year operating projections for the proposed project as well as for the combined operation after it is up and running.
• Cash Flow Analysis: This analysis is critical for assessing the impact of any new program or service on your existing operation from a cash flow perspective.

Most new programs experience a loss in the first year or two due to expenses related to start-up. Ideally, your current operations will generate sufficient cash flow to cover the short fall. If not, there may be grant funds available for program expansion, new services, and/or relocation of centers (refer to Chapter 9: Site Development Plans for a discussion of funding sources). Once the program or service is beyond the start-up stage, it should generate a positive cash flow.

All final decisions to move forward will be based upon the results of this feasibility study. For example, the feasibility study may reveal that establishing a new service or program requires resources that far exceed the capability of the center, even though it is the best approach to addressing the community's goal.

IMPACT ON EXISTING OPERATIONS

Before moving forward with the expansion of services, an important part of the evaluation process is to determine how the proposed plan will impact on existing operations. For example:

• What impact will it have on the staffing?
  • Will there be a need for additional primary care providers?
  • Will additional staff be needed? (e.g. nurses, Social workers, mental health aides, dentist, hygienists, dental assistants, office staff, administration?)
• Can economies of scale be achieved by expanding services?
• If a program expansion is being considered, is there enough room at the present location or will additional space be required?
• If the decision is to expand the existing facility, how much disruption in service will it cause?
• Will temporary space be required to continue operations during construction? At what cost?
• If a satellite facility is in the plan, what services can be provided from the main center and which ones will need to be duplicated?

Any strategy that negatively impacts on a successful operation, even though financially feasible, should be carefully reviewed before moving forward. For example, unless carefully handled, the addition of another cost center could result in problems arising from the informal organizational structure. One way to ensure consensus and a smooth transition is to involve the immediate staff in the decision-making process from the beginning.