My dentist insists that I don't have to floss my teeth.

Unless, of course, I want to keep them.

The same can be said of strategic planning. You really don't need a strategic plan -- unless you care where you and your practice are going to end up.

If you're thinking about creating a strategic plan for your practice, the amount of work and detail involved may seem overwhelming. But fear not: All you really need is a little help.

This article is intended to help first-time planners -- as well as seasoned planners -- by providing a simple, concise approach to creating a strategic plan.

Defining strategic planning

First of all, let me clear up a few misconceptions about the nature of a strategic plan:

�         A strategic plan isn't static. It changes as your planning assumptions change.

�         Strategic planning focuses on the big picture. It's not about managerial issues that must be resolved today.

�         Strategic planning doesn't require a comprehensive, detailed financial budget projected years into the future.

So, what is strategic planning? Strategic planning is a process that helps a practice visualize and position itself for the future. The result of this process is a living document offering strategic alternatives for your practice's future success.

Taking it step by step

Generally, strategic plans should cover a 3-year planning horizon. (Beyond that length of time the value of strategic and tactical alternatives is greatly diminished because of the rapidly changing healthcare environment.)

To plan for the future effectively, you'll need to answer the following questions about your current status and future goals:

�         How are we performing compared to our peers?

�         What do we do well?

�         What do we do poorly?

�         What are our competitors' strengths and weaknesses?

�         In the future, will our practice:

o       be a full service provider, or specialty focused?

o       emphasize quality or value?

o       aim for niche or broad market penetration?

�         What threatens the future of our practice?

�         What opportunities exist for our practice?

Answering these questions will give you insights about your present day operation and provide a reference point so that you can visualize your practice's future, set goals and position your practice properly for the years ahead.

I find it practical to break down the strategic planning process into six steps:

1.      analysis of your current situation

2.      analysis of your practice's strengths, weaknesses, opportunities and threats (SWOT)

3.      development (or refinement) of your mission statement

4.      goal setting

5.      tactical planning

6.      implementation.

Step I: situation analysis

To begin, you must analyze your current situation by looking at seven key factors that define where your practice is today and how it got there. This information will give your planning process a reference point and enhance your ability to make meaningful decisions about how to position your practice in the future.

�Factor 1: your practice's history

To begin your situation analysis, create a chart that shows how your practice has performed during the past 3 years. This review should compare income statements and important practice statistics and ratios, both over time and in comparison with industry benchmarks. The primary purpose is to identify trends and problems and then determine the reason for them.

The chart below shows the performance history of EyeCare Clinic, a hypothetical practice in the Midwest with a senior (general) ophthalmologist and his new (cornea specialist) partner. After analyzing the data in this chart, the doctors will need to answer the following questions:

�         Why have billings and collections declined steadily throughout the 3-year period?

�         Why has the number of employees increased each year?

�         Why is employee productivity declining?

�         Why is physician income currently under industry benchmarks (as a percentage of collections)?

�         Why has the accounts receivable collection period eroded from 75 to 90 days between periods?

�         Why have cataract procedures declined between periods?

Understanding historical trends helps you to assess your practice's strengths and weaknesses more accurately. This is essential if you want to make effective choices for the future.

Factor 2: patient data

The second key area of your historical review is an analysis of patient sources and demographics. These are both important to an understanding of patient dynamics and market share.

�         Patient sources. Prepare a spreadsheet showing patient referral sources. (See sample chart) Once you've prepared your spreadsheet, analyze the data. Why have referrals increased from Dr. B and Dr. D, newspapers and radio? Why have Dr. C and word-of-mouth referrals declined?

�         Patient demographics. It's also important to know where your patients live -- and whether you've gained or lost patients from each area. This data should include both new patient and total patient demographic information by zip code, for each year being reviewed.

Create a separate spreadsheet for each service you offer -- cataract, refractive, retina. etc. (See the sample)

Again, you'll need to explain the trends you uncover. Why is new patient cataract volume declining in zip code 544XX? (This is especially troubling because this area was once dominated by EyeCare Clinic.) Why is new patient cataract volume increasing in 542XX?

Factor 3: provider productivity

The third key area to review is productivity during the 3-year period you're analyzing. This data should include the dollar amount of billings and collections, as well as the number of patient visits and major surgeries performed, by provider, for each of the past 3 years.

This information is important when you explore future options. For example, when evaluating expansion opportunities, you'll need to consider your staff's current excess capacity.

This data may also shed light on overall practice trends. For example, one provider's poor performance, whether due to illness or other reasons, may explain declining practice trends and be masking improvement on the part of other providers.

Factor 4: your competition

The next part of your historical review is an analysis of your competitors. (For a sample) You can gather this information from a number of sources. For example:

�         You can get physician names, subspecialties, services and the names of the managed care plans your competitors accept from the Yellow Pages, or by calling the practice directly.

�         You can obtain surgical market share information from many sources. (Some, such as your favorite sales representative, or hospital or outpatient contacts, will have questionable accuracy.) If you have no other sources, try calling your competitors and inquiring how many procedures they performed last month. You'd be surprised how often you'll get a response.

You can check the reasonableness of your estimates of competitors' cataract numbers by using the following test: The number of cataracts removed annually in the United States is approximately 5% of the number of senior citizens. So, multiply the number of senior citizens in your service area by 5%. This will give you a rough idea of the number of cataract procedures performed annually in your area. If your estimate of the total number of cataracts performed in your area is greater than this number, you may have overestimated the market share your competitors hold. (Many doctors make this mistake.)

Once you've compiled your data, add a couple of columns to the chart to record your conclusions about strengths and weaknesses, by competitor. Their strengths might include:

�         being first in the community

�         excellent reputation

�         quality outcomes

�         subspecialty coverage (full-service)

�         deep pockets

�         a prominent location

�         excellent managed care positioning

�         ownership of an outpatient surgery center

�         a state-of-the-art facility

�         excellent referral relationships.

Weaknesses might include:

�         poor patient skills

�         poor outcomes

�         an inferior location

�         lack of a Web site (or an inferior one)

�         lack of a full-time physician in your service area

�         limited or no subspecialty coverage

�         heavy staff turnover.

When you're finished, study the results. Which practice is the market leader for cataracts or refractive surgery? How has that practice attained the leadership position? What can you learn from its success?

Factor 5: your business structure

The fifth part of your situation analysis is a simple review of your current legal structure. Are you a sole proprietorship, partnership, C or S corporation, LLC, or some other business form? The question you should be able to answer is: Why?

Share your strategic plan with your tax advisor for his input before you implement your plan. Make sure that your practice's current structure is still in your best interests. This review is doubly important if you're planning a merger, practice acquisition or partner additions.

Factor 6: managed care

The sixth step in your situation analysis is summarizing the managed care options available in your area. This will help you to develop your contracting options. Summarize the relevant data using a format similar to the sample chart.

This information can be obtained from a variety of sources, but it may take weeks to fully assemble, depending upon your location. Your state insurance department may have made plan information and enrollment figures available on your state government Web site. You can also try calling the insurance department itself for plan information.

Factor 7: expected future trends

The seventh and final step in your situation analysis is an analysis of other trends that will affect your practice in the future. These should include:

�         Population trends in your service area. Are population estimates increasing? Do they support any expansion plans you may have? (Population data is available on the Internet at www.census.gov, or from your local Chamber of Commerce.)

�         Reimbursement trends. How will reimbursement declines affect profitability? (Reimbursement trends are available on the Internet at the American Society of Cataract and Refractive Surgery Web site: www.ascrs.org.)

�         Technology trends. Will new technology improve operational efficiency or enhance market share? If so, at what cost?

�         Trends in ophthalmic surgery. What new surgical procedures are on the horizon? Will they replace current procedures or add incremental service income? (Trends are discussed in numerous journals and shared at annual conventions.)

This completes your situation analysis.

Step II: analysis of your practice's strengths, weaknesses, opportunities and threats (SWOT)

The SWOT analysis is arguably the most important step performed in the planning effort. For that reason, it's vital that you commit proper management resources to the effort.

I recommend that the SWOT analysis be performed off-site, away from the demands of the office. Physicians, the administrator and all supervisors should participate. (They all have a unique perspective that's relevant to the task at hand and they'll all benefit by contributing to the process.)

For the SWOT analysis, create two charts. The first should help you analyze your practice's strengths and weaknesses. List the different areas of your practice so that participants can rank their strength on a scale of one to five. Your list might include:

�         clinic efficiency���������������������

�         state-of-the-art equipment ��

�         services provided����������������

�         information technology��������

�         quality of facilities�����������������

�         location(s)�����������������������������

�         marketing abilities���������������

�         Web site��������������������������������

�         image������������������������������������

�         training����������������������������������

�         morale�����������������������������������������������

�         employee skills

�         patient coverage������������������

�         patient satisfaction���������������

�         office hours���������������������������

�         quality of care�����������������������������������

�         patient education.

Leave room on the chart for comments about each area.

The second chart should allow you to evaluate opportunities and threats. Your list of opportunities might include:

�         satellite expansion

�         partner addition

�         managed care additions or deletions

�         managed care strategy

�         marketing opportunities

�         adding services

�         deleting services

�         referral source opportunities

�         mergers or acquisitions

�         staff additions

�         improving operational efficiencies

�         corporate structure

�         methods to increase market share

�         optometric networking opportunities

�         other expansion plans (optical shop, refractive surgery joint venture, outpatient surgery center expansion).

Your list of threats could include:

�         reimbursement issues

�         hospital developments

�         competitive developments

�         managed care changes

�         socio-economic changes

�         workforce issues

�         governmental regulations.

(These lists are by no means comprehensive.)

Your discussion concerning opportunities and threats is one of the most important parts of your strategic planning effort. After all, combating threats and taking advantage of opportunities is the essence of strategic planning.

Step III: mission statement

A mission statement is a succinct declaration of a business's purpose and core beliefs. It's the guiding light that keeps your practice moving in the right direction.

In my experience, few ophthalmologists take mission statements seriously. Mission statements are thought of as a corporate tool, of little relevance to the world of medicine.

Nothing could be further from the truth. A mission statement can motivate staff, provide general guidelines for day-to-day operations, create the image you want to project and provide a philosophical guideline for every staff person to follow. (Of course, these benefits are only achieved if the mission is communicated clearly to every staff member.)

The mission statement should include some comment about the services you provide, the markets you serve and the level of customer service you plan to offer. A mission statement for our EyeCare Clinic might read as follows:

EyeCare Clinic: Mission Statement

EyeCare Clinic will provide a full range of eyecare services to patients in the greater Clyde Valley area through its network of clinic offices and hospital affiliations. We will offer the highest level of service to our patients and our referring physicians by meeting or exceeding their needs. Our main priority is the satisfaction of our patients and referring physicians.

The mission statement should reflect your true feelings and philosophies. If it doesn't, you shouldn't commit it to paper. Credibility and trust within your practice will be severely damaged if your actions routinely contradict your mission statement.

Step IV: goal setting

You now have the tools you need to define your practice's strategic objectives for the next 3 years.

Start by deciding what actions, if any, should be taken to minimize or eliminate threats to your practice and take advantage of opportunities. Use your situation analysis data to guide you.

Let's examine some of the hypothetical threats and opportunities facing EyeCare Clinic.

Threats

1.      Midwest Eye Care purchased an optometric practice in town. With 20% of EyeCare Clinic's cataract volume referred from optometrists, this poses a threat to future cataract volume, which has already suffered greatly.

2.      A new Medicare HMO will be available next year. With poor geographic coverage and an anterior segment focus, it may be impossible to win any of the HMO contracts when they come up for bid.

3.      Reimbursement continues to erode. (No surprise here.)

4.      Patient volume has declined in zip code 544XX. Patient satisfaction surveys and discussions with long-term satisfied patients from the area have identified the 45-minute commute as the main issue. An optometrist who opened his practice 2 years ago in the area (who refers to the Eye Institute) has negatively affected new and cataract patient volume. Patients have indicated a desire to return to EyeCare Clinic, but they want their primary care closer to home.

Opportunities

1.      Refractive surgery is growing rapidly.

2.      There's no stand-alone refractive laser center in town.

3.      Several friendly optometrists have expressed an interest in merging.

4.      There's no glaucoma subspecialist in town.

5.      There's only one retinal specialist in town and he's nearing retirement.

6.      There's only one outpatient surgery center in town -- a multispecialty center owned jointly by the hospital and a number of physician groups.

Goals

After reviewing the organization's threats and opportunities and studying the situation analysis data, the doctors at EyeCare Clinic made a significant strategic shift. They decided that long-term success required that they compete with the multispecialty ophthalmology groups in town. As a result of this decision, the doctors updated their mission statement and specified several goals to accomplish this long-term objective. The new goals included:

�         Evaluate the feasibility of setting up a separate refractive-only location. (This goal addresses opportunities #1 and #2 and threat #4.)

�         Aggressively pursue the HMO contracts by setting up an IPA with local optometrists and a retina physician who's willing to share office space in the neighboring town. This will include the addition of a glaucoma specialist because:

o       A he'll fill a need in the community

o       A their patient base is sufficient to support him

o       A negotiations with the HMOs will benefit from this added capability. (This goal addresses threats #1, #2, #3 and #4 and opportunities #3, #4, and #5.)

�         Pursue merger discussions with Dr. Doe after he agrees to join the IPA. His addition is important to the HMO strategy and to position the practice as a serious competitor to the multispecialty ophthalmology groups. (This goal addresses threats #2, #3 and #4.)

�         Examine the feasibility of opening a satellite office in zip code 543XX to regain lost share. With the addition of a glaucoma specialist, we'll have sufficient physician coverage to make this option feasible. (This goal addresses opportunity #4 and threats #2, #3 and #4.)

�         Evaluate the feasibility of building an outpatient surgery center at the end of the first and second planning year. (This goal addresses opportunity #5 and threat #4.)

Step V: tactical planning

Achieving the goals you've set requires the last two steps in the planning process -- tactical planning and implementation.

Tactical steps define specific actions to be taken, due dates for those actions and responsible individuals. (See the sample chart) Without these details being specified, goals simply won't be accomplished.

Also, remember that having a goal doesn't mean you should follow it blindly to completion. Part of the tactical planning process should include periodic evaluation or re-evaluation of the economic and political wisdom of each goal.

Step VI: implementation

Implementation of your tactical plans will re-quire ability and commitment on the part of your staff. (If they've been part of the planning process, such as the SWOT analysis, their commitment to the plan will be much easier to ensure.)

Implementation shouldn't be rigid -- long range planning frequently requires timing and goal modification because of unforeseen factors that arise. To make sure your implementation stays on track, hold quarterly meetings to review progress and update tactics and goals.

Into the future -- with eyes open

Strategic planning is important to the success of any business, and ophthalmology practices are no exception. If you care about where you and your practice will end up in the years ahead, it's an effort you really need to make.

Happy planning!

Craig A. Borsdorf is president of CAB Group, LLC, an ophthalmic practice management firm with offices at 3332 N. 140th St., Omaha, NE 68164. He can be reached at (402) 932-7722 or by e-mail at cab2020@home.com.

EyeCare Clinic: Historical Review

	1997	%	1998	%	1999	%	Benchmarks
Billings	$1,825,000	118%	$1,766,000	124%	$1,667,000	132%	XX
Net Collections	$1,542,000	100%	$1,427,000	100%	$1,367,000	100%	XX
Total Expenses	�$832,000	54%	�$860,000	60%	�$880,000	64%	�45-60%
Physician Income	�$710,000	46%	�$567,000	40%	�$487,000	36%	�40-55%
Key Facts:
Number of FTEs	14	XX	15.5	XX	17	XX	XX
Collections per FTE	�$110,143	XX	�$92,065	XX	$74,529	XX	$90,000-130,000
Accounts Receivable	$456,250	XX	$441,500	XX	$416,750	XX	XX
Days Billing Outstanding	75	XX	80	XX	90	XX	�45-80 Days
New Patient Visits	1,800	XX	1,700	XX	1,600	XX	XX
Cataracts Performed	505	XX	�448	XX	379	XX	XX
LASIK Performed	XX	XX	XX	XX	50	XX	XX

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EyeCare Clinic: New Patient Sources

Referral Source 1997 1998 1999 Dr. A 16 13 19 Dr. B 11 13 44 Dr. C 122 116 96 Dr. D 15 12 40 Newspaper 43 40 85 Radio 0 0 120 Seminars 0 0 22 Word of Mouth 1580 1489 1155 Drive By 12 16 18 Other 1 1 1 Total 1800 1700 1600

EyeCare Clinic: Cataract Patients By Zip Code

ZIP CODE	NEW PATIENTS (PER YEAR)			TOTAL PATIENTS (SINCE PRACTICE INCEPTION)
	1997	1998	1999	1997	1998	1999
541XX	122	100	162	3,122	3,200	3,212
542XX	360	420	515	5,360	5,620	5,815
543XX	18	22	14	318	322	314
544XX	500	500	200	12,500	12,800	13,000
545XX	800	858	709	32,800	33,458	34,009
Total	1800	1700	1600	54,100	55,400	56,350

EyeCare Clinic: Competitive Analysis

����������������������� ����������������������� ����������� Practice	Physicians	Subspecialty	Estimated Cataracts	Cataract Market Share	Estimated Refractive	Refractive Market Share	Managed Care Plans
The Eye Institute	J. Smith	General	1,100	27%	0	0%	HMO South
	R. Randall	General	200	5%	800	56%	All PPO's
Doe Eye Clinic	Bill Doe	Peds	0	0%	0	0%	All PPO's
Midwest Eye Care	B. Good	General	1,550	38%	0	0%	HMO South
	C. Good	General	800	20%	600	41%	HMO North
	D. Good	Retina	-	0%	0	0%	HMO West
	E. Sweet	Plastics	-	0%	0	0%	All PPO�s
	F. Small	Peds	50	1%	0	0%
EyeCare Clinic	Senior MD	General	379	9%	xx	xx	All PPO's
	New MD	Cornea	-	-	50	3%
Totals	-	-	4,079	100%	1,450	100%

Managed Care Statistics

Organization	New PPO	Old PPO	HMO South	HMO North	HMO West
Contact	Bill Smith	Jane Doe	Brian Brown	Phil Beck	Ann Johnson
Address	123 Main St.	111 Wilson St.	333 South Street	555 1st St.	456 Main St.
Telephone	444-4444	432-4444	434-1234	444-1234	444-5432
Enrollment	8,200	12,400	4,000	3,000	3,800
Other Information			Heartland IPA owns contract. Contract expires 12/2002.	Capitation --exclusive with Midwest Eye Care.	Contracts expire 12/20/01.

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EyeCare Clinic: Strategic Plan Tactics

GOAL: Evaluate the feasibility of setting up a separate refractive-only location.
(Opportunities #1 and #2 and threat #4)

Action	Responsible Party	Due Date
Visit Dr. Medfly, close personal friend of the cornea specialist, who has built his own stand-alone refractive center in Utah. Report on findings	All physicians and Administrator	Q1, 2001
Obtain quotes for an excimer laser and required equipment.	Administrator	Q2,2001
Develop a financial proforma for the refractive center using estimated surgical volume and operating expenses, using data obtained from Dr. Medfly.	Administrator	Q2,2001
Go/no go decision on proforma.	Management Team	Q2, 2001
Develop a business plan for the center.	Administrator	Q3, 2001
Go/no go decision on the business plan.	Management Team	Q4, 2001
Identify a location for the refractive center.	Administrator	Q4, 2001
Follow business plan timetable (facility, staffing, equipment, etc.)