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Final Strategic Plan for Acquisition of Altru Health System
Julie Bentley
HCS/586
March 28, 2016
Dianne Nelson
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Final Strategic Plan for Acquisition of Altru Health System Following is the strategic plan for Mayo Health System to acquire Altru Health System as
a combination of competition buy-out, growth, and expansion (Mayo Clinic, 2016). The strategic
plan is important because the strategy of a health care organization is the comprehensive plan
stating how the corporation will achieve its mission and objectives (Hunger & Wheelen, 2011).
The strategic plan will start in Part I with the organizational structure. Part II is the
environmental analysis and setting of the strategic goals with the acquisition, a list of 3-5 year
goals of both health care systems working together for the health of all health care consumers.
Part III will discuss the financial plan. Part IV will discuss the implementation of the strategic
plan along with the barriers that are anticipated and the contingency plans for the barriers. The
communication plan and market entry strategy will conclude Part IV. Part V will be a discussion
of the evaluation and control guidelines and measurements.
Part I – Organizational Structure
The organizational structure will maintain Mayo Health System’s mission, vision, and
key values due to the acquisition of another health system with Mayo Clinic Health System
being the parent health care organization (Mayo Clinic, 2016).
The mission that is currently part of the strategic plan is stated as “To inspire hope and
contribute to health and well-being by providing the best care to every patient through integrated
clinical practice, education and research” (Mayo Clinic, 2016). The vision is stated as “Mayo
Health System is association with Altru Health System will provide unparalleled experience as
the most trusted partner for health care” (Mayo Clinic, 2016). The key value is stated as “the
needs of the patient come first” (Mayo Clinic, 2016) followed by the other core key values of 1)
respect, 2) compassion, 3) integrity, 4) healing, 5) teamwork, 6) excellence, 7) innovation, and 8)
stewardship for financial resource savings and cost containment (Mayo Clinic, 2016). These
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core key values are used to guide the acquisition by Mayo Health System of Altru Health System
as a guide to the expansion and growth of the mission stated and helps it in their strategic plan as
an expression of the vision and intent of the founders of Mayo Clinic
(mayoclinichealthsystem.org, 2016). All of these key core values together make a directional
strategy for the acquisition at this time. The values will be reviewed yearly at the Corporate
Board Meeting to see if they are still being adhered to or need to be changed due to external or
internal changes that occur.
Strategic Planning Model
The strategic planning model that is used is a combination of directional, adaptive,
market entry in new region with the acquisition of Altru Health System, and competitive. There
is a common directional plan set among the facilities, values, goals, mission, and vision. The
adaptive model is used for changing circumstances or patient needs and integrative care for the
complexity of disease processes experienced on a daily basis. The market entry model is used
with research and development when technology and software can better care for the patient at
home using telecommunication medicine versus constant travel to clinics. The competitive
model is known in the health care industry globally as a leader for innovation, strategy, and
health care research that tops the charts from a survey analysis both externally and internally
(Swayne, Duncan & Ginter, 2008).
A direct statement from Mayo Clinic before the acquisition states “Mayo Clinic with this
acquisition combines knowledge, integrity and teamwork into a uniquely effective, integrated
model of care, bringing timely solutions and hope to patients and people” (Mayo Clinic, 2016).
Organizational Structure of Mayo Health System with Altru Health System
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The organizational structure of the acquisition is a combination of the functional,
divisional, and matrix structure with the off-site hospitals, clinics, and outpatient services.
The headquarters and parent organization will be Mayo Health System, located in Rochester,
MN, with divisional areas being the sites of Arizona, Florida, and North Dakota to mid-central
North Dakota. The organizational structure will also have the collateral organizations and
facilities to help with strategic plans as well as medical expertise (Swayne, Duncan & Ginter,
2008, pgs. 337-343). The strategic thinking and planning follows the 1) corporate level, 2)
divisional level, 3) organizational level, and 4) unit level for strategic implementation,
management, thinking, and planning processes (p. 24).
A statement from the organizational governance page of the ‘Mayo Effect’ mentions that
“Mayo Clinic in alliance with Altru Health System is a non-profit organization with a single
governing board, the Board of Trustees” (Mayo Clinic, 2014).
Involvement Governing Board Has in Strategic Goals
The involvement of the Board of Trustees at Mayo Clinic in combination with the
acquisition of Altru Health System gives the responsibility of the mission, vision, values, and
strategic goals to the President and CEO John H. Noseworthy, of both health care systems. It is
stated in section 1-B of the bylaws of Mayo Clinic Health System that the responsibility of the
President and CEO will “define and coordinate Mayo Clinic/Altru Health System’s vision,
mission, and strategy, and accomplish enterprise alignment with the strategy (including the
strategic plan for enterprise diversification activities) and market positioning” (Mayo Clinic,
2016). This will include the responsibility of setting forth the strategic planning for financial and
strategic implementation with acquisition that is discussed in Part IV of the strategic plan, while
maintaining the corporate mission, vision, and values discussed earlier. This shows there is large
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involvement of the leadership team and Board of Trustees with the implementation of strategic
goals. Jeffrey W. Bolton, Vice President of Administration and Operations will be the new
director for the implementation of the strategic goals (Mayo Clinic, 2016).
Theoretical Framework
The theoretical framework is currently following the systems design and this will
continue with the acquisition of Altru Health System in northern Minnesota and North Central
North Dakota facilities acquired. Mayo Clinic currently has a statement regarding the framework
followed at all of the clinics, offices, and hospitals it currently operates and will be the
framework used with the acquisition and posted in all facilities acquired. It says “Mayo Clinic is
a physician-led organization. Physicians maintain leadership roles in conjunction with clinical
evidenced based practice. Leaders make decisions for the betterment of the entire organization.
Mayo Health System in combination with Altru Health System operates under a consensus
decision making model, governed by committees representing the three shields of the practice,
education, and research” (Mayo Clinic, 2011).
Current Key Leaders
The key leaders will change in only two respects with the acquisition of Altru Health
System. There will be regional operational directors at each facility with Jeffrey W. Bolton being
Vice President of Administration and Operations at all facilities acquired. His associates will be
William McKinnon, M.D. along with associate operations director at Grand Forks, ND, will be
Brad Wehe, who is the current Chief Operations Officer at Altru Health System in Grand Forks,
ND. The following leaders will remain in their current setting or office until 2020 with the new
elections. These will include the leadership of Mayo Clinic Health System in collaboration with
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the current leadership at Altru Health System. The current leadership at Mayo Health System
until next elections is:
1) Samuel A. Di Piazza Jr. – Chair, Board of Trustees (2014).
2) John H. Noseworthy, M.D. – CEO and President (2009).
3) Gianrico Farrugia, M.D. – Vice President, Mayo Clinic and CEO of Mayo Clinic Florida
(2014).
4) Jeffrey W. Bolton – Vice President of Administration and Operations (2011).
5) Wyatt W. Decker, M.D. – Vice President, CEO of Mayo Clinic Arizona (2011).
6) Kedrick D. Adkins, Jr. – Chief Financial Officer (2014).
7) Joshua B. Murphy, J.D. – Chief Legal Officer and Secretary (2015).
8) Harry N. Hoffman – Treasurer (2003).
9) Sherry L. Hubert – Assistant Secretary (2003).
10) Paula E. Menkosky – Assistant Secretary (2013).
11) William A. Brown, J.D. – Assistant Treasurer (2010).
12) James R. Francis – Assistant Treasurer (2004).
13) Jeffrey R. Froisland – Assistant Treasurer (2007).
14) Paul Gorman – Assistant Treasurer (2011).
15) Ricky J. Haeflinger – Assistant Treasurer (2011).
16) Kevin M. Lockett – Assistant Treasurer (2015).
17) Mark L. Norby – Assistant Treasurer (2015).
18) Joan A. Weber – Assistant Treasurer (2015).
19) Christina K. Zorn – Assistant Treasurer (2015).
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The Mayo Clinic has 35 Trustee Members with a diversity of experience and knowledge
throughout the United States (Mayo Clinic, 2016).
Altru Health System will be using the current Board and Leadership until elections occur
in March, 2020, for the new leadership taking over in September 2020. The Altru Health System
leadership team is:
1) Eric Lunn, M.D. – President and Board of Trustees for Altru Health System.
2) Dave Molmen – CEO.
3) Brad Wehe – Chief Operating Officer.
4) Dwight Thompson – Chief Financial Officer.
5) Mark Waind – Chief Information Officer.
6) Kellee Fisk – Chief People Resources Executive (Resource Center Director).
7) Margaret Reed, RN – Chief Nurse Executive, Inpatient Division.
8) Dennis Reisnour – Chief Planning Executive.
9) Colleen Swank, M.D. – Chief Medical Executive.
10) Scott Charett, M. D. – Medical Director, Surgical Services.
11) Joshua Deere, M.D. – Medical Director, Primary Care.
12) Yvonne Gomez, M.D. – Medical Director, Quality and Care Management.
13) Laura Lizakowski, M.D. – Medical Director, Medical Specialty Care.
14) William McKinnon, M.D. FACEP – Medical Director – Regional Operations.
15) Renee Axtman, RN – Administrative Director of Primary Care.
16) Kelly Hagen, RN – Administrative Director of Heart and Vascular Services, and
Surgical and Procedural Services.
17) Joel Rotvold – Executive Physician Recruiter.
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18) Heather Strandell – Administrative Director of Care Management.
19) Ken Vein – Administrative Director, Plant and Faciliites.
20) Jill Wilson – Administrative Director, Regional Operations, Orthopedics/Sports
Medicine and Integrative Medicine (Altru Health System, 2016).
Change Management Model for Acquisition
The change management model used is a series of steps that Mayo Clinic and Altru
Health System analyzes before the acquisition takes place with analysis of internal, external,
strengths, weaknesses along with the competitive advantage maintained by the acquisition.
The change management model guides the implementation of the strategic planning
process. There are several models, but the one that both Mayo and Altru Health System has
chosen to use in the strategic planning process and implementation is a combination of the Plan-
Do-Check-Act (PDCA) model by Kotter, and the LEAN/Six Sigma models.
The acquisition will use a combination due to strategic plan changes in several different
areas of legislative/political, economic resources, social/demographic areas, technological
changes, and competitive organizational changes that occur with acquisition of health care
systems (Swayne, Duncan & Ginter, 2008). LEAN and Six Sigma are chosen for the waste of
time, resources, inventory, and waste in general during the improvement processes and change
model activities. The PDSA model is used in combination because with the changing strategic
plan it is good to have the alternative way of accomplishing the strategic plan when the original
is not accomplished (Swayne, Duncan & Ginter, 2008). Having the PDCA model ever before the
implementation of the strategic plan keeps individuals on focus, and the goal before their eyes so
they can accomplish what the end result will be. These process change models will be evaluated
every 6 months to evaluate and control progress from the operations and strategic alliance office.
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Acquisition Value Chain
The acquisition will continue with Mayo Health System value chain of strategic
resources, organizational structure and culture along with all of the pre-service, point-of-service,
and after-service to complete a satisfaction of health care that is not received at any other health
care organization that is available in the United States. The acquisition of Altru Health System
only strengthens the value chain more due to an additional medical school associated with the
health system. When one of the areas is lacking in the value chain then the strategic plan is right
alongside of the value chain to create what is missing or is weak, or to create growth were
needed (Hunger & Wheelen, 2011).
Major Service Delivery and Support Activities in Value Chain
Mayo Health System and Altru Health System have all three of the major service delivery
methods. It has pre-service with reminders for immunizations that are due per Email and mail,
and uses the patient portal information technology software for sharing research and health
system information with over 500,000 patients that it cares for. Marketing is used as part of the
pre-service with information regarding cancer and surgical intervention treatment (Swayne,
Duncan & Ginter, 2008).
Point-of-service is through the delivery service received once you make your
appointment. After-service is used for follow up physician appointments, education, and
continued preventative health service. After-service is also used for billing and accounting
purposes for finance data collection, etc. ICD-10 coding for reimbursement from third party
payers, as well as the prior mentioned follow up appointments at primary care physician offices
with electronic medical record transfers and progress notes combined make transition easy once
discharge occurs. Marketing is used for after-service for additional health services available
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which is extended to each and every individual through media, software, and advertisement
(Swayne, Duncan & Ginter, 2008).
Locations for the acquisitions of Altru Health System are Minnesota, Wisconsin,
Arizona, Florida, and North Dakota (Altru Health System, 2016). The target markets are
whoever comes through the facility doors, and with a special emphasis for young adult health,
adolescent and child obesity patients. Marketing is used to target new patients as previously
mentioned and for honest information for education and research evidence based globally.
Programs and services are for clinically complex individuals, and deal with over 135 global
countries. Technology is in use for telemedicine and physician consultation. Clinical operations
include hospital, clinic, outpatient, physician offices for all health diagnosis, and treatment of
both acute and chronic disease diagnosis.
Organizational culture is diverse with outreach to areas not previously served. The
culture will include all stakeholders, and is involved with strategic momentum and decision
making for each and every area that has the Mayo Health System name attached. Strategic
resources are financial, endowment, trusts, and involve referrals, new market areas, and the
employees no matter what the employee does at both of the acquisition areas (Mayo Clinic,
2016).
Part II – Environmental Analysis and Setting Strategic Goals
Purpose of Environmental Analysis
The purpose of the environmental analysis is to help the organization understand the
broader context in which it is operating. By investing time to identify key trends and
environmental factors that impact both Altru Health System and Mayo Clinic Health Care
System you can begin to see implications and plan a course of action (Center for Non-profit
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Management, 2016). By looking at the environmental analysis and the purpose it helps to see it
as a “window” to Mayo Clinic Health Care System and to Altru Health System. Both of these
systems have strategic issues that may shape or change the entire health care industry, or have a
direct impact on any one health care organization due to the synergy between the two health care
systems (Swayne, Duncan & Ginter, 2008).
Another aspect of the purpose is to help in strategy development by keeping decision-
makers within an organization informed on the external environment. This may include
information on regulation and standard changes due to evidenced based care, political office
changes, reduction of pollution and biohazardous waste, technological developments and
software changes that lead to increased safety and quality issues, and shifting demographics. If a
new technology is developed and is being used in a different industry, the environmental analysis
would see how this technology could also be used to improve processes within Altru and Mayo
Clinic Health System (Conjecture Corporation, 2016).
Implications of Environmental Analysis in Creation of Strategic Plan
The implications that can be drawn from the environmental analysis pointed out that with
the acquisition of Altru Health System there would be additional contracts, and a threat would be
that those contracts would be ending before complete acquisition. Performance gaps indicated
there was a longer time for physician’s to see patients at Altru Health System, and an upgrade of
technology indicated that delays in orders and medication reconciliations were evidenced.
On the positive side was that there was a need for younger health needs due to a major
University close by the Altru Health System. This academic University has a medical school, and
additional studies also included biochemistry, physics, and molecular biology, and
epigenome/epigenitic majors in this region which could be an asset to the health system. Another
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untapped market was one of adolescent health needs such as updates for immunizations, teaching
for health eating habits, and exercise physiology. The other untapped market was a nearby Indian
Reservation in Northern North Dakota that would need help with renal, urinary, hypertension,
congestive heart failure issues, and alcohol and drug addiction medical facilities for growth
expansion for treatment of these issues.
The need for changes in the strategic plan with the acquisition will reflect the goals that
are set forth for expansion and growth and the competitive health care facilities in the area. Altru
Health System is the only health care facility within 60 miles of the western border of
Minnesota, and the only health care facility on the eastern side of North Dakota. The closest
facilities are located in the southern area which would include Fargo, ND, and the western areas
which would include Minot, ND, and the central area which includes Bismarck, ND. The
alliance with Mayo Health System will bring other market opportunities to the region that has
not existed before.
The strategic plan’s focus is on monitoring the external environment for trends and
changes taking place in the area and incorporate them into the strategic plan. It would forecast
the occurrences of natural flooding, or drought conditions which would hamper medical care due
to lack of resources. It would do an assessment of the environmental changes for differences in
medical health care needed due to age of population, strategic decisions that would impact the
financial resources available to the facility as well as the community, educational needs for the
public, political advantage for a benchmark system in the area, and environmental sustainability
for the land and area that it resides in (Swayne, Duncan & Ginter, 2008). Another often
overlooked implication is the effect that the stakeholders have from other industries, supply
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sources, etc. for the success or failure of the acquisition and the effect that the merging of the two
health care systems would have for resources to the area.
Major Benefits of Competitive Analysis as Part of Strategic Planning Process
The major benefit of a competitive analysis, as part of the strategic planning process, is to
understand the competitors in the service area, which is none locally for Altru Health System at
this time. It identifies any competitor weaknesses or vulnerabilities which is a major benefit for
the acquisitioning health system that is buying. The next benefit is the assessment of the impact
of Mayo Clinic Health System’s strategic actions against specific competitors such as research
and development of disease processes, medical expertise on chronic disease processes, etc. The
benefit of identification of potential moves that a competitor might make to endanger Altru
Health System and Mayo Clinic Health System would help the new acquisition create in the
eastern North Dakota and western Minnesota area competitive advantage by cost advantage and
differentiation with access to global health care initiatives and medical expertise (Swayne,
Duncan & Ginter, 2008). Other benefits that are listed in several additional sources are 1)
avoidance of surprises in the marketplace, 2) provides a forum for leaders to discuss and evaluate
their assumptions about the competitive health care environment, 3) awareness of significant
competitors (none currently) that Altru and Mayo Health System must respond, 4) use of key
variables for benchmarking purposes, 5) Altru Health System and Mayo Health System
consensus of goals and capabilities listed below, 6) fosters strategic thinking throughout the
whole organization, 7) identifies market niches, 8) selects a viable strategy, 9) contributes to the
successful implementation of the strategy, and 10) shortens the time for response and anticipates
the other competitors moves (Swayne, Duncan & Ginter, 2008). As you can see the benefits are
many.
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Evolving Economic, Legal, and Regulatory Issues That Effect Strategic Plan
Economic issues that affect the strategic plan is lower resources available for upgrading
of technological systems and decrease in patient care due to lower income availability due to loss
of jobs, and environmental flooding and drought conditions.
Legal and regulatory issues that affect the strategic plan is higher regulation of state
health care abuse that is reported, employer based health care plans that are accepted have
changed due to employers that have left the area and new employers that have entered the area,
contract pricing is decreased for Medicare and Medicaid in North Dakota.
Accomplishment of Mission, Goals, and Objectives as Set in Previous Strategic
Plans
According to the SWOT analysis, the ability of Altru Health System to accomplish the
mission of “Improving Health, Enriching life” is seen in the continued 2015 Community Needs
Implementation Strategy (Altru Health System, 2015). The strategy continues to concentrate on
community public health and gave initiatives on rate of obesity, mental health services, alcoholic
binge drinking, impact of poverty on the state of current health in community, and ending with
financial barriers to health care access such as the Federal Health Care plan initiatives. The
accomplishments showed that Altru’s Health System strategic plan was by 2018 to reduce the
proportion of adults in Grand Forks County who are considered obese from 23% to 20%. (2012
North Dakota Behavioral Risk Factor Surveillance System results), and by 2018 to reduce the
proportion of high school students grades 9 through 12 in Region 4 who are considered obese
from 14.1% to 12% (2011 North Dakota Youth Risk Behavior Survey Results) (Altru Health
System, 2015).
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Mental health strategic plans were accomplished by the Alliance and the Grand Forks
Mayor’s Cabinet on Health and Human Services both passing resolutions in support of improved
access to behavioral health services. These resolutions were targeted to North Dakota legislators
during the 2015 legislative session. Members of the Alliance attended local legislative forums to
express support for several bills to address behavioral health needs in the state, and legislation
was monitored weekly during the session. Also, the northeast clinic has increased their services
for walk-in services on every Tuesday. Additional services that have been an accomplishment in
this area for mental health services is Grand Forks Public Health Department sponsored a youth
mental health first aid training on December 3, 2015, which was attended by 18 professionals.
A new community partners group was established by law enforcement in 2015, and is now
convened by Altru Health System, to explore the problem of synthetic and opioid drug abuse and
overdoses in the community. Guided by a community assessment of the problem, the focus of
the group is on youth and community education, public service announcements, drug take back
programs, provider education, and additional law enforcement initiatives. Future policy
recommendations are anticipated when the assessment is complete (Altru Health System, 2015).
Binge drinking is being handled by other community resources at this time as a result of
the SWOT analysis, and will be reassessed with the next years’ goals.
Other issues considered is the colorectal cancer screening rates increase and continued
monitoring for the area.
Altru’s Ability to Respond to Internal and External Challenges and Changes
Altru’s Health System has the ability to respond to the internal and external challenges
and changes by using a quarterly assessment of the external environment and allowing those
challenges that are identified to change the strategic plan by using the PDCA/PDSA cycle set
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forth by Deming (American Society for Quality, 2015). The limitations are in the financial
resources available in the area.
Three to Five Year Goals and Objectives and Strategic Plan
Following is the three to five year goals and objectives for acquisition of Altru Health
System starting with year three.
Third Year – 1) Update current computer and technology systems throughout all of Altru Health
System. Start is January 1, 2017 with completion September 30, 2017.
2) Market new health care promotion for young adult medicine, child and
adolescent obesity rates to be decreased by 3-12 % in 3 years from start
of market and advertising. Increased knowledge with adolescents
teaching
adolescents along with college age teaching mentors for young adult
support
health groups, and education of disease processes and prevention.
Strategy would be young adult teaching classes for healthier lifestyles at
this
time of life. Prevention and healthier lifestyle for all age populations is
the
2nd strategy in region and area with measureable items of documented
classes attended and preventative education and medicine documented
with an
increase of 60% - 75% in a three year period. Completion will be in 2 –
4 years
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with measurement standards reported yearly to Mayo Clinic Health
System for provider standards and regulatory control measures.
Fourth Year - 1) Reassessment of SWOT analysis for opportunities or threats. Reported
quarterly.
2) Long term range goals for increased research and development for growth
in medical expertise and new medical technology. Increase by 25% in 2
years. 60% of current and new providers will have published research work.
Fifth Year - 1) SWOT analysis continues.
2) Health assessments in younger aged patients (ages 4 – 32) to review
current strategic plans for obesity, drug and alcohol abuse in area,
mental
health needs, and colorectal cancer decreases due to environmental
concerns.
Colorectal cancer rates will drop by 2-4 % in 5-8 years. Initiation is
September 30, 2016.
3) Financial resources long range plans assessment – long term trusts initiated
and secured by 12 % to increase capital resources. Advertising per TV
and radio starting June 2016 (Mayo Clinic, 2016) (Altru Health System,
2016).
Part III – Financial Plan with Acquisition
Assumptions and Projected Budget
The assumptions that is used to determine the strategy of acquisition of the Altru Medical
Center by Mayo Health System is 1) the medical expertise is needed from an additional teaching
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and research University Medical Center, which is considered an additional human resource and
knowledge asset, 2) Altru will become a “resource bundle” as well as Mayo Clinic, for Altru
Health System facilities in the northern Minnesota, and eastern North Dakota areas of health care
where there is little health care competitive advantages today due to lack of health care facilities,
3) acquisition could use up resources delegated for continued research at both facilities, 4) the
culture change could influence not participating in the Altru Health System good old home-time
feel of coming to receive health care because of Mayo Clinic culture take-over, 5) additional
market for adolescent and child obesity patients, 6) no close proximity to the Altru Health
System additional facilities for continuous improvement and quality assurance, 7) tacit
knowledge communication from both Altru and Mayo Clinic culture and experiences, and 8)
logistical complications due to weather extremes in geographical area.
The projected budget shows that revenues would be decreased due to assets and revenue
being used for acquisition purposes in projections for year one and two. The projected new
market of child and adolescent obesity health care would take about 3-8 years to achieve the total
assimilation of the total market to the area with additional marketing and pediatric psychological
and physician training. The decrease of 20-28% of adult obesity measures will facilitate
additional market resources for continued financial revenues from health and fitness seminars
and books associated with the new lifestyles. Altru is located in an area that has logistical
complications during certain months of the year for travel, and additional financial as well as
human resources are needed for research completion, and facility operations (Altru Health
System, 2014). Maintenance of equipment is a needed continuous financial and operational
resource and is added into the liabilities. The liability expenditures for snow and safety coming
into and out of both health care systems will be taken care of by the cities (Grand Forks Review,
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2015) they reside in with an amount of three to five percent shared by Altru and Mayo Clinic
Health Care Systems (Altru Health System, 2014) (Mayo Health System, 2015). This is
calculated on total inch snowfall for the year with calculated flood rates in spring snow melt
times for city figures obtained from Grand Forks, ND, and Rochester, MN. The percentages and
numbers will show on the Excel Spreadsheet that accompanies the fiscal strategic plan.
Capital Expenditures and Contingency Planning for Unexpected Events
Capital expenditures are used when new patents are obtained for research evidenced
based research that has met criteria for human use. They are used in revenues for buildings, land
locations for comparative advantage in health care industry, and equipment that both Mayo
Clinic Health System and Altru Health System own without leasing at this time.
Contingency planning is Plan B and Plan C with the new strategic plan for acquisition of
Altru Health System. We have a rotation of staff set up with temporary staffing agencies in both
Rochester, MN, and in Grand Forks, ND, when contingency plan B and C go into effect from the
operational director, Theodore Davis, II. Most of the contingency planning revolves around
severe and extreme weather issues such as “white out” blizzard conditions, and flooding in the
spring and summer months. Tornado and severe thunderstorms occur also in the summer months
for both health systems, and contingency planning is in effect during these storms. The nuclear
warhead missiles that are housed in underground areas in North Dakota affect the local Altru
Health System health care environment and fees are paid yearly to the Federal Government to
FEMA for clean-up and regulation standards due to close proximity (Altru Health System,
2015).
Certificate of Need (CON) is initiated for the additional adolescent and child obesity rates
that are at 38 – 42% currently in the area (Altru Health System, 2015). This is filed before the
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acquisition and will not play a role in the financial analysis or plan statements with projected
numbers (Hunger & Wheelen, 2011).
Net Patient Service Revenue
Altru Health System has agreements with third-party payors that provide for payments to
Altru at amounts different from its established rates. Payment arrangements include
prospectively determined rates, reimbursed costs, discounted charges, and per diem payments.
Net patient revenue is reported at the estimated net realizable amounts from patients, third-party
payors, and others for services rendered, including estimated retroactive adjustments under
reimbursement agreements with third-party payors (Altru Health System, 2015).
Retroactive adjustments are accrued on an estimated basis in the period the related
services are rendered and adjusted in future periods as final settlements are determined. Altru
recognizes patient service revenue associated with services provided to patients who have third-
party payor coverage on the basis of contractual rates for the services rendered, as noted above.
Altru also provides care to patients who meet certain criteria under its charity care policy without
charge or at amounts less than established rates. Altru does not pursue collection of amounts
determined to qualify as charity care, and they are not reported as revenue (Altru Health System,
2015).
Net Assets
Assets, liabilities and related revenues and expenses are segregated into unrestricted and
restricted net assets. Unrestricted net assets include general operating and other designated net
assets and gifts, grants and bequests that are not donor-restricted. Restricted net assets include
gifts, grants and bequest and other funds that are restricted as to their use by donors and other
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third parties. Assets released from restrictions are included in other operating revenue (Altru
Health System, 2015).
Budget Summary Current Business Model
The current business model of both health systems is a mixture of all of the business
models. It evidences the customer solutions model with expertise in consultation. The mult-
component system is used with the extensiveness of health care provided and medical expertise
in each area with specialization in continued research for cell morphology, etc. It utilizes the
marketing and advertising model for trust revenues and assets. It has the free patient portal
access system that allows more patient flexibility with scheduling, test results which promotes
new market patients that may not have had the patient portal system elsewhere. It uses the
efficiency model to promote health services to mass individuals for care, education, and training.
Certain aspects of the time model are in use with Mayo Clinic Health System Research and Altru
Health System biochemistry and molecular biology majors working together for rare and cutting
edge technological treatments for chronic disease processes (Mayo Clinic Health System, 2016)
(Altru Health System, 2015).
The structure falls into a mixture of conglomerate, strategically placed business units,
functional, and simple. No financial adjustments were made in the projected assumed figures for
acquisition of the Altru Health System by Mayo Clinic Health System (Hungern & Wheelen,
2011).
Internal Resources and Financial Capabilities Effect on Financial Plan and
Implementation
The internal strengths of medical expertise in both systems, research and development,
and telemedicine electronic visits is strong assets from North Dakota University close proximity
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for professorship and leadership capabilities lends for a strong financial plan that will incorporate
assets available for a younger patient population need for continued health care, the obesity in
one region or area being reached and treatment results with a decrease of weight evidenced, and
creation of a healthy middle class agricultural setting for commerce and other business industry
attraction to the area ( Altru Health System, 2015).
Growth and expansion by acquisition of Altru Health System will continue to increase
market of a lower cost for liabilities health care competitiveness in the region of Northeastern
North Dakota down to central mid-state, and the Northwestern side of Minnesota where there is
no other competitive health care. Continued growth and expansion is the projected goal for both
Mayo Health System and Altru Health System (Mayo Clinic Health System, 2016) (Altru Health
System, 2015).
Implementation of the Plan
The strengths and opportunities far outweighed the threats and weaknesses of both health
systems. The weaknesses are identified as ones that can be turned-around within 1-3 years. The
opportunities will become a strength as medical expertise increases with the acquisition, and
technological upgrades of the current system is integrated. The threat of continued new entries
into the health care industry in the region will be one that is closely watched and monitored
throughout the acquisition, the reason is that when other health care systems would see it as an
opportunity to outbid, or take over the region with their competitiveness (Swayne, Duncan &
Ginter, 2008).
Altru Health System will bring assets of $501,851,778 to the merger and alliance
of the two health care systems. Assumptions and contingency plans was discussed as well as the
capital expenditures of the new acquisition or target market of adolescent and child obesity
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patient numbers fall below expectations, or the younger patient needs are not achieved that
attend the University of North Dakota. The implementation of the continued acquisition opens up
a new market for the culture and expertise that Mayo Clinic has throughout the global world to
present it to the Northwestern border of Minnesota and Northcentral and Northeastern North
Dakota for continued outreach and growth.
Part IV – Implementation
The implementation of the strategic plan is of most importance to make sure that the
implementation process is a smooth and easy transition for those experiencing change and for
those that are new to the organization of the alliance of two major health care facilities with the
execution of the strategic plan and process for Mayo Health System and Altru Health System
(Hunger & Wheelen, 2011). The implementation is the key part.
The implementation will be through a communication change plan to both health care
systems. It will include a schedule for initial role changes and the parent health care system of
Mayo Health System to take over the Altru Health System. This date has been determined to
begin on January 1, 2017. This allows administration and the patient portal website of Mayo and
Altru to add the alliance information through information technology avenues. Letters that will
be accompanied by Email will be sent to each patient at their residence of the health care
organization alliance. The websites for Mayo and Altru will continue to give information as it
becomes available for the public and patients to access. Value chain options will be highlighted
to each patient along with the target for continued growth and a new market strategy for the
young adult medicine along with child and adolescence obesity treatment and measures.
Barriers to Anticipate
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The barriers to anticipate are 1) employee buy-in, 2) state and federal legislative and
regulatory standard change due to alliance, 3) due diligence – financial, 4) assignment, duty, and
responsibility changes, 5) decision making, 6) lack of resources (Swayne, Duncan & Ginter,
2008).
Overcoming Barriers
A direct way to overcome barriers is a good communication plan that will be discussed
next, and showing the value of the alliance between Mayo and Altru Health System. If the
employee, Board of Trustees, and the community at large do not understand why the alliance is
occurring, and how to embrace the change for the betterment of the community, education,
resources, etc. then the barrier will remain. Legal and ethical team members along with the
business law office will oversee any changes to contracts of providers, as well as the regulatory
and state legislative statutes.
The legal office will handle the changes to law as stated in the by-laws of each health
system. Information may be obtained from these offices after the alliance.
Methods and Strategies Used to Value and Support Implementation of Communication
Plan
The methods and strategies used to value and support implementation of the
communication plan above is a repetition of the core values, core purpose of the alliance, and the
core roles along with the mission and vision statement of the alliance merger organizations to
each and every department per weekly newsletter, Email, and organization website updates for
how the organization alliance continues to progress. Administrators along with managers of each
unit would be updated on time line for updates to occur for information technology upgrades
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with mergers of the health care systems. A patient update website would be established to inform
patients and other stakeholders of time frame for changes to be seen in the health care systems.
Communication between physician and patient at home per Email and laboratory results
would be added as well as radiology exams and results. This allows the value of patient
scheduling when patient needs, and taking part in participation of their care for the wellness
prevention versus non-compliance that was seen in the rural areas before the merger.
Market Entry
The market entry strategies for the alliance of Mayo Health System with Altru Health
System is a combination of the cooperation, development (internal and external), expansion of
scope with market development and penetration, enhancement for maintenance of scope and
stability, directional for continued growth and stability needs as they arise. The other market
entry strategies ensure referral network and positioning strategy with differentiation based on
quality, upscale image due to the university hospitals and research conducted at each of the
health care organizations (Swayne, Duncan & Ginter, 2008).
Resources Available
The resources available for the alliance communication plan and implementation is taken
from the combined financial records of Mayo Health System and Altru Health System. The totals
include $189,434, 352.0 million for collected revenues of divisions, and revenues of stakeholders
totaling $62.98 billion dollars for the market share that is part of the finance strategic plan.
Continued generation of capital is organized by the assumption of continued trust capital
placement with Mayo Health System both in combination with North Dakota trusts addition
from Altru Health System trusts (Altru Health System, 2015, Mayo Health System, 2015).
Shareholder value is added by reduction of operating costs while maintaining and improvement
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of medical efficacy with upgrade to information technology systems in all health care facilities
(Mayo Health System, 2015). Corporate partnerships in the purchasing area with decreased costs
continue to add sustainability and generate capital for the alliance of both Mayo and Altru Health
System (Mayo Health System, 2015).
Employees Prepared and Trained
The employees with the initial talking of alliance were prepared and trained for the
alliance with weekly updates on the organization websites, and training for the information
technology upgrades. Managers during staff meetings stated the goals, values, and objectives
with time frame to each employee as well as organizational wide Email disbursement According
to unit and department leadership schedules the employees and leadership is sent for training
locally, then to a regional city for what to expect within 6-8 months once the complete alliance
forms. This regional city for leadership is Rochester, Minnesota, where the parent health care
organization is based (Swayne, Duncan & Ginter, 2008) (Mayo Health System, 2015).
Managers Provide Effective Leadership and Direction
The managers before, during and after alliance of the health care organizations, will
continue to lead and direct by updating employees and external entities of objectives set forth for
1-5 years in the future, keeping everyone up to date in changes of contracts, etc. The direction
and leading will be a Parent Corporation of Mayo Health System, and LLC and coordination
efforts of Altru Health System (Altru Health System, 2015) (Mayo Health System, 2016).
Synergy
Synergy between the health care organizations functioned well organized with the
communication plan and bi-monthly telecommunication meetings between all organizations of
the merger. Weekly telecommunication Face-Time and Skype was also used to facilitate
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operational and strategic momentum. The combined effort will continue to be a success and
evaluated bi-yearly for any changes that will need to be made.
Part V- Evaluation and Control
Measurement Guidelines for Strategy Effectiveness
The measurement guidelines will be evaluated as a 50 – 72% increase to shareholder
value with the question and data reported from the new upgrade electronic information system
with documented provider numbers for the young adult medicine usage, and child and young
adult obesity decreases of 18-25% by the year 2018. Market share measurements will be
evaluated by higher than 55% once the alliance occurs with continued and increased service to
the region of northwestern Minnesota and eastern to central eastern North Dakota region.
Output controls are evaluated by the cost reduction starting with the ambulatory surgical
clinics in both health care systems. The measurement was a cost reduction with the LEAN/Six
Sigma processes of 12-25% reduction by the year 2019. The input controls are evaluated by
administration of skills assessment and education required for continued employee service to the
community and facilities. All employee input controls are measured at 100% yearly.
Strategy Not Going According to Plan
If the strategy does not go according to plan the PDCA cycle will be reviewed and
operations director along with the CEO will evaluate and change or reengineer the people or
leadership of that specific strategy. Sometimes the right person is not the person for that
particular strategic plan, or the experience needs to be expertise in a certain strategic plan area.
Contingency plans will be initiated at this time.
Strategic Position and Action Evaluation
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The strategic position with the alliance of Altru Health System and action evaluation will
follow the SPACE model. It is used primarily for the appropriate strategy posture and position
for alternative actions if needed after the alliance for directional and adaptive strategy
formulation and changes. It is the 1) service category strength, 2) environmental stability, 3)
relative competitive advantage, and 4) financial strength which is listed above for net assets of
revenue, etc. (Swayne, Duncan & Ginter, 2008). The alliance of Mayo Health System with Altru
Health System is in the aggressive, competitive profile for SPACE strategic position and action
evaluation (p. 262, 263).
Tolerance Range
The tolerance range is calculated at the strategy evaluation. The tolerance ranges for
market share is 45 – 55% increase with the acquisition of Altru Health System for new market
entry of young adult medicine. The tolerance ranges for child and adolescent obesity decrease is
10-18% decrease of body mass indexes for both Minnesota and North Dakota numbers. The
numbers for this tolerance ranges showed between 2014 and 2015 a 12% decrease of body mass
index for ages 10-18 adolescents (Altru Health System, 2015). These measurements are
continued throughout data retrieval for coordination of strategy tolerance ranges at the
responsibility center of Mayo Health System and Altru Health System. The responsibility center
also has the coordination of operations department with the divisions strategic management
office to change the tolerable ranges and strategic plan with the notification to administration per
by-laws.
Corrective Action That Falls Outside Standards
The corrective action that is implemented on January 1, 2017 of the alliance for
performance and predetermined tolerance range failures is: 1) continued evaluation for 1 month
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following deviation from predetermined standards, 2) process review (PDCA cycle), 3) re-
engineer process and charge middle management, 4) consultant review and third party process
review and trial (Hunger & Wheelen, 2011).
In conclusion, the strategic plan is for acquisition of Altru Health System using the
growth and expansion, adaptive, collaborative, matrix, divisional, moving to conglomerate
strategies for growth. Part I discussed the organizational structures of both Mayo and Altru
Health Systems with the alliance with Mayo Health System assumption of parent health care
organization. Part II discussed the environmental SWOT analysis and setting of the strategic
goals for the alliance. Part III explained the financial plan for the acquisition. Part IV showed the
steps and barriers of the implementation process. Part V ended the acquisition with evaluation
and control measurements with figures documented for Mayo and Altru Health Systems. The
leadership and management team wish to thank the financial and board of trustees for their time
and consideration for the strategic plan of alliance and acquisition.
30
References
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