HCM-FPX5312_MusiKeti_Assessment 4-1

1 Assessment 4: Recommending Evidence-Based Strategies to Address Organizational Challenges and Opportunities Keti Musi HCM-FPX5312: Analyzing the Health Care Environment Prof. Nowill Capella University October 30, 2021

2 Executive Summary For my Analyzing the Health Care Environment course project assessment, I will be conducting in an in-depth analysis of NewYork-Presbyterian Healthcare System and recommend evidence-based strategies to address organizational challenges and opportunities in a dynamic environment. For this assessment, I will provide the foundation for this analysis and apply an understanding of the external healthcare environment across core disciplines. Overview of NewYork-Presbyterian NewYork-Presbyterian is one of the nation’s most comprehensive, integrated academic health care delivery systems, dedicated to providing the highest quality, most compassionate care, and service to patients in the New York metropolitan area, nationally, and throughout the globe. NewYork-Presbyterian encompasses 10 hospital campuses across the Greater New York area, more than 200 primary and specialty care clinics and medical groups, and an array of telemedicine services. NewYork-Presbyterian has four major divisions: (1) NewYork- Presbyterian Hospital, (2) NewYork-Presbyterian Regional Hospital Network, (3) NewYork- Presbyterian Physician Services, and (4) Community and Population Health. NewYork- Presbyterian Healthcare System’s mission is to be a leader in the provision of world class patient care (i.e., high quality, fiscally responsible healthcare services that meet the needs and expectations of the communities they serve), teaching, research, and service to local, state, national, and international communities. However, NewYork-Presbyterian still has a huge potential in providing great patient care, maximizing value for patients (i.e., achieving the best outcomes at the lowest cost), and making its financial outcomes more sustainable.

4 Expansion, which can result from multiple causes, is of vital importance to ensure the continuity of businesses. Mergers and Acquisitions is one way of expanding businesses beyond the boundaries they originally operated in. Mergers and acquisitions are subjected to many internal and external factors, some which may result pursuing such an option a bad decision for the members of the company. NewYork-Presbyterian will need to conduct a proper and complete analysis of these factors to ensure balanced evidence, reasoning, and options to make the most informed decisions about pursuing a merger and acquisition. The healthcare industry depends on evaluating existing and impending legislation, changes in market and economy, societal changes over time and technological advancement. To properly proceed through an M&A transaction, businesses commonly complete a full PESTEL analysis. PESTEL analysis is a strategic (i.e., situational, risk management, scenario planning) tool to help us understand the external macro- environmental factors (beyond a healthcare organization’s control) that are impacting the operations and performance (and profitability) of the healthcare organization, and how the organization can either manage or mitigate the impact of these external factors (Rothaermel, 2017). The PESTEL Model includes six factors: Political, Economic, Sociocultural, Technological, Legal, and Environmental aspects of a company (Rothaermel, 2019). For healthcare organizations, like NewYork-Presbyterian, PESTLE analysis is an essential tool when considering a merger and acquisition. That’s because the best merger and acquisition strategies are developed in large part based on various external factors that may significantly affect NewYork-Presbyterian’s operational and financial performance (Markwell & Leigh-Hunt, 2016). PESTLE Analysis Political Factors Effecting M&As: Political factors are triggered by the relation with foreign government, political stability, and government intervention in economy. The Political environment impact on the healthcare industry performance is changing continuously mainly because of the changing government regulations. Tax legislation changes, consumer protection and employment regulations,

5 insurance mandates, and impact of changing government funding to healthcare are all elements that could have an impact on the healthcare environment. These various factors affect mergers and acquisitions as companies will not risk its existence by entering into M&A activity during an unfavorable political environment, politically unstable environment, or when governmental intervention in business activities is more than desirable. Economic Factors Effecting M&As: Unemployment, inflation, interest rates, and credit availability are economic factors that both directly and indirectly affect the financial performance and operation of the healthcare industry. These economic factors define the future of an organization in a market where it is willing to invest, helping business organizations in deciding the price of its product and services, target consumer, and marketing strategy. Any of changes is these factors can change how the public is able to spend their money, impacting policy spending. Economic factors, irrespective of the size of business, play a very important role, and must be analyzed thoroughly before moving into a market. There have been cases in the past where this factor led to the closure of healthcare organizations which underwent mergers and acquisitions. Social Factors Effecting M&As : Socio-cultural factors (or issues) relate to the cultural differences or similarities (ex. beliefs, values, and norms) of people. Social factors affect the whole M&A cycle: pre-merger decision-making, negotiation and deal structuring, and post-merger integration. These factors generally become visible when the M&A (i.e., restructuring) is done and the day-to-day operations begin to proceed. Businesses often fail to notice or consider this factor at an earlier stage, as the initial primary focus is to maximize wealth. The primary reason for a M&A’s failure to achieve the promised value is cultural differences (i.e., the fundamental ways of working are so different and so easily misinterpreted). Therefore, it is the duty of the top management to do a due diligence over this factor to avoid significant issues. Technological Factors Effecting M&As: Technological factors are a more contemporary challenge that a business encounters in its day-to-day operations and functions. Technological advancements (including the speed at which technology disrupts that industry) specific to hospitals and healthcare manufacturers plays a significant role in determining the factors that can impact NewYork- Presbyterian long-terms operations and performance. A business must match itself with constantly changing technologies in order to sustain themselves in the market and to ensure their objectives are achieved. For established players, staying ahead of industry innovators and new agile startups is critical—and harder than ever. Fortunately for them, M&A can level the playing field and open the door to future game-changing transformations. Forward-thinking healthcare companies merge with or acquire companies with technological expertise they can then use to develop new offerings, redefine industry boundaries and drive top-line growth. Legal Factors Effecting M&As: The law is another consequential factor, as it directs the way in which a company should conduct business under the guise of legislation. Legal factors (which involve antitrust laws, taxation policies, corporate social responsibility, intellectual property rights law, consumer protection laws,

7 sustainable in a dynamic, ever-changing healthcare environment. Markets for healthcare services present both opportunities and threats that influence NewYork-Presbyterian’s business operations, functions, and performance. By recognizing and understanding these external macro- environmental factors, NewYork-Presbyterian can effectively capitalize on the most significant market opportunities for growth and expansion via M&A to strengthen its business model – specifically providing great patient total care, maximizing value for patients, and making its financial outcomes more sustainable. Exploiting such opportunities can mitigate the effects of many of the risks, threats or challenges to the NewYork-Presbyterian shown in this external analysis. PESTEL Analysis Continued NewYork-Presbyterian (NYP) has identified merger and acquisition (M&A) as the one specific strategic initiative to improve patient outcomes and financial sustainability, and resiliency outcomes. As we continue to analyze diverse external macro-environmental factors – political, economic, socio-cultural, technological, environmental, and legal – affecting NYP’s goal of providing great patient care, maximizing value for patients, and making its financial outcomes more sustainable in a highly competitive healthcare environment, we need to identify the essential participants and stakeholders in the healthcare system and their vital role in identifying and resolving various challenges facing NYP in achieving its goals. In the healthcare system, customers are patients pursuing different medical care services. Patients seek quality and affordable medical care services from various disciplines, including (1) primary care or routine medical care, (2) specialty care, (3) emergency care, (4) urgent care, (5) inpatient or hospital care, (6) surgery, and (7) research participants. This situation makes the patient care populace very complex as they seek diverse levels of (medical and social services)

8 care from various providers and caregivers and have different health-related care goals. The external supply chains is typically decided based on the patient populace that is being served. The healthcare (internal and external) and hospital supply chain refers to the procurement and distribution of products (i.e., physical goods or supplies) and services to providers and patients. In healthcare supply chains, the principal participants include payers (e.g., government agencies and regulators, employers, or any other individuals), fiscal intermediaries (e.g., insurance companies, health maintenance organizations, pharmacy benefit managers), providers (e.g., hospitals, divisions, physicians, and facilities such as physician offices, medical and ambulatory surgical centers, and pharmacies), purchasers (e.g., resellers such as pharmaceutical wholesalers, medical-surgical distributors, product representatives, independent contracted distributors, group purchasing organizations) and manufacturers (e.g., drugs, medical device/equipment, hospital medical supplies, providers of information technology services and manufacturer of capital equipment) (Burns & Lee, 2008). An effective supply chain brings in the right materials (i.e., physical goods) and information at the right time, with the right amounts, to the right place, in the right condition in order for patients to receive quality care. This can have a direct impact on patient care by reducing risk and errors of unnecessary harm associated with health care, eliminating waiting times to treatments and for appointments and reducing the length-of-stay (i.e., improving the quality of care, increase efficiency, and providing more patient value (Singh, 2006). For example, the external supply chain for NewYork-Presbyterian’s primary care and multispecialty medical practice locations that provide outpatient clinic and routine appointments is different from the hospital locations where higher level of care (ex. emergency care and intensive care) is provided.

10 In order to defend against competition and to improve their market positions relative, healthcare organizations form strategic partnerships or alliances. Strategic partnerships or alliances offer Healthcare organizations, like New York-Presbyterian, opportunities to expand their network, access and leverage expanded benefits of scale, access essential industry resources, offer excellent value for consumers as they shop for health care services, expand access to advanced medical care to improve patient outcomes, streamline processes, reduce costs, lead to innovation, and improve patient care (McCue et al., 1999). The type of external partnerships are (1) healthcare networks, (2) local businesses, (3) physician practices, (4) rehabilitation services, (5) laboratories, (6) nursing facilities, (7) pharmacies, and (8) accountable care organization (ACO). Many stakeholders that influence the processes and outcomes that occur in hospitals. Stakeholders are “…a person, group, or organization that has interest or concern in an organization” (Stakeholder, 2018). Healthcare organizations have both internal and external stakeholders, having unique but equal influence (Coombs & Holladay, 2012). However, internal and external stakeholders can also be affected by the hospital in very different ways. Suppose a hospital opens a new specialty that is not done in other facilities regionally. In the case, internal stakeholders may be impacted negatively in ways such as involuntary staff relocation or reassignment, overcrowded working areas, and decreased parking spots available due to the influx of patients. Conversely, patients (i.e., external stakeholders) will experience the positive impacts of the availability of a new service located close to home. Internal stakeholders are those who (1) operate within the hospital, (2) know the innermost workings of the organization, which puts them in a unique position to offer insight and expertise, and (3) participate in the strategic

11 development of coordinating resources to fund and sustain an operation. An example of internal stakeholders would be hospital employees, managers, medical staff, the board of directors, and investors. External stakeholders are those individuals who (1) are not employed by the hospital but are impacted by or impact the organization’s performance and (2) influence the organization by driving service line decisions, which often affects the bottom line. Examples of external hospital stakeholders would be those who provide inputs (suppliers like insurance, pharmaceutical, medical equipment, office and hotel product, and service companies) and those who rely on hospital outputs (patients), competitors, regulators, special interest groups, and creditors (Wilston, 2019). Laws and regulations are critical levers for governments to affect the quantity, quality, safety, and distribution of services in health systems. Therefore, healthcare organizations face more regulation than just about every other industry in the United States. They are subject to inspection, review, reporting requirements, and enforcement actions by many state and federal agencies, and they must follow numerous local, state, and federal regulations. The relevant laws and regulations that impact New York-Presbyterian’s healthcare system are (1) Affordable Care Act (ACA), (2) Health Insurance Portability and Accountability Act (HIPAA), (3) Health Information Technology for Economic and Clinical Health (HITECH) Act, (4) Medical Treatment and Labor Act (EMTALA), (5) Anti-Kickback Statute (AKBS), (6) Patient Safety and Quality Improvement Act (PSQIA), (7) Fraud and Abuse Laws, and (8) Medicare Access & CHIP (Children’s Health Insurance Program) Reauthorization Act. Market Data Analysis Most healthcare organizations have merger, acquisition, partnership, affiliation, or joint venture (JV) in their strategy in response to an ever-shifting, increasingly competitive market

13 can be broadly categorized into three types: (1) manual (labor-intensive), (2) automated (APIs), and (3) engineered (custom APIs) (Giannakos et al., 2019). The approach that I would use to integrate data from multiple sources (from differing perspectives, across various disciplines, stored in different formats and varying levels of structure) is engineered (using APIs to create dataflows and enable integration automatically). The data extracted from the various sources would be consolidated into a single, cohesive data set, which would be located into a centralized system like a data warehouse or data lake. This is the foundation to produce effective, actionable business intelligence. Market Data Analysis Continued Primarily due to COVID-19’s impact, healthcare industry merger and acquisition (M&A) activity has remained robust in 2021, as organizations try to respond and build resiliency in the

14 face of industry disruption, market shifts, and new market dynamics. 2015 2016 2017 2018 2019 2020 2021 0 20 40 60 80 100 85 71 80 69 71 62 34 Hospitals and Health Systems Total Transactions for Q1-Q3 Combined Numner of Transactions Source: Kaufman Hall Transactions Data (M&A Quarterly Activity Report: Q3 2021) Furthermore, Bain & Company’s US Healthcare Trends 2021 report states that healthcare organizations (including hospital groups) expect to do more M&A transactions, with 50% indicating that they were highly likely to make one or more acquisitions over the next two years. The M&A objectives are multifaceted – (1) increasing care access, (2) improving care quality, (3) driving efficiencies that lower costs, (4) taking advantage of economies of scale, (5) address

16 acquisition (M&A) – i.e., to improve patient care quality and outcomes and financial sustainability outcomes. In M&A, it is critical to have a compelling strategic rationale and strong pre- and post-deal management (i.e., proper integration planning and execution). Additionally, it is critical to document the necessary strategies and initiatives that will help realize NewYork- Presbyterian’s (NYP) overall goal. From both the PESTLE analysis and Market Data analysis, it is evident that competition (from consolidation and new market entrants) and technology (particularly that digital transformation of healthcare) from external macro-environmental factors are the main aspects that could directly affect NYP’s business operations, functions and financial performance, impacting its ability to provide accessible, affordable, scalable and sustainable care for patients. NYP should embrance competition and techological advances to drives relentless improvements in access, quality and cost. Below are three evidence-based, innovative strategies (which are interconnected and interdependent) to address NYP’s organizational challenges and opportunities in a dynamic environment, allowing NYP to exploit all opportunities and mitigate the threats or challenges it may face. These will be critical to ensure NewYork-Presbyterian’s provide its patients and communities with high-quality, convenient and cost-effective care. 5. During both integration and transformation phase, ensure that NewYork-Presbyterian (i.e., the acquiring hospital) both transfers and receives managerial, clinical, operational and technological expertise (at least 50%) to ensure that access, affordability, quality, and experience are all improved. This will increase HYP’s changes to attract patients into their ecosystem (versus the competition)—in a sense, encouraging patients to think of NYP health system first for all their healthcare needs (i.e., provide a one-stop shop – in term of breadth and scale – for the entirety of a patient’s healthcare encounters).

17 6. Improve operational efficiencies associated with economies of scale, reduced administrative and overhead costs, improved integration of care, reduction or elimination of redundant services, shared costs for expensive IT infrastructures and purchasing, access to a robust network of system resources, equipment and facility upgrades to reduce hospital operating costs (by 15%−30%) – savings that accrue need to be passed on to patients and their health plans, translating into average price decreases of hospital/medical services (by 6%−18%). In a competitive marketplace (where consolidation is increasing due to rising levels of M&A’s), taking a coalition approach (1) helps NYP ensure the most efficient use of resources, (2) enables NYP to provide better patient care and service, achieve operational efficiencies, decrease patient care cost, and achieve differentiation, and (3) help fuel innovation and drive value-based care. 7. Increase the quantity of care, enhance access to care (i.e., breadth of services), and improve quality of care across the full continuum of care (by updating clinical operations across a health system, implementing consistent best practices and enhancing the promise of technology and data analytics), but decrease costs (due to increased scale). This will enable NYP to deliver (1) broad access to health services, (2) high quality and efficiency in the delivery of health services, and (3) match (and exceed) the level of competition to the nature of the health services to improve health outcomes, while improving quality of care and controlling costs. Evidence-Based Recommendations

19 exploring group purchasing options. Once the functional departments identify these cost-saving opportunities, the financial team will need to assess the step-change improvement plans for short-term results and long-term sustainability and achievability, then allocate resources to the efforts. NewYork-Presbyterian’s operations are complex, highly variable, and deeply interconnected systems. NewYork-Presbyterian will need to use data science (both descriptive and predictive analytics), machine learning (ML), artificial intelligence (AI), natural language processing (NLP) and deep learning (DL), and advanced optimization algorithms to significantly increase the quantity of care, enhance access to care, and improve quality of care across the full continuum of care for a lower cost. NewYork-Presbyterian will need to invest in a developing a data lake (to collect, store, process, and analyze big data), building data science, data platform engineer, data architect, and data visualization designer teams, and intelligent (cloud computing) solutions that will enable that to make better medical/clinical, operational, and financial decisions. Conclusion The US healthcare industry – which is a collection of disconnected components (health plans, hospital systems, pharmaceutical companies, medical device manufacturers) – is going through a period of transition and transformation, which brings organizational challenges and opportunities inherent in this dynamic environment. Increasing pressure to provide great patient care, maximize value for patients, and make its financial outcomes more sustainable and resilient is driving healthcare providers like NewYork-Presbyterian to pursue mergers and acquisitions to create operational, strategic, and financial value, while not straying away from the core of their mission, vision, and strategies. To properly proceed through an M&A transaction, a full PESTEL

20 analysis was completed for NYP to help it understand and mitigate the external macro- environmental factors that could impact its business operations, functions, and financial performance. Additionally, three evidence-based, innovative strategies were developed to enable NYP to exploit all opportunities and mitigate the challenges it may face in a dynamic environment. NewYork-Presbyterian faces a choice in a dynamic, ever-changing healthcare environment: transform to be part of the future or risk being left behind. NewYork-Presbyterian could leverage M&A for growth and expansion to transform to a healthcare ecosystem providing accessible, affordable, scalable, and sustainable care for patients for the entirety of their healthcare needs (i.e., overall wellness encompassing mental, social, emotional, physical, and spiritual health).