Valley-wide Health Systems Inc. Harvard Case Solution & Analysis

Valley-wide Health Systems Inc. Case Study Solution

 

The case illustrates the business strategy of Valley-Wide Health Systems, established by Salazar in Saint Louis as a profit organization but to treat insured and uninsured patients both in the facility. Before the initiation of the business model, there have been limited accessibility for the uninsured patients in the San Louis Valley, seeking the market gap and opportunity, Valley-Wide initiated its operations to offer full fledge medical services to the patients.Under the leadership of Salazar, the hospital adopted best practices to enhance the business operations.In doing so, the healthcare was taught the best practices from the other businesses and hence lead to successful operations in the market.

In 1998, the Mercy Hospital reached to Valley-Wide Health Systems to outsource the certain type of patient care to the Valley-Wide hospital, in an attempt to downsize and control the cost. The project however failed to prove successful opportunity for Valley-Wide, due to inadequate understanding of the culture, government funds and expected cash flow stream. This lead to continuous losses to Valley-Wide hospital and lead to laying off the employees in an attempt to control the cost and sustain the position in the market.

Keywords:  Culture, Market Dynamics, Organizational Strategy, Regional strategies

Introduction

The Valley-Wide Health Systems started its operation in 1976, after analyzing the market gap of inadequate medical facilities and services for the uninsured patients in the San LuisValley.The healthcare started as it hired five doctors in the initial period to serve the purpose.The business model of the Valley-Wide Health care remains to be for-profit with budgets and financial statement.

Since majority of the healthcare assistance has been provided by the federal government in shape of grants, the facilities remained limited to a certain level for the valley and the patients. Analyzing so, Salazar, the CEO of the Valley-Wide hospital acquired 40% financial assistance from financial insurance companies. 40% from the Medicare and Medicaid’s and 20% as a federal grant. Such business model reduced the dependence of the hospital on the federal grant and hence improved the profitability in the given period. Also, under the leadership of Salazar, the company adopted the best business practices and understanding of the culture to develop the right fit for itself and hence improve the level of operations and effectiveness of the service.In doing so, Salazar hired medical knowledge equipped person nel and perspective of business in the hospital to develop a uni-focal direction and business approach. However, in 1998, the company accepted the Durango project in south San Louis location as a third party to support the patient care in Mercy Hospital. The Mercy Hospital has been looking to downsize the operation and spun off its two facilities.The Valley-Wide accepted the projects and expanded its operations in the region. The business model merely depended on the federal funds to run the facility operations. However, the expected funds become reduced due to affluent position of the South San Louis Valley, along with the financial crisis in 2003 which made the hospital to cut down the cost in order to make the other ends meet.

However, the financial instability has not been the only issue for Valley-Wide to operate in Colorado, the culture and values also differ as of the parent region. This difference made the management to deal with the regular issues differently, and also hindered the implementation of the best practices adapted and learned in San Louis Valley in the particular region, resulting in continuous conflict, demotivated employee morale and hence the overall productivity.

Identification of the Problem

The key problem in the case is the misunderstanding of Durango market and market Opportunity along with the mis estimating of the cash flows to drive the operations successfully in the market.

Since, the management estimated a continuous cash flow in shape of government grant, and depended heavily on it to run the business,it leads to the failure in meeting the expenses and operational demand in the market. In addition, the financial storm broke out in the region in 2003, which further reduced the cash flows and made it difficult for the company to meet the expense to offer the adequate patient care.

Moreover, the misunderstanding of the culture and the ethnic values in San Louis Valley, created the organizational conflict among the employees and the management.This lead to resistance in bringing the best practices in the organization and also reduced the overall performance due to difference in cultural backgrounds. For example, the doctors in the Durango demanded spring holidays and also multiple day off during the week.This created a mismatch between the organizational prior practices and the practices to be developed in the Durango market.

Such differences created hindrances and resistance in meeting the organizational goals and lead to the inability to meet the efficiency and effectiveness of operations, lowering the organizational performance in the market.

Identification of the solution

In order to deal with the pertaining issues, the Valley-Wide management should develop the market understanding and cultural understanding to deal with the differences. In doing so, it should develop a unique organizational structure and strategy to support the cultural difference between the two regions. Doing so, it should increase the number of hours worked and compensate it with the multiple off in the week, this will complete the total number of required working hours to meet the creation threshold level in the organization.

In addition to this, to resolve the spring holidays culture difference in the organization, the Valley-Wide should plant some of the expatriates in the new market to anchor and take along the organizational practices uniformly in the new market as well.In doing so, the company should develop a unified organizational strategy and vision to bring all the prior and new employees from both regions on the same page. (Porter, How Competitive Forces Shape Strategy, 1979)

Lastly, in order to resolve the issue, the company should develop a unified communication platform between the two regions which will help to disseminate learning and the best practices, along with the development of unified culture in the organization. This will also allow the employees on Durango to establish a bond with the other region’s employees in the long term help in developing the unified operational and business strategy for both the regions. (Porter, 1987)..................

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