NEWARK OPTHALMIC CENTRE STRATEGY

Newark Opthalmic Centre Strategy



Newark Opthalmic Centre Strategy

Introduction

Based on the 'Newark Opthalmic Centre' case the following report addressed to James Collington and a comprehensive implementation plan for Dr. Harrison. The report includes the A3 with the IS/ IT strategy.

A3 Plan

The business of healthcare is becoming riskier. Capitation is increasing the risk providers must assume; expansion of the populations they cover makes health-related events (and the cost) more difficult to predict: and competition among providers is eroding operating margins, making the effect of risk on profitability more pronounced. At the same time, the management of risk is becoming more complex as the delivery of healthcare becomes ever more fragmented. Each trend implies a serious threat to healthcare organizations. Opthalmic's for example, face two options for trading off risk against profitability in the future - they can accept lower margins in the more commodities like low risk business, or take on higher risk for potentially higher margins. But each also provides opportunities for players who manage risks well and develop a risk portfolio that suits their appetite for risk, their skills, and customers' needs. This is because healthcare organization margins are actually a "risk premium": the reward for taking on risk. To take advantage of the opportunities, risk must be treated as a core business activity for which responsibility is taken at senior level, rather than as a technical skill to be handled by specialists. As competition and pressure on costs reduce margins, and covered populations become riskier, a more sophisticated approach to risk management is required. By understanding care provision in terms of risk as well as average cost, a payer or provider can evaluate all the available risk management roles and strategies to optimize its performance. The winners will be those that excel at this and integrate risk management thinking into all aspects of their operating strategy. (Deanna Mulligan et al, 1996)

IS/IT strategy

Principal Types of Risk

To manage risk, healthcare organizations must first understand the size and characteristics of its four principal types for a comprehensive support system IT/IS implementation.Clinical Operating Risk - the risk of variations in the costs incurred by a payer or provider in providing clinical services.

Event Risk

The risk associated with fluctuating demand for healthcare in the covered population

Pricing Risk

The risk inherent in setting prices given the unpredictable expenses of event risk. Financial Risk

The basic business risks faced by all companies: capital, partner insolvency, cash flow, liability, and regulatory risks.

The first three are especially important to healthcare organizations, which stand or fall by their ability to manage them. Managing and mitigating financial risk is also important, but because it is a risk all businesses face, we will not discuss it further here. Event Risk

Event risk is determined by the characteristics of the pool of covered lives - the members of a healthcare plan or the population managed by a risk-bearing provider - and has two elements: incidence and severity. The greater the variation in occurrence of any one ...