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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.

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References

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org/about-us/

 Altru Health System. (2015). Altru Financial Report . Retrieved from

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American Society for Quality. (2016). Plan-Do-Check-Act (PDCA) Cycle. Retrieved from

http//asq.org/learn-about-quality/project-planning-tools/overview/pdca-cycle.html

Conjecture Corporation. (2016). What is the Role of Environmental Analysis on Strategic

Management. Retrieved from http://www.wisegeek.com/what-is-the-role-of-

environmental-analysis-in-strategic-management.htm

Get Full Value From Your Communication Plan. (2016). Retrieved from http://www.burrell

esluce.com/resources/newsletter/2008/july_2008

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Hunger, J.D., & Wheelen, T.L., (2011). Essentials of Strategic Management (5th ed.). Upper

Saddle River, NJ: Pearson Education.

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org/about-Mayo-clinic/mission-values

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http://www.mayoclinic.org/documents/governance-management-structure-pdf/doc-

20079617

Martindale-Hubbell. (2016). Business Basics of Mergers and Acquisitions Retrieved from

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and-acquisitions.html

Swayne, L.E., Duncan, W.J., & Ginter, P.M. (2008). Strategic Management of Health Care

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