free essays
Free essays

Environmental Analysis for Sherrill Hospital


EnvironmentalAnalysis for Sherrill Hospital

Sherrillhospital provides health services and child care services in LosAngeles. It has a total of 150 employees falling within the state andfederal threshold of a major health provider. This year themanagement of the hospital has to realign its policies with the legalchanges have emerged since the adoption of the Patient Protection andAffordable Health care Act. The average pay for all employees is$55,000 with about 120 of them employed on a permanent full-timebasis.

TheExternal Environment

ThePatient Protection and Affordable care Act is an external factor thatwill prompt internal adjustments. The Hospital qualifies for up to35% of tax credit of the insurance premiums it pays for itsemployees. The credit will be increased to 50% in 2014 (Wilensky,2012). The remaining insurance cots after the deductions of taxcredits will continue to be subtracted at the expense of thehospital. The hospital has no option but to adjust and meet therequirements of the PPACA because it risks getting a fine of 2000dollars per employee. The hospitable is however less vulnerable tothe provisions of the PPACA because it is also a beneficiary in termsof guaranteeing patient payment of fees due to mandatory insurancerequirements provided by the Act. The cost of insurance is likely toincrease the burden for the hospital. The management will have tospend more in allocation insurance to all employees. The cost will goup and will significantly cutting profits.

Litigationis another significant issue that may affect the operation cost ofthe hospital. Providing health services has the perpetual risk offacing malpractice suits. They arise from issues such as unsuccessfulsurgical operations and other forms of negligence that may be causedby the doctors. The enactment of the Patient Protection andAffordable Health Care increased the possibility of facing more lawsuits over the already existing loopholes that can cause the hospitalto be sued. Doctors may want to pass some of the litigation costs tothe patient hence increasing the overall fees charged for healthservices. This has two major effects: (1) It will make our servicesexpensive than before hence driving away our traditional customers. Traditional customers are those patients who have established arelationship with the Sherrill as their hospital o choice for year.This is possible especially if other competing hospitals chargecomparatively lower fees with better quality services than ourhospital. (2) A lot of time and resources will be devoted tofinancing medical litigation at the expense of medical research andacquiring better equipment for treatment. This will indeed bring downthe quality of service therefore degrading the position the hospitalholds in terms of service delivery.



Thesame problem of service error has affected the hospital due theshortage of staff. Nurses are not sufficient commensurate to theincreasing number of patients admissions annually. The hospital endsup using the services of semi-trained nurses and inexperiencedassistants who drive up the possibility of error. Discrepancies inremuneration draw medical students from one field to another, aproblem that has caused a perennial shortage of doctors in hospitalsincluding Sherrill. The hospital sounds heavily on the few doctors toretain them while saving large amounts of money for amount litigationarising from unprofessional conduct of untrained staff.

Infrastructuraldevelopment and acquisition

Thisis an internal force that largely affects the cost of providingspecialized services to patients. Infrastructure such as bedcapacity, computerized tomography scanners, x-ray scanners, andtheater rooms are internal infrastructures that need updating. Areduced tax on such equipment makes them affordable for acquisition.However, the management of Sherrill hospital considers this a veryimportant competitive aspect. The hospital has been the sole providerof CT scanning services for the last five years. High quality healthservices hospital infrastructure is vital in providing specializedservices. Adoption of advanced technology of health infrastructure isa competitive strategy that the hospital considers the best cuttingedge strategy. The equipment requires heavy capital investments thatcompeting hospitals may not afford. It therefore takes advantage ofthe long experience it has in the industry and the profits ploughedback into the hospital to acquire high quality facilities that makehealth care services a great experience for patients.

Howthe above factors can affect the competitive strategy of the hospital

Theabove factors have serious implications on the organization’sability to formulate a competitive strategy. The Patient Protectionand affordable health care Act as caused several concerns about theshortage of staff, increased government regulations, decreased timewith patients, and government involvement in the relationship betweenthe physician and the patient. This has greatly shifted the attentionof doctors to independent practice options. It then becomes difficultfor the management to design a permanent quality appraisal programbecause of the uncertainties about doctor retention. It is verythreatening to the hospital’s service delivery because patientswould find it cheaper to deal with a privately registered doctor thana doctor working at Sherrill. Reduced overhead costs, costs ofbilling and claims. Doctors will definitely find an incentive inprivate practice because they can set their own service fee and takecare of the patient in a manner they deem fit. Conditions such asthis put the hospital in a vulnerable position of losing all itsdoctors for the now emerging and lucrative business of registering asprivate physicians. The management cannot enforce doctor’s internalterms that seem to expect too much from them. In fact the managementwill opt for more compromises just to keep doctors at Sherrill. Thiscompromise is undesirable in the health sector because it leads tohuge spending on paying doctors. The hospital has other members ofstaff that command a huge wage bill.

Competitivestrategies such as hiring the most reputable doctors and using moderntechnologies are now very expensive for Sherrill hospital.Previously, the hospital had a good number of profiled doctors thatprovided consultancy services. The same number as since shrankbecause the hospital found it unsustainable to pay them. Of the tensurgeons the hospital had four years ago, Sherrill can only afford topermanently pay four today. Others are hired on contract basis. Themanagement is grappling with maintaining the increased cost broughtabout by the Affordable care Act.

Litigationpossibilities as an external force also inhibit the ability of thehospital to make strategic competitive decisions (Needleman et al,2006). Although it is to come with strategies that can help keep thehospital away from the court rooms, some suits come from absolutelyunprecedented circumstances. These circumstances might arise from thenegligence of the doctor, misinterpretation of some sections of theaffordable care Act, and misunderstandings wit patients. Forinstance, the management and a strategic plan that would help restoreour image through reducing the number of patient-doctor relatedlitigations. However, this did not work because relatives who losepatients through death still filed cases even when the circumstanceswere really inevitable. Unfortunately, the media publicized the case.It affected Sherrill hospital’s public image. It is difficult tocome up with competitive strategies that can counter bad publicitythat come from the media especially on litigation associated withpatient death. There were suggestions from the board members that welet doctors faced with such charges face it alone. However, even ifthat was done, it is impossible to dissociate of the hospital fromsuch legal tussles. Furthermore, the doctors will still pass the samecosts of litigation to the hospital hence making no difference atall.

Asso long as the hospital will be part of the perennial shortage ofpractitioners, a competitive strategy remains an elusive idea. Thegovernment is supporting a subscription-based practice model patientscan subscribe with a private physician to get private services fromthem. Government programs such as Medicare and Medicaid supportinsurance paid to private physicians (Porter, Goold &amp Luchs,2006). This exacerbates the already existing shortage challenge.Competitiveness can be derived from having trained nurses and otherphysicians such as gastroenterologists. However, formulating astrategy that will improve the quality of health care is difficult ifthe availability of nurses and physicians remains low. If Sherrillhas to get a competitive edge through staffing, it must be preparedto spend more on hiring more staff through competitive terms that areabove the market average. This is expensive considering the increasedoperational costs arising from the factors discussed above. Raisingthe wage average of all physicians while hiring more is costly andcan lead to huge losses if the efforts do not translate to morepatient admissions. In the legal and economic environment thehospital can only try to maintain its position in the market becomesthese challenges cut across the health industry.

Infrastructuralenhancement strategies are vital in gaining a competitive advantagein health care provision. Most patients and insurance firms willprefer partnerships with hospitals that can accommodate morepatients. Insurance premiums are dependent upon factors that make itcheaper to pay health insurance for patients. Patients also preferinsurance firms that have lower premium charge. This interaction ofinsurance firms, the hospital, and patients make it necessary for thehospital to consider infrastructural quality as its competitivestrategy.


ThePatient Protection and Affordable Health care Act as increased thenumber of people enrolled for health insurance. This has definitelyincreased the number of people turning up for health care at Sherrillhospital. The hospital is likely to experience a dire strain onresources due to the increase of patients. The best strategy is todesignate attention to patients with complications that needspecialized cases. Considering that insurance firms still pay forpatients with emergency cases, the hospital should maximize onattending to accident emergency cases while still giving attention toother cases. Emergency cases are delicate therefore requiring thehospital to take advantage of its infrastructural capacity. Greatsuccess in managing accident and emergency cases will definitelyraise the profile of the hospital over its competitors.


Needleman,J., Buerhaus, P. I., Stewart, M., Zelevinsky, K., &amp Mattke, S.(2006). Nurse staffing in hospitals: Is there a business case forquality?. HealthAffairs,25(1),204-211.

Porter,M. E., Goold, M., &amp Luchs, K. (2006). From competitive advantageto corporate strategy. Managingthe Multibusiness Company: Strategic Issues for Diversified Groups,285.

Wilensky,G. R. (2012). The shortfalls of “Obamacare”. NewEngland Journal of Medicine,367(16),1479-1481.