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Strategic planning for pathology practices and laboratories

Author: David A. Novis, M.D.

Deputy Editor-in-Chief: Patricia Tsang, M.D., M.B.A.

Last author update: 20 September 2021

Last staff update: 20 September 2021

Copyright: 2002-2024, PathologyOutlines.com, Inc.

PubMed Search: Strategic planning[TI] (laboratory OR pathology)

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Table of Contents

Cite this page: Novis DA. Strategic planning for pathology practices and laboratories. PathologyOutlines.com website. https://www.pathologyoutlines.com/topic/managementlabplanning.html. Accessed April 19th, 2024.

Definition / general

Definitions of strategy and approaches to strategic planning comprise a sizable, diverse body of literature
There is no single right way to go about strategic planning, no perfect plan; they all have something to offer

What is strategic planning?

The process of establishing a direction that a business will pursue
Strategic planning involves answering 3 basic questions about a business:
1. Where do we want it to go?
2. Why do we want it to go there?
3. What will it all look like when we arrive?

Why have a strategic plan?

Reasons to develop a strategic plan include:
- Start or grow a business
- Improve existing services
- Prepare for the advent of a new service or venture
- Prepare for the fiscal year
- Realize a corporate mission
- Mitigate a threatening issue
- Solve internal problems
- Galvanize the morale and focus the work effort of employees
- Improve efficiency

Who is responsible and held accountable for strategic planning?

Developing a strategic plan is a governance function, the responsible individuals of which comprise:
- Business owners:
  - Practice owners, e.g. equity holders, partners
  - Laboratory owners, e.g. equity holders, hospitals, etc.
- Board of directors or individuals who serve in that capacity and hold fiduciary positions in the practice, laboratory or hospital
- Chief operating officer or individuals who serve in that capacity
Individuals responsible and accountable for governance functions (i.e. strategic planning) do not include nonfiduciaries:
- Vice presidents
- Directors
- Staff
- Nonstaff employees and contractors
Implementing a strategic plan is a management / administrative function, the responsible individuals of which may comprise:
- Professional and nonprofessional staff / executive and nonexecutive staff
- Subcontractors and vendors
- Consultants

Planning overview

Classically, strategic planning proceeds in 3 basic steps:
1. Discussion: a series of sessions to determine the preferences of the practice partners, strategic options, feasibilities of those options and crafting of a strategic plan
2. Implementation: executing the strategic plan
3. Evaluation: following up on the metrics that determine the plan's success or failure and acting on contingencies designed to mitigate failure

Assemble a planning team

Members of strategic planning teams commonly include:
- CEO, chairman of the board of directors or whoever serves in these capacities
  - Pathology practices may have a group president, chair or chief pathologist who serves in these roles
- Board of directors: pathology practices may have partners or an executive committee serving in this role but if they intend on growing substantially, must also consider having independent (nonpathologist) board members with fiduciary responsibilities
- Staff who will be implementing the plan
- Administrators to record and oversee planning activities
- Content providers and consultants, if necessary
  - Consultants may provide data, content and opinion but they have no fiduciary responsibility and should make no decisions for the team
- Mediator or facilitator if the group is engaging in strategic planning for the first time, previous planning has not been successful, consensus cannot be reached or the group believes that they require a greater degree of impartiality than is available locally

Develop a strategic planning protocol

Items to consider in a strategic planning protocol may include:
- Policies and procedures for decision making and conflict resolution
- Designations for accountability
- Planning team responsibilities, job descriptions, roles, responsibilities and timelines
- Designations of individuals with ultimate responsibilities for planning team organization, planning and conducting meetings, assigning responsibilities, gathering data, following up of assigned tasks, communication to team members, etc.
- Schedule to obtain regular status updates on implementation

Analyze the landscape

Gather intelligence about what options the plan might pursue: SWOT (strengths / weaknesses / opportunities / threats) analysis
1. May benefit from engaging marketing consultants
2. In pathology practices, partners and staff members who have been in practice a while and who are connected with the industry may be able to fulfill this function
Examples of SWOT elements include:
- Strengths: what are they and how will you leverage them?
  - What are the organization's assets and unique resources?
  - What differentiates the organization from its competitors? What is its competitive advantage?
  - How broad are the current and potential customer bases?
- Weaknesses: what are they and how will the organization overcome them?
  - What must improve? What expertise / resources / staff does the organization lack?
  - What capital or access to capital does the organization lack?
  - Does the organization rely on one or only a few customers?
- Opportunities: what are they and how will the organization maximize / capitalize on them?
  - What emerging trends can the organization service profitably?
  - Is there talent that the organization needs and can acquire readily?
  - Are competitors failing to service their customers adequately? Is there an unmet need that the organization can fulfill?
  - Is there a new technology that the organization can embrace?
- Threats: what are they and how will the organization mitigate them?
  - Is there a better equipped (funding, talent, mobility, etc.) competitor in the proposed market?
  - Are new competitors on the horizon?
  - Is there a new technology that will replace the organization's current services?
  - Is the organization overly dependent on third parties, suppliers or key customers?

Brainstorm strategic options and requirements

With SWOT analyses in hand, organizations should be ready to brainstorm strategic options
Pathology practices will also need to have their stakeholder analysis in hand
Laboratory owners / institutions will have performed their own stakeholder analysis, which will likely be confidential

Determine outcome metrics

Determining whether or not strategies and strategic plans are successful requires tracking:
- Hard metrics of success
- Threshold measurements that establish success or failure of the plan
- Timetables by which to record those measurements
- Contingency plans if desired thresholds are not met
Hard versus soft metrics
- Soft metrics focus on process, e.g.
  - Number of customer contacts
  - Published articles
- Hard metrics focus on definitive outcomes, e.g
  - Quarterly revenue
  - Number of customers

The chart below provides some examples of using metrics to evaluate a strategic plan:

Goals of strategic plan	Metric	Threshold	Measurement timetable	Contingency if thresholds not met
Grow revenue	Revenue	10K	Quarterly	Cease growth; terminate subcontractors
Grow volume / customers	Accessions	1K/quarter, 4K/year	Quarterly	Cease growth; terminate subcontractors
Build relationships: laboratory	Satisfaction scores	> 4.8/5	Monthly	Switch to point of service satisfaction surveys, address all dissatisfaction immediately
Build relationships: pathology practice	Committee appointments / trustee seat	3/1	Within 2 years / within 3 years	Commence political activities Increase volunteerism Increase donations

Perform feasibility study for selected strategy

See Business plan

Common mistakes: why strategic plans may fail

Failure to link in a single clear trajectory, mission, vision, strategy, goals and outcomes
All stakeholders in the plan are not in complete agreement with, aligned or vested in the plan or its outcomes
Goals and objectives are unrealistic or overambitious
Strengths overestimated or not important to customers
Opportunities and trends poorly researched and hence overestimated or nonexistent
Adhering to unsupported or fault assumptions
Organization does not provide adequate leadership
Plan, its assignments and accountabilities not communicated adequately
Plan focuses on soft or the wrong outcome measurements
Not performing timely, meticulous scrutiny, follow up and challenging of outcome metrics
Inertia: waiting to come up with the mythical perfect plan before embarking on a plan
Devising and then ignoring implementation of the plan
Waiting for a disaster before beginning to plan
Thinking the plan is a one time event, i.e. a weekend retreat rather than an ongoing process that often entails trial and error
Putting tactics before strategy: starting with a tactical approach and working backwards into strategy; diluting strategy to accommodate preconceived tactics
Stubbornly adhering to old principles, policies and procedures / failing to consider new ideas and innovations

Special considerations for pathology practices

Start with a reality check: the stakeholder analysis

Stakeholder analysis engages in honest, sometimes uncomfortable discussions among decision makers / pathology group partners to lay all cards face up on the table describing:
- Their intimate business and life needs
- Their levels of comfort with the risk that launching new business ventures entails
Unless the practice comprises more than 1 or only a few owners, all of whom are of the same mind, this group discussion may be the most difficult yet most important activity that assembling a strategic plan requires
Obstacles that may lead to decisional inertia or fiscal misadventure:
- Lack of corporate mentality results in unaligned agendas
  - Decision makers are physician practice partners / owners / service providers who may see their practices existing primarily to serve their own needs rather than the other way around
  - It is not realistic to expect everyone to share the same aspirations, lifestyles and professional requirements, all of which are likely to change during progressive stages of their careers
  - Consequently, everyone may not agree on the same corporate direction
- Lack of business acumen
  - Partners / associates are generally hired for their medical expertise, not for their business acumen
  - Some partners may have MBAs but not necessarily any experience in building, owning or managing businesses
  - Partners may be ill equipped and perhaps reluctant to admit to their difficulties in making the business decisions that the privilege of partnership bestows upon them
- Differences in risk tolerance
  - Not everyone may be comfortable with leveraging their personal assets to secure investment capital or accepting the level of accountability that strategic decisions require
- Differences in culture, social skills, self awareness, self efficacy, emotional IQ and ability to compromise
  - Partners may not possess equal willingness to understand and appreciate each other's needs and personal goals, to work as a team, to accept criticism or to be challenged
  - It may be impossible to reach consensus unless these differences are resolved
- Differences in processing information
  - Some partners may base their decisions on clear, tangible, objective analytical data that focus on outcomes
  - Others may base their decisions on abstract, visceral, value oriented perceptions that focus on the impact those decisions have on other people
  - Explaining the efficacies of different points of view will require the partners to know how they must present their positions to each other

Examples of partners' diverse agendas:

Where do you want to go?	Why do you want to go there?	What must it look like when you arrive?
Increase practice worth	Posture practice for sale	Sell practice for 1.5x annual revenue
Increase income	Pay college tuitions	Graduate kids with no debt to myself or them
Increase time off	Love of travel	4 months off to travel the globe / do international volunteer work
Exit practice	Aging, tired of working	Retire comfortably with no debt
Make a career change	Enjoy a particular specialty	Become an academic specialist
Preserve job	Hospital consolidation may put me out of work	Become a hospital employee with a long term contract

Sample questions that might:
- Allow partners to better understand each other
- Lead practice members to arrive at a uniformly acceptable plan, eliminate certain plan options or cease planning altogether
If required to implement our plan:
- What magnitude of pay cut are you willing to take?
- How many more hours a day are you willing to work?
- How much less time are you willing to take off?
- Are you willing to terminate nonpartner professional staff?
- Are you willing to terminate nonprofessional staff?
- Are you willing to sell the practice for the right price?
- Are you willing to become an employee of the hospital?
- On what magnitude of loan note are you willing to place your personal signature?
- What magnitude of differential pay levels or work requirements among partners and other group members will you tolerate?
- How much time and resources are you willing to devote to learning new skills?

Brainstorming strategic options and requirements

With stakeholder and SWOT analyses in hand, pathology practices should be ready to brainstorm strategic options
2 examples of strategic options:
1. Majority of partners may want to grow revenue in preparation for selling the practice in the distant future
  - SWOT analysis may show that the market provides a growth opportunity in available customers or need for new services
  - Pursuing this opportunity may require capital (debt), temporarily adding work hours and decreasing salaries
  - Stakeholder analysis may reveal that several members have conflicting personal agendas and are not on board with this strategic direction
  - Implementing this strategy might require rewriting corporate bylaws
  - Implementing this strategy might require stratifying salaries based on an inverse relationship between income and risk: for instance, providing higher current salaries but less interest in future profits for those who desire less risk and choose not to invest in a corporate venture versus lower current salaries and greater interest in future profits for those who are willing to take more risk and invest their own capital
2. Majority of partners want to preserve their livelihood in the face of cuts to reimbursement and hospital mergers
  - SWOT analysis may show that local clinicians desire additional services and attention and several hospital projects may benefit from additional effort from the pathology group
  - Majority of partners want to adopt a strategy of deepening their relationships with the local customers and administrators
  - Doing so involves attending more committee meetings, assuming hospital leadership roles and interacting more frequently with customers
  - Stakeholder analysis reveals that several partners are uncomfortable with these activities
  - Implementing this strategy might require those dissenting partners to assume more service responsibilities that free up other partners to engage in relationship building activities

Special considerations for laboratories

Who is responsible and held accountable for strategic planning?

Governing body and fiduciaries
- Laboratory owners: e.g. equity holders, hospital, etc.
- Board of trustees
- Chief operating officer
Individuals responsible and accountable for governance functions (i.e. strategic planning) do not include nonfiduciaries such as:
- Vice presidents
- Director level employees and subcontractors
  - Laboratory director, staff pathologists, department chairs
  - Clinical Laboratory Improvement Amendments (CLIA) does not specifically list strategic planning as a required duty and responsibility of laboratory directors
  - CAP Accreditation Laboratory Director Assessment checklist (DRA.11200) Director Responsibility Education / R&D Phase II requirement (CAP: Director Assessment Checklist [Accessed 3 February 2021])
    - Laboratory director must ensure provision of strategic planning
    - Evidence of compliance: "Records or minutes from strategic planning sessions demonstrating participation and role of laboratory director"

Involvement of laboratory directors in institutional / laboratory strategic planning

Some reasons why laboratory directors become involved in strategic planning activities
- Ethical and professional motivation
- Business and posturing
- Career advancement
- CAP accreditation requirement
Laboratory director / pathologist roles that provide value to institutional / laboratory strategic planners
- Determining the extent and type of support the institutional strategic planners require of the laboratory and its director
- Ensuring that laboratory operations align with and advance those of the institution / laboratory owners
- Keeping strategic planners abreast of laboratory trends
- Providing content to institutional strategic planners
- Supporting decisions of institutional strategic planners
- Ensuring that laboratory operations advance institutional strategic agendas
- Ensuring biases and preferences among laboratory professional and nonprofessional staff do not undermine institutional strategic agendas
- Providing leadership in implementing institutional strategies
- Providing insight and suggestions for outcome metrics, thresholds, milepost measurements and contingency plans
Engaging the laboratory director in strategic planning
- Solicit CEO's / owner's expectations, extent and parameters of laboratory director's involvement
- Consider having expectations of involvement incorporated into laboratory director's job description, if not already incorporated
- Document all conversations and activities involving strategic planning
- Review organization's SWOT analysis and strategic plan
- Secure support among professional and nonprofessional laboratory staff for institutional / laboratory strategic planning
- Neutralize / mitigate dissent among professional and nonprofessional laboratory staff for institutional / laboratory strategic planning
Unintended consequences of and mistakes in engaging in laboratory strategic planning
- Overestimating laboratory director's responsibility and authority in strategic planning
- Placing the agenda of the laboratory / laboratory staff / colleagues over that of the institution / owner
- Engaging in confrontations with institutional planners / owners over design and implementation of plan (other than those regarding ethical issues)
- Frustration over strategic planning decisions that run counter to the opinions and desires of the laboratory director and laboratory staff
- Communicating dissent with plan to nonengaged outsiders

Laboratory strategic planning team

Professional and nonprofessional staff who will be implementing the plan
Administrators to record and oversee planning activities
Content providers and consultants, if necessary
Liaison to institutional / owner strategic planners, e.g. COO, director of ancillary services, etc.
Liaisons to other physician and operational departments, e.g. hospital medical director, nursing director, pharmacy director, etc.

Additional references

Free Management Library: All About Strategic Planning [Accessed 3 February 2021]

Board review style question #1

The individual(s) ultimately responsible for institutional strategic planning are

Board of directors and owners
Chief financial officer
Chief operating officer
Medical staff
Vice president for business development

Board review style answer #1

A. Board of directors and owners. Vice presidents and C suite officers are responsible for gathering intelligence and implementing plan. The medical staff may contribute content. Fiduciaries (board members) and owners are responsible for determining the strategic plan and ensuring its proper implementation.

Comment Here

Reference: Strategic planning for pathology practices and laboratories

Board review style question #2

Which condition among pathology group partners is the least likely to hinder strategic planning efforts?

Differences in processing information
Differences in risk tolerance
Lack of business acumen
Lack of understanding of basic pathology principles
Unaligned agendas

Board review style answer #2

D. Lack of understanding of basic pathology principles. Pathology practices usually hire pathologists for their expertise in pathology, not to manage or craft the business operations of the practice. As in any group of individuals, partners are likely to possess different personal agendas, levels of business acumen, tolerance for risk and manners in which they process information.

Comment Here

Reference: Strategic planning for pathology practices and laboratories

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