Developing a Strategic Plan for KFSH & RC Healthcare System

1. Developing a Strategic Plan for KFSH & RC Healthcare System King Faisal Specialist Hospital & Research Centre Healthcare System April 28, 2004 This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organisation without prior written approval from McKinsey & Company. This material was used by McKinsey & Company during an oral presentation; it is not a complete record of the discussion.

2. Contents • Introduction to McKinsey & Company • Examples of our impact in hospitals • Project overview

3. Our firm • Leading management consulting firm worldwide • 85 offices in 44 countries • Clients include over half of Fortune 500 companies • 7,000 consultants worldwide comprising over 90 nationalities • 23 industry practices and 35 functional capability groups

4. Snapshot of McKinsey’s healthcare practice • ~70 partners focused on healthcare across the Firm • 450 member consultant network includes • 250medical doctors • 150 PhDs in fields including genetics, immunology, biotechnology, molecular biology and neurobiology • 250 with MS/BS degrees in medical services and/or work experience in the healthcare industry • More than 1600 healthcare studies (pharmaceuticals, hospitals, and insurance) undertaken since 1996 and 700+ internal proprietary research documents published • Wide range of clients including • Government departments of health • Health care providers • Health care payors • Leading pharmaceutical companies • Biotech and medical devices companies

5. Wide spectrum of hospital and insurance assignments, overall functional area split, 1998 - 2003 • 100% = 502 engagements • Other • Post-merger management • Miscellaneous • IT systems • Strategy • Corporate strategy • Business unit strategy • Product/market strategy • Marketing/sales • Sales force management • Channel strategy/management • Growth • Building new businesses • Growth strategy • Organization • Organizational structure • Change management • Management planning/ decision process • Operations • Operations strategy • Purchasing and supply management (PSM) • Service operations

6. Contents • Introduction to McKinsey & Company • Examples of our impact in hospitals • Project overview

7. Client case example – cardiovascular strategy • Situation • McKinsey’s role • Impact • System description • Multi-hospital system in the Northeast, US • Highest margin service line (CV) losing market share and margin • Challenges • Declining market share in critical specialties • Under investment in infrastructure and program improvements • Declining patient and physician satisfaction • Objectives • Develop a cardiovascular service line strategy that captures and grows share • Improve and standardize clinical outcomes • Improve satisfaction • Program design • Launched 4-month effort to redefine and focus cardiovascular services • Evaluated industry-wide pressures in the context of overall market attractiveness • Identified key success factors • High-volume, high profit • Attractive micro-markets • Physician presence • High patient and referring physician satisfaction levers • Assessed likely competitive responses • Detailed capacity needs • Created implementation plans to create new heart hospital • Improved time from arrival to open artery in the cath lab from 120 minutes to 80 minutes • Increased percent of patients on “best practice” medical regimens from 70% to >90% • Decrease in CABG mortality by 40% • Returned service line to profitability • Met growth projections of $7 million on target with implementation plans • Improved physician and patient satisfaction

8. Client case example – service operations excellence • Situation • McKinsey’s role • Impact • System description • $1.6 billion non-profit academic health care system • Network of 35 member hospitals • Over 6,000 physicians and 2,200 available beds Challenges • High capacity utilization levels (ICU utilization was >90%) • 21% of surgery cases delayed • 8% of surgeries cancelled • Growth aspirations likely to cause additional pressure • Objectives • Liberate effective capacity • Reduce delays and cancelled surgeries • Launched 3-month service operations effort targeted on the end-to-end care process (ER, OR, ICU, impatient units) • Detailed impact of variability and mix of demand on system capacity • Evaluated ability to alter scheduling processes to: • Minimize demand and variability by day of week • Maximize capacity across the entire end to end process • Instituted evidence based treatment plans for common diseases • “Ensure that the right patient is in the right bed receiving the right care at the right time” • Immediate reduction in number of delayed cases from 21% to 5% • Immediate reduction in number of cancelled cases from 8% to <1% • Liberated 23% capacity for strategic growth • Reduced length of stay while improving clinical outcomes and satisfaction • Eliminated delays for radiology and ancillary testing by staffing according to demand • Developed foundation to leverage new skills in payor negotiations

9. Contents • Introduction to McKinsey & Company • Examples of our impact in hospitals • Project overview

10. Your goal: To develop a strategic plan for KFSH&RC • Today • Goal • To undertake a strategic planning process to define the next level of distinctive performance and the future of the organization • How and where to pursue growth (e.g. new service lines and businesses that can be built from existing strengths) • How and where to improve service operations • New capabilities and skills required for successful implementation • Leading tertiary care and biomedical research institution, regionally and internationally • Multi-site network, with three institutions: Riyadh, Jeddah, and the Center for Children‘s Cancer • In transition to a new corporate structure as a public company • Faced with multiple forces of change in the KSA healthcare environment (e.g. insurance laws, disease profiles, local competition)

11. A strategic plan includes four components • Mission– Why does the organization exist? What are our values and priorities? Mission • Vision/aspirations– What do we want to become or achieve? What will success look like in 5 years? For example: • What is our distinctiveness? • What are our needs? • How will we compete? Vision/ aspirations • Initiatives– What specific programs should we pursue to make our vision successful? • Talent management • Organizational structure • Management processes • Infrastructure and systems • Performance measurements • Capturing funding Initiatives • Action plan– What is the workplan to execute against the initiatives? What actions are required in what sequence? Who will be responsible? What resources do we need? Action plan

12. In light of the different histories and circumstances of KFSH&RC‘s sites, each must have sufficient flexibility to chart its own course, consistent with, and facilitative of, the overall mission and vision of KFSH&RC • Flexibility at the site-level • Broad and active participation • The strategic planning exercise must be owned by KFSH&RC‘s management team and involve as broad a possible stakeholder group in order to successfully change institutional culture and mindset • KFSH&RC‘s strategic plan must be grounded in Saudi‘s changing healthcare environment, identifying contingencies that are required for KFSH&RC to flexibly respond and proactively shape its environment • Contingency planning Key design principles for KFSH&RC’s strategic planning effort

13. Design and facilitate the strategic planning process • Preparation Overall project approach and timeline • 1-1.5 month summer break Months • April 15 • May • June • July • September • October • 0 • 1 • 2 • 3 • 5 • 5.5 • 4 • KickoffWorkshop • Workstream 1 • Workstream 2 • Launch targeted operational improvements • Workstream 3 • Define and launch new businesses/services • Workstream 4 • Build up KFSH&RC’s ‘change’ capabilities

14. Workstream 1 • Workstream 3 • Workstream 4 • Design and facilitate strategic planning process • Define and launch new services/ businesses • Build up KFSH&RC’s change management capabilities • Internal diagnostic of KFSH&RC’s clinical, administrative, and reputation performance • External diagnostic that assesses key local, regional, and international market trends and KFSH&RC current positioning • Definition of mission, vision, and KPIs • Focus areas and priorities for KFSH &RC moving forward • Implementation roadmap • Evaluate attractiveness and feasibility of new services/businesses that can generate additional income for KFSH&RC • Clinical • Research • Ancillary • Other • Provide a framework for assessing future business ideas • On-the-job training of KFSH&RC staff • Training workshops on healthcare and functional topics • Outline of the key requirements to establish an internal healthcare consultancy and an implementation plan Key focus areas by workstream • Workstream 2 • Implement targeted operational improvements • Launch implementation of selected ‘quick win’ • Operational performance assessment • Identification of improvement areas • Definition of performance targets • Action plan for implementation

15. Roles for KFSH&RC staff in the strategic planning project • Role • Responsibility Executive sponsors • Visible champions of the projects (e.g. kick-off all meetings, answer questions about the project) • Communicate to entire organization on why the strategic planning is being undertaken, status updates, and the future Project leaders • Coordinate all taskforces (meet with taskforce heads once every 2-3 days, ensure clarity around objectives and end products, stress-test output) • Plan communication to entire organization (e.g. what message when, what communication channel) Taskforces • Meets weekly • Frames and structures the problem • Debates output of analytic subteams and develops recommendations • Prepares presentations for the project leaders and for the organization Analytic subteams • Meets every day • Gathers and analyses data (based on well-defined analyses agreed by taskforces) • Prepares presentations to the taskforces on key analyses and recommendations

16. Our approach to working with you in a partnership Joint work • Work interactively with you to jointly develop end-products and to ensure your ownership of the outcome Fact-based approach • Objective analyses based on logic and quantitative/qualitative facts Implementation orientation • Recommend actionable solutions that will result in tangible change on the ground