Strategic Management Paper - Hospital industry analysis

ACKNOWLEDGMENTS
First and foremost, I am thanking God for the wisdom and perseverance that He has been
bestowed upon me throughout my life: "I can do everything through him who give me
strength." (Philippians 4: 13). This Strategic Management paper would not be possible
without the help of God, the support and encouragement of all the people I love especially
Benjamin (my husband), Jamie and Jasmin, my loving daughters and all my friends.
The contributions also of many different people, in their different ways, have made this
possible. I would like to extend my appreciation to the Dean, all Faculty and Staff of FEU-
Makati especially to all my professors during my MBA days: Prof. Antonio Concepcion,
Prof. Dante Sy (+), Prof. JayJay De Ocampo, Prof. Raul Mirasol, Prof. Nick Fontanilla, Prof.
Carlos Velayo, Atty. Manuel Ortega, Prof. Raymond Queddeng, Prof. Oscar Lagman, Prof.
Willy Cuason and Dr. Benjamin Espiritu. Thanks to all the staff in Academic Office, Deans’
Office, Registrar/Cashier Office especially to Mr. Richard Tobias, Ms. Daisy Sansalian,
Ms. Tina Morada, all the staff in the library, all security guard personnel for their
friendliness during my days in FEU-Makati.
Special mention to the following: Prof. Oscar Lagman (Marketing and Panel Chair),
Prof. Segismundo Gonzalez (Panel Member), Dr. Emiliano Hudtohan (Panel Member),
Prof. Raymond Queddeng (Financial Planning), Dr. Benjamin Espiritu (Former Dean), ,
From FEU-NRMF Medical Center: Dr. Policarpio B. Joves, Jr. (Medical Director), Dr. Polly T.
Chua-Chan (Assistant Dean), Dr. Linda Tamesis (Chief of Clinics), Ms. Nerissa Luanzon
(Chief Accountant) and Mr. Arlo Mortos (English Editor) for their encouragement in
making this strategic management paper possible. Their support, guidance, advice, as well
as pain-staking effort in proofreading my paper is greatly appreciated particularly, the
patience and understanding and unconditional support shown to me.
Last but not the least, I would like to thank the FEU-NRMF Medical Center especially to
the late Mrs. Josephine C. Reyes, Former Chairman of the Board of Trustees and Mr.
Nicanor C. Reyes III, New Chairman of the Board of Trustees of FEU-NRMF for the
financial support throughout the completion of my degree.
JIM

Executive Summary
Hospitals play an important role in the health care system. They are health care
institutions that have an organized medical and other professional staff, and inpatient
facilities, and deliver medical, nursing and related services 24 hours per day, 7 days per
week. The WHO Expert Committee on Organization of Medical Care in 1956 enumerated
the functions of a hospital which are restorative, preventive, educational, and research.
Hospitals may be classified in a number of ways: According to ownership hospital may be
public or private. According to the types of cases treated – General hospitals provide
medical/surgical services for all kinds of conditions, illnesses, injuries or deformities, and
Special hospitals provide medical/surgical services for particular kinds of illness/disease or a
special group of population. In terms of service capabilities: hospitals are broadly
categorized into primary, secondary and tertiary levels of health care.
All hospitals have administrative service capabilities that pertain to personnel, finance,
records, maintenance/housekeeping/janitorial, communication/information, transport
service, security, linen/laundry, dietary, and drug provision. Likewise, all types of hospitals
provide both in-patient and out-patient services.
The three-year statistics of the Department of Health showed that hospital’s market size
and growth rate in the Philippines as: type of ownership- 61% of hospitals in the Philippines
are privately-owned; in terms of hospital beds- the government has - 51% bed capacity; as
to scope of services- 95% are general and only 5% are special hospitals; and with regards to
utilization – 48% of the population were confined in private hospitals. As per records of
DOH (March 2012), showed that from 2009-2011 hospital industry posted minimal
substantial growth.
As number of rivals, the industry is fragmented into many small hospitals dominated by a
few large hospitals. Hospital competition always has a strong geographical element since
patient bear cost from being treated in hospitals far from where they live. In the scope of
competitive rivalry, the geographic area over which most hospitals compete is within the
area of location. Consumers also deserve to know the quality and cost of their health care.
Providing reliable cost and quality information empowers consumer choice. The hospitals
were differentiated based on type of ownership, type of cases treated and according to
service capability. Innovation is also important to deliberate needs, wants and expectations
of the stakeholders.

Hospital also competes based on the location and services offered to patients, an exception
is the loyalty of patients to their attending doctors; patients go where their doctor is
affiliated. FEU-NRMF is a private tertiary, and level 4 teaching hospital situated in
Quezon City. As per record of the Quezon City Government, The following are the major
players - St. Lukes Medical Center, UERM Memorial Medical Center and Capitol Medical
Center.
According to Michael Porter in his book Competitive Advantage, five forces model of
competition applied in hospital industry. In the hospital industry, because of high
investment cost, high switching cost, government regulations, and specialized knowledge is
needed, e.g., the threat of new entrants is considered low. Competition is also based on
process or quality. In terms of in-patient services, the threat of substitutes is low because
only few in-patient services can be performed outside the hospital. The major substitution
taking place in health care has been the switch from in-patient care to out-patient
alternatives. There are surgical procedures now being done on out-patient basis. Also
alternative therapies are increasingly substituted for traditional health care. The
bargaining power of supplier is high in terms of physicians, they are the gatekeeper to the
system and play crucial role in controlling consumer choice. Other suppliers such as nurses,
pharmaceutical companies, medical supplier and other hospital supplies have no power
over the hospitals because there are many suppliers available in the market. In terms of
bargaining power of buyer, Health Maintenance Organization (HMO), Philhealth
purchase services in large volume and control provider choices, large employers as buyers
have power over hospitals. Individual patient in general has a weak bargaining power
because most decision of patient depends on the advice of the doctors and other medical
staff of hospitals. Hospitals face less competitive rivalry because if anyone is very sick, they
will be brought to the nearest hospital.
The rise of sophisticated consumers, increasing public accountability, changing
environment, technological change, changing lifestyle, increasing globalization and the
ageing of society that demands higher quality of care are some factors that driving the
hospital industry change.
The strategic group map showed that the hospitals with higher bed capacity had higher
price of services.
In competitor analysis, the following are the critical success factors in hospital industry are
specialization, public perception, service quality, technological leadership, cost position,
range of services and price policy.

These are the key success factors that help hospitals to succeed: service quality, reputation,
technological skills, specialization, new service innovation, strong e-commerce capabilities,
relative cost position and customer service capabilities.
Hospitals are very important institutions for the economic and social well-being of society.
External factors, other than government also affect the performance of hospitals. The
performance of private hospitals is based on market forces.

Table of contents
Chapter I- HOSPITAL INDUSTRY
I. Definition of the industry and its dominant economic features …………..……......... 1
1. Industry’s Dominant Economic Features…………………………………………..….…………. 1
1.1 Market Size and Growth Rate………………………..……………………………..………….... 2
1.2 Number of Rivals…………………………………………………………………..……..……..………. 3
1.3 Scope of Competitive Rivalry………………………..……………………….……..……………. 4
1.4 Degree of Product Differentiation……………………………………..….……..….………. 4
1.5 Service Innovation……………………………………………………….….………………...……….... 5
1.6 Pace of Technological Change……………………………………….……..…………..…………. 6
II. Major Players…………………………………………………………………………..……………….…………….. 6
III. Industry analysis using five forces model………..…………………………………..…………….... 12
IV. Driving forces……………………………………………………….………………….………………………….... 13
V. Strategic group map.......................................................................................................... 14
VI. Competitor analysis……………………………………………………….……………………..……………… 15
VII. Possible strategic moves of competitors………………………………..………….………..……… 17
VIII. Key Success factors……………………………………………………………………..…….……………..…… 18
IX. Conclusion of industry analysis……………………………………………………………………………… 19
Chapter II – THE COMPANY
I. Nature of the Business……………………………….………………………………………………………….… 20
a. History and Development……………………………………………………………………………….. 20
b. Business Overview…………………………………………………………………………………………….. 21
c. Products and Services……………………………………………………………………………………….. 21

d. Geographic Scope…………………………………………………………………………………………... 22
e. Organizational Structure……………………………………………………………….…………….…. 23
II. The Value Chain of Hospital……………………………………………………………………………….… 24
III. Strengths, Weakness, Opportunities and Threats (SWOT) …………………………….… 28
IV. Financial statements (current and past 2 years) …………………..…………….…………... 34
V. Competitive Strength Assessment ………………..………………………………………………….… 37
VI. Company’s Competitive Advantage…………………………….………………………………….… 38
Chapter III - STRATEGY
I. Vision and Mission…..………………………………………………………………………………….………….… 39
II. Objectives…..…………………………………………………………………….…………………………………...… 40
III. Present Strategies ……………………………………………………………………………………….…….….. 41
IV. Proposed strategies………………………………..…………………………………..……….………….….…. 43
V. Implementation…………………………….…………………………..……………………………..……….…... 53
VI. Financial projection……………………………..…………………………………………………..……..……. 55
VII. Economic environment………………………………………………..………………………………….…… 58
APPENDICES
Proforma Financial Statements
Medical Census Report
10 Leading Causes of Confinement
Customer Service Summary of Client’s Comments
Organizational Chart
Directory of Services

Chapter I
HOSPITAL INDUSTRY
I. Definition of the industry and its dominant economic features
Hospitals play an important role in the health care system. They are health care
institutions that have an organized medical and other professional staff, and inpatient
facilities, and deliver medical, nursing and related services 24 hours per day, 7 days per
week.
The World Health Organization (WHO) Expert Committee on Organization of Medical
Care in 1956 gave the following definition: “The hospital is an integral part of a social and
medical organization, the function of which is to provide for the population complete
health care, both curative and preventive, and whose out-patient services reach out to the
family in its home environment; it is also a center for the training of health workers and for
biosocial research.”
The WHO Expert Committee on Organization of Medical Care in 1956 enumerated the
functions of a hospital (Primer on Hospital Administration) which are restorative,
preventive, educational, and research. The restorative function of hospitals deals with the
in-patient or out-patient diagnosis, treatment of disease: curative and palliative, involving
medical, surgical, and special procedures, physical, mental and social rehabilitation, care of
emergencies, particularly accidents and disease. The preventive function of hospitals
pertains to the supervision of normal pregnancy and childbirth, supervision of normal
growth and development of child and adolescent, control of communicable diseases,
prevention of prolonged illnesses, prevention of invalidism, mental and physical, health
education, and occupational health. The educational function of hospitals refers to
building the knowledge and expertise of medical undergraduates, postgraduates:
specialists and general practitioners, nurses and midwives, medical social workers, and
other allied professions. Finally, the research function of hospitals pertains to the physical,
psychological and social aspects of health and disease and hospital practices, technical and
administrative. Ideally, the big medical centers that attend to the needs of people at
national level receive their patients as referrals from the rest of the health care facilities in
the country.
1. Industry’s Dominant Economic Features
Hospitals may be classified in a number of ways. According to ownership, hospitals may be
public or private. Hospitals may also be classified according to the types of cases treated.
1

General hospitals provide medical/surgical services for all kinds of conditions, illnesses,
injuries or deformities. Special hospitals provide medical/surgical services for particular
kinds of illness/disease or a special group of population. In terms of service capabilities,
hospitals are broadly categorized into primary, secondary and tertiary levels of health
care.
All hospitals have administrative service capabilities that pertain to personnel, finance,
records, maintenance/housekeeping/janitorial, communication/information, transport
service, security, linen/laundry, dietary, and drug provision. Likewise, all types of hospitals
provide both in-patient and out-patient services.
1.1 Market size and growth rate
In the business life cycle, the position of hospital industry is slowing growth.
Table 1- Hospital Facilities to Population Ratio in the Philippines, 2009 – 20111
2009 2010 2011 Annual
No. of
Facilities
Population
Ratio
No. of
Facilities
Population
Ratio
No. of
Facilities
Population
Ratio
Growth
Rate
Hospital
Government
Private
1796
721 (40%)
1075(60%)
1:51,351 1812
725 (40%)
1087(60%)
1:51884 1840
720(39%)
1120(61%)
1:53040 0.8%
-.04%
1.38%
Hospital Beds
Government
Private
96141
48349(51%)
47792(49%)
1:960 98154 1:958 103781
53389(51%)
50392(49%)
1:940 2.65%
3.47%
1.81%
Population 92,226,600 94,013,200 97,594,040 1.94%
Sources of Row Data: DOH-BHFS & PHA, March 2012
Table 1 shows that the total number of hospital in the Philippines as of 2011 are 1840 (Public
=720; Private =1120) with 103,781 hospital beds (Public = 53,389; Private = 50,392). The 61% of
the total numbers of hospitals in the Philippines are privately-owned, while 39% are operated
by the government. As to type of ownership of hospital care, private hospitals take the lead in
terms of number of hospitals. In terms of hospital beds, the government has a bigger share
which is 51%. With regard to utilization, 48% of the population who needed in-patient care was
confined in private hospitals. The total population in the Philippines is 97,594,040 and the
population growth rate is 1.903%. The hospital bed to population ratio is 1:940. The industry
posted slow substantial growth in the past three years although its local market potential is
high, given that majority of the local population (specifically those from the lower income
classes) still do not have access to quality health care.
As to ownership, most of hospitals are private, 61% of DOH licensed hospitals are private. 88%
of DOH licensed hospitals are Philhealth accredited.
1
Sources of Row Data in Table 1: Population 2009-2011:http://www.doh.gov.ph/kp/statistics/demography1; 2010 Hospital Census: DOH-
BHFS 2010, “Proposed Classification of Hospitals and Other Health Facilities”, March 2012.2011 Hospital Census: Philippine Hospital
Association Journal and Souvenir Issue Vol. XLIV No. 1, p47
2

As to scope of services, 95% are general and 5% are special hospitals.2
Table 2 - Profile of Government and Private Hospitals in the Philippines, 2011
Region HOSP ABC HOSP ABC HOSP ABC HOSP ABC HOSP ABC HOSP ABC HOSP ABC HOSP ABC HOSP ABC HOSP ABC HOSP ABC
I 17 285 16 650 4 450 3 800 40 2185 36 444 26 586 17 916 3 285 82 2231 122 4416
II 21 340 18 1084 1 200 1 500 41 2124 14 162 22 541 6 516 0 0 42 1291 83 3343
III 11 208 40 1866 2 250 5 1420 58 3744 25 272 87 2321 30 2297 5 740 147 5630 205 9374
IV 49 665 53 3322 4 606 1 200 107 4793 53 645 97 2715 42 3365 9 1226 201 7951 308 12744
V 30 919 13 375 4 450 2 750 49 2494 37 522 19 535 12 762 1 150 69 1969 118 4463
VI 25 435 30 1712 3 600 2 725 60 3472 8 142 7 308 7 1053 6 1098 28 2601 88 6073
VII 37 673 18 817 1 250 3 1125 59 2865 13 199 13 560 13 1303 4 1310 43 3372 102 6237
VIII 33 735 14 950 2 200 1 250 50 2135 12 173 10 299 3 230 2 310 27 1012 77 3147
IX 22 808 9 717 0 0 1 250 32 1775 22 256 19 518 7 618 0 0 48 1392 80 3167
X 14 195 15 829 4 608 2 450 35 2082 36 595 24 858 12 904 5 630 77 2987 112 5069
XI 12 198 4 100 2 200 2 1400 20 1898 62 1249 13 561 12 1238 4 930 91 3978 111 5876
XII 18 498 8 468 0 0 2 600 28 1566 43 644 23 639 12 1272 1 181 79 2736 107 4302
NCR 2 68 12 2881 9 1731 25 13768 48 18448 28 332 60 1983 13 854 33 8512 134 11681 182 30129
ARMM 15 424 7 450 0 0 0 0 22 874 7 161 1 11 0 0 8 172 30 1046
CAR 24 485 11 665 1 150 1 400 37 1700 10 154 7 188 2 160 1 244 20 746 57 2446
CARAGA 22 384 8 400 4 450 0 0 34 1234 17 261 4 179 3 275 0 0 24 715 58 1949
TOTAL 352 7320 276 17286 41 6145 51 22638 720 53389 423 6211 432 12802 191 15763 74 15616 1120 50392 1840 103781
GOVERNMENT
Level 1 Level 2 Level 3 Level 4 TOTAL Level 2 Level 3 Level 4 TOTAL
GRAND
TOTAL
PRIVATE
Level 1
Table 2 shows that the biggest concentration of private hospitals is in Region IV (11%),
followed by Region III (8%) and NCR (8%). However, many of the private hospitals in
Regions IV and III are Levels 1 and 2 in service capability. NCR ranks the highest when it
comes to the number of Level 4 hospitals (33 hospitals) and percentage share of bed
capacity (23%) among the private hospitals in the country. Many of the general and
specialized hospitals in the Philippines are also located in NCR. This can be attributed to
the area’s accessibility to medical specialists, population density and income levels.
1.2 Number of Rivals
The industry is fragmented into many small hospitals and dominated by a few large
hospitals. It is difficult to assess the intensity of rivalry among players, since patients bear
costs for being treated in hospitals far from where they live; hospital competition always
has a strong geographical element. In general, however, hospitals have to deal with high
fixed costs which pressure them to achieve higher occupancy levels which tend to increase
intensity of competition. The existence of numerous and diverse competitors also tend to
increase competition. 3
2
Information taken from DOH-BHFS 2010, “Proposed Classification of Hospitals and Other Health Facilities”, March 2012.
3
http://dirp4.pids.gov.ph/ris/taps/tapspp0104.pdf, p4
3

1.3 Scope of Competitive Rivalry
Scope of competitive rivalry of hospitals is local (within the area). FEU-NRMF is located in
Quezon City, based on the records of the Center for Health Development of the
Department of Health, 2011 - Quezon City has 58 licensed hospitals, with a combined bed
capacity of 8,566. Sixteen are government hospitals with a bed capacity of 5,073 while 42
are privately-owned with a bed capacity of 3,493. This means a hospital bed to
population ratio is 1:341.4
1.4 Degree of Product Differentiation
The service offers of hospital are differentiated based on type of ownership, type of cases
treated and according to service capability.
The DOH classifies hospitals as detailed in DOH Administrative Order no. 205-00295
.
1. Type of Ownership
1.1 Public – owned by the municipal government, city/provincial government, or
the national/central government or its relevant offices/branches.
1.2 Private – established and operated with funds raised or contributed through
private capital, donations, or through other means by private individuals,
association, corporation, religious organizations, firms/companies or joint stock
association.
2. Types of cases treated
2.1 General Hospital – provides medical/surgical services for all kinds of conditions,
illnesses, injuries or deformities
2.2 Special Hospital - provides medical/surgical services for particular kinds of
illness/disease or a special group of population.
4 http://www.quezoncity.gov.ph/index.php?option=com_content&view=article&id=305:health-and-wellness&catid=86:a-
lifestyle-city&Itemid=313, Copyright 2012
5 http://www.doh.gov.ph/node/691
4

3. According to service capability
3.1 Level 1 - An emergency hospital that provides initial clinical care and
management to patients requiring immediate treatment, as well as primary
care on prevalent diseases in the locality.
3.2 Level 2 - Non-departmentalized hospital that provides clinical care and
management on the prevalent diseases in the locality.
3.3 Level 3 - Departmentalized hospital that provides clinical care and
management on the prevalent diseases in the locality, as well as particular
forms of treatment, surgical procedure and intensive care.
3.4 Level 4 - Teaching and training hospital (with at least one Accredited
Residency Training Program for Physicians) that provides clinical care and
management on the prevalent diseases in the locality, as well as specialized and
sub-specialized forms of treatment, surgical procedure and intensive care.
1.5 Service Innovation
There are five key stakeholders in the innovation process, and each has its unique and
deliberate needs, wants and expectations.
1. Physician and Other Care Givers - Improved clinical outcomes, diagnosis and
treatment.
2. Patients - Improved patients’ experience, improved physiological well-being,
reduced waiting time, reduced delay.
3. Organizations - Enhanced efficiency of internal operations, cost containment,
increased productivity and quality and outcomes improvement
4. Innovator Companies - Profitability, improved outcomes
Pediapharma - Pediapharma, Inc. is a science-based innovator
pharmaceutical company that has established a niche in the pediatric specialty
market by introducing unique and value-added ethical and consumer products
from ethical/dental products to nutraceuticals. No. 70-A, Scout Tuazon St South
Triangle Quezon City6
6
http://www.mims.com/Philippines/Company/Info/Pediapharma
5

GE, athenahealth, and Sermo are among the top 10 innovative healthcare
companies named by Fast Company. Kaiser Permanente is the sole healthcare
provider on the list. GE was recognized for its Healthymagination initiatives,
athenahealth for its work on the physician billing, practice management and
medical records front, and Sermo for its online physician community.7
5. Regulatory Agencies - Reduced risks and improved patient safety
Research and Development is very important to coming up with new ways of treating
patients. New technology is important for the success of the hospital. In such cases,
members of the industry must come up with new products to compete effectively.
1.6 Pace of Technological Change
Investments in technology and quality improvement are keys to financial success and
survival. The hospital technology directly drives (affects) quality and hospital financial
performance. The type of hospital technology (clinical or information) drives different types
of quality-related performance (clinical or process), and directly and indirectly affects
hospital financial performance.
II. Major Players
According to the Medical Director of FEU-NRMF Medical Center, hospitals compete based
on the location and services hospitals offered to patients. An exception is the loyalty of
patients to their attending doctor; patients will go to hospitals where their doctor is
affiliated. FEU-NRMF is a private tertiary and level 4 teaching hospital situated in
Quezon City.
Table 3 – List of the four (4) major hospitals located in Quezon City based on the records of
QC Government.8
Hospital District Number of Beds
Private
St. Luke's Medical Center 3 650
U.E.R.M Memorial Medical Center 3 307
Capitol Medical Center 1 300
FEU-NRMF Medical Center 2 300
7
http://www.healthcareitnews.com/news/fast-company-selects-top-innovators-healthcare
8
http://www.quezoncity.gov.ph/index.php?option=com_content&view=article&id=305:health-and-wellness&catid=86:a-lifestyle-
city&Itemid=313, Copyright 2012
6

The St. Lukes Medical Center is located at 279 E. Rodriguez Sr. Boulevard, Quezon City, a
650 bed capacity established in 1903.
Vision: One of the Top 5 medical institutions in Asia.
Mission: To deliver excellent healthcare through caring and highly competent
professionals, utilizing world-class technology and research. This we shall do in the most
financially viable way without losing sight of our primary purpose - to be of service to God
and mankind.
Objectives: To deliver excellent healthcare through caring and highly competent
professionals, utilizing world-class technology and research.
Core Values: Social Responsibility, Passion for excellence, innovation, customer focus,
expertise and teamwork.
Facilities/Equipment/Services
The 650-bed hospital is home to ten (10) Institutes, eight (8) Departments, and twenty-
three (23) Centers. Over 1,700 hospital-affiliated medical consultants see out-patients in
more than 450 private clinics.
Staff: St. Luke’s Medical Center has over 1,500 medical consultants, 230 medical residents
and 123 fellows on its roster, apart from interns from its College of Medicine. There are 644
nurses and 2,000 other paramedical, administrative and support staff. Over 4,000
professionals in medicine and its allied fields, as well as business management and hospital
support staff are the crown jewels of St. Luke’s. Their collective expertise and dynamic
synergy provide a roster of local and international patients with health care skills and
optimum technology.
Institutes: Cancer Institute, Heart Institute, International Eye Institute, Institute of Digestive
and Liver Diseases, Institute of Orthopedics and Sports Medicine, Institute of Pathology,
Institute of Pediatrics and Child Health, Institute of Pulmonary Medicine, Institute of
Radiology and International Institute for Neurosciences.
7

Departments: Medicine, Nuclear Medicine, Obstetrics and Gynecology, Surgery,
Otorhinolaryngology, Pediatrics, Anesthesiology, Physical Medicine and Rehabilitation,
Emergency Medicine, Out-Patient Care, Legal Medicine and Jurisprudence, and Dentistry
and Oral Surgery.
Centers: Aesthetic Surgery Center, Blood and Marrow Transplant Center, Breast Center,
Center for Joint Replacement Surgery (CJRS), Center for Liver Diseases, Center for Renal
Diseases and Transplant Services, Complex Wound Care Center, Comprehensive Brain
Tumor Center, Comprehensive Pelvic Floor Center, Comprehensive Sleep Disorders Center,
Dermatology Center, Diabetes, Thyroid and Endocrine Center, Geriatric Center, Memory
Center, Movement Disorders Center, Neurodevelopmental Center, Weight Management
Center, Pain Management Center, Positron Emission Tomography Center (PET),
Rheumatology, Allergy and Immunology Center, Stone and Prostate Treatment Center,
Vision Laser Center and Voice, Swallowing and Sinus Center
Medical Specialties - Cardiovascular Medicine, Neurology and Neurosurgery, Cancer,
Ophthalmology, and Digestive and Liver Diseases.
Special Equipment: State-of-the-art technology possessed by no other hospital in the
country 3-Telsa MRI, 256-slice CT scanner, PET scanner and Cyclotron
Achievements:
 Acknowledged Leader in Asia (Micronesia, the Middle East, Europe and the United
States), Center of Excellence in Asia
 1989 – Financial Management Award ( Annual Management Award in Asia) by World
Executive Digest and the Asian Institute of Management
 2000-3-star Child Labor and Child-Friendly recognition by International Labor
Organization(ILO) and Employer’s Confederation of the Philippines (ECOP)
 2001- ISO 9001 Certification of Institute of Radiology
 2002- Hall of Fame Award for Excellence in Radiation Services (Department of
Health)
 2003- Accredited by the Joint Commission International in 2003, becoming the first
hospital in the country and the second in Asia to be so recognized. This accreditation
means that patients of the hospital are assured of receiving high quality services at par
with those of the best hospitals in the world.
 2003- Clean Air Act Award (Department of Environment and Natural Resources);
Asian Hospital Management Awards winner in two categories and four runner-up
entries in three other categories: Winner - Community Service: St. Luke's Social
Services Program: Sharing World-Class Service to the Underprivileged; Runner-Up -
Human Resource Development: Total Quality Work Life: Improving Employee
Productivity; Runner-Up - Community Service: Dengue Research Program; Runner-Up
- Quality Medical Care: Centralized Handling of Cytotoxic Agents for Chemotherapy;
Runner-Up - Quality Medical Care: Pharmacy Coordinated System of Medication
Review (Towards Increased Patient Safety)
8

The University of the East Ramon Magsaysay Memorial Hospital (UERMMC), a 307 bed
capacity, located at Aurora Boulevard, Barangay Doña Imelda, Quezon City, opened in
1957.
Vision: A bastion of quality education, service and research in the health sciences
advancing health empowerment towards nation building.
Mission: Provide equitable, holistic, and quality health care. Provide services relevant
and responsive to the needs of the community
Objectives: To develop and provide innovative hospital services.
Core Values: Integrity, Commitment, Social Responsibility and Compassion
The Medical Staff: A total of 300 fully certified medical specialists in their respective
specialty and subspecialty societies comprise the medical staff of the Hospital. In the
Nursing Service, they had 336 personnel from Chief Nurse to General Utility Man
Departments: Anesthesia, Nursing Service, ENT-HNS, Medicine, Neurosciences, Ob-Gyne,
Ophthalmology, Radiology, Rehabilitation Medicine, Surgery and Psychiatry.
Specialty and Subspecialty:
 Internal Medicine: Cardiology; Pulmonology; Gastroenterology; Nephrology;
Infectious Diseases; Hematology; Oncology; Diabetology; Endocrinology;
Rheumatology; Psychiatry
 Surgery: General Surgery; Orthopedics; Plastic Surgery; Urology; Thoracic Surgery;
Obstetrics & Gynecology; Ophthalmology; Otorhinolaryngology; Radiology;
Pediatrics; Rehabilitation Medicine; Neurology ; Neurosurgery
 Ancillary services: Pathology (clinical, surgical and cytology), Radiology,
Pharmacy, Blood Bank, Cardiopulmonary Laboratory, Respiratory Therapy, GIT-
liver Study Unit, Endoscopy Unit, Neurophysiology Laboratory (EEG), Audiology
and Industrial Medicine.
9

The UERMMMC hospital has earned the same high reputation and prestige that
UERMMMC medical professors and UERMMMC College of Medicine graduates have
earned in the field of medical practice and in the government medical board
examinations. The UERMMMC Hospital is where students gain experience through direct
contact with patients; and it is where, as a Pay Hospital, the College of Medicine professors
treat their own patients. The Hospital also provides rich clinical experience to interns,
nursing students and physical therapy students on the basis of the diversity of clinical cases,
the competence of the health care professionals and the modern facilities. As a topnotch
hospital, it is well-known not only locally but also internationally as seen in their website.
Capitol Medical Center (CMC) was built on March 19, 1970. A 300 bed capacity hospital
located at Quezon Avenue, corner Scout Magbanua, Quezon City. It is also a family
business.
Vision: Envisions itself to be a globally recognized health care institution by 2015.
Mission: dedicated to the delivery of total quality health care services in partnership with
competent and ethical physicians, professionals and staff utilizing internationally accepted
technology, facilities and systems. Capitol Medical Center continually strives to be a role
model in the delivery of excellent and comprehensive health care services.
Objectives: To attract tourists who are in the country to undergo minimally invasive
medical procedures and treatments.
Core Values: Not clearly mentioned
The hospital provides world-class health care facilities, a total of 274 physicians with 10
specialties and a total of 11 operating theaters.
Facilities: Delivery Room, Ear Nose Throat, Electroencephalographic, Electromyography,
Emergency Room, Eye Center, Heart Station, ICU, Kidney Center, Laboratory, Nursery,
10

Operating Room , OPD, Pediatric ICU, Pulmonary Section, Radiology, Rehabilitation
Medicine and Skin Center.
Equipment and Achievements: It is a home to the Philippines first successful kidney
transplant in November 1970, just five months after it opened its doors to the public. It has
acquired the first and only Digital Infrared Thermograph Imaging in the country –
objective and noninvasive diagnostic equipment used in various procedures. The first of its
kind Voice Swallowing Clinic was set up to address the needs of a specific group of patients
– voice professionals and dysphasic individuals in 2000. The first Laparoscopic
Nephrectomy was also performed by CMC surgeons in 2003. It recently acquired the latest
state-of-the-art technology, the first body sculpturing machine in 2006.
The CMC is a major player in the medical tourism program. This program encourages cost-
effective medical treatments. It aims to attract tourists, who are in the country to undergo
minimally invasive medical procedures and treatments. This active involvement in the
program is just another manifestation of CMC’s commitment to provide excellent medical
care and total quality health care services in the best way possible.
Sources: hospital website
11

III. Industry analysis using five forces model
According to Michael Porter in his book Competitive Advantage, the degree of competition
attractiveness of an industry can be determined by five forces: 1. Threat of New Entrants; 2. Threat
of Substitutes; 3. Supplier Power; 4.Buyer Power; and 5. Rivalry among competitors.
1. Threat of new entrants - The hospital industry considers the threat of new entrants as
low. The main barriers to entry into the hospital industry are government regulation, high
investment costs, capital requirements needed to compete, high switching-cost, advance
technology are required and specialized knowledge is needed. Competition is also based on
process or quality and geographic factors limit competition. Brand identity is also not easy
for the new hospitals.
2. Threat of substitutes – The threat of substitutes in the hospital industry are very low in
terms of in-patient services, few in-patient services could be performed outside the hospital.
A major substitution taking place in health care has been the switch from in-patient care
to out-patient alternatives. Most surgical procedures are now being done on out-patient
basis. Alternative therapies such as massage therapy, acupuncture and so on, substituted
for traditional health care.
3. Bargaining power of suppliers – Bargaining power of supplier is high in terms of
healthcare professionals. Physicians and other health care professionals have been
important and powerful “suppliers of patient” to the industry because of their importance
to healthcare institutions. Other suppliers, such as nurses, pharmaceutical companies,
medical equipment supplier and other hospital supplies, have low power over the hospital
because there are many suppliers in international market.
4. Bargaining power of buyers – Private hospitals cater generally to those belonging to
the middle and higher income segments of the population. Perhaps, the greatest change in
the nature of the health care industry in the past decade has been the growing power of
the buyers. The 27% of potential patients are members of Health Maintenance
Organization (HMO) and 67.8% are members of Philippine Health Insurance Corporation9
- because they purchase services in large volume, they control provider choices. Large
employers also as buyers have power over hospital. But in general, individual patient have
low bargaining power over a hospital because most of their decision depends on the advice
of doctors and other medical staff.
5. Rivalries among competitors – Hospital competitive rivalry is low because there are
usually not very many hospitals in a given area and if anyone is very sick, they will be
brought to the nearest hospital. Also, hospitalizations essentially all cost the same price and
most of the time patient is covered by insurance.
Rivalries are among those hospitals offering similar cluster of inpatient services within same
geographic area. But competitors are not just hospitals, but also physician clinics, outpatient
surgery centers that can provide similar services.
For some markets, consolidation has resulted in competition between large for-profit and not-for-
profit systems. Additionally, because of managed care, switching costs for consumers are high.
Because many markets have supported too many providers in the past, the strategic stakes are
9
Data is taken from the survey done of FEU-NRMF Medicine students last June 2012 entitled A Study on the Factors affecting utilization
of services of FEU-NRMF Medical Center among the residents within the 5km radius.
12

extremely high. Most experts agree that further consolidations are likely, rivalry will intensify, and
still more providers will not survive.
IV. Driving forces
Factors that affect hospital industry include:
1. Rise of sophisticated consumers - The clients of healthcare and suppliers exert
bargaining position not only to influence the organization’s price but also for its
quality and efficiency. Patients can now easily get information from the internet.
2. The Accrediting Bodies - The Accrediting agencies such as Philhealth, HMO’s
and International Accreditation like Joint Commission International play a big part
in public accountability. This will increase competitiveness in terms of quality health
care delivery.
3. Challenging evolution in healthcare delivery – There are changing
boundaries between health and healthcare like surgeries done in outpatient
settings, home care, health and internet, satellite clinics and laboratories in the mall.
4. Changing Environment - More people need medical attention due to the erratic
changes in the environment.
5. Technological Change- Molecular biology and Information Technology are
utilized to improve laboratory diagnosis and reduce cost of treatment.
6. Research and Development – New knowledge and new tools are generated
which are beneficial to healthcare consumers.
7. Ageing of Society – The aging population demands for higher quality healthcare
services and expansion of services to cater them are needed.
8. Increasing Globalization – One such phenomenon is “medical tourism” which
has given patients the option to avail for affordable healthcare worldwide. The
others are the general effect on health from changes in national economic growth,
link between ‘health and wealth’ and Improved access to knowledge and
technology.
9. Regulatory Influences and Government Policy Changes
Source: Megatrends, Driving Forces, Barriers to Implementation, Overarching Perspectives, Major Trends into the Future, Implications for
TATRCAnd Specific Recommendations for Action. http://www.tatrc.org/docs/hof_report_08.pdf
13

V. Strategic group map
--hide---
The vertical axis represents the Price of some primary Services in hospitals (Room Rates,
Laboratory Services and Diagnostic Services). The horizontal axis represents the range of
services includes the hospital bed capacity, primary care services, subspecialty services,
diagnostic services and ancillary services. The circles represent the position of hospitals in
strategic group map.
Strategic group map showed that the hospitals with higher bed capacity had higher price
of services.
VI. Competitor analysis
The Critical Success Factor Analysis10
---Hide---
Interpretations
1. Specialization - The degree to which the organization focuses its efforts in terms of
the number of product categories, the target market, and size of its service area.
2. Public Perception - the degree to which it seeks name recognition rather than
competition based on other variables.
3. Service quality - The level of emphasis on the quality of its offering to the
marketplace.
4. Technological Leadership - the degree to which it seeks superiority in diagnostic and
therapeutic equipment and procedures.
5. Cost position - the extent to which it seeks the low-cost position through efficiency
programs and cost-minimizing facilities and equipment.
6. Range of Services: the degree to which it provides ancillary services in addition to its
main services.
10
Service Competitor Analysis
14
15

7. Price policy: its relative price position in the market (although price positioning will
usually be related to other variables such as cost position and product quality, price
is a distinct strategic variable that must be treated separately).
Financial Performance ratio for the last 3 years -- hide---
VII. Possible strategic moves of competitors - hide-
VIII. The Key Success factors for hospitals11
1. Service quality: The level of emphasis on the quality of its offering to the
marketplace. The skills and capability of the doctors, nurse and staff.
2. Reputation: A well-known and well-respected brand name. Establishing a strong
brand and good reputations for quality are critical for success.
3. Technological Skills: the degree to which it seeks superiority in diagnostic and
therapeutic equipment and procedures.
4. New Service innovation capability: To have competitive advantage, innovation is
important.
5. Strong E-commerce capabilities: A user-friendly web site and/or skills in using
internet technology applications to streamline internal operations.
6. Customer Service Capabilities: the degree to which it provides ancillary services in
addition to its main services.
IX. Conclusion of industry analysis
Hospitals are very important institutions for the economic and social well-being of society.
Their curative and rehabilitative functions enable them to restore individuals to being
productive members of society and for those individuals to enjoy the benefits that can be
derived from it. The success of hospitals in their mission is therefore important. This success is
11
Source: Competitive Business Strategy for Teaching Hospitals by James Langabeer and John Napiewocki,
http://www.emeraldinsight.com/books.htm?chapterid=17599489show=pdf
16
17
19

highly dependent on the hospitals' managerial capability. An understanding of how
hospitals are managed will contribute immensely to future successes in hospital
management and towards the enhancement of their roles in society.
External factors, other than government, also affect the performance of hospitals. These
include their cooperation and competition among each other, technological development,
socio-cultural factors, hospital networking, and health care financing. Internally, hospital
performance is directly affected by the background of its decision-makers, its planning
processes, its organizational structure, its implementation and control systems, and the
quality and quantity of its resources, among others.
The performance of private hospitals is based on market forces. This has led many hospital
managers and their staff to become more and more customer-oriented in their decisions.
A trend toward customer-orientation of most managerial decisions, such as capital
budgets, personnel, and pricing, appears to be rising among private hospitals. What one
has to look-out for within this strongly competitive environment are decisions which could
lead to the uneconomical use of scarce resources. This may be avoided through a system of
cooperation among competing hospitals.

Readings and Reference Materials:
Department of Health (DOH), http://www.doh.gov.ph/
National Statistics Office (NSO), http://www.census.gov.ph/
Philippine National Statistical Coordination Board (NSCB), http://www.nscb.gov.ph/
Philippine Institute for Development Studies (PIDS), http://www.pids.gov.ph/index.php
National Economic and Development Authority (NEDA),
The Local Government of Quezon City, http://www.quezoncity.gov.ph/
World Health Organizations (WHO), http://www.who.int/en/
Philippine Health Insurance Corporation, www.philhealth.gov.ph/
Trading Economics, http://www.tradingeconomics.com/
The Wharton School Study of the Health Care Value Chain, Lawton R. Burns, Robert A. DeGraaff,
Patricia M. Danzon, John R. Kimberly,William L. Kissick, and Mark V. Pauly
HealthCare Strategy: Focus on Improving Patient Care without Increasing Cost by Willie L. Carter -
http://www.techmankanata.com/admin/pdf/Healthcare-Strategy-Article.pdf
Thompson−Strickland−Gamble: Crafting and Executing Strategy: Concepts and Cases, 17th Edition
Harvard business Review 2004, Redefining Competition in healthcare by Michael E. Porter and Elizabeth
Olmsted Teisberg
(Sources: Zook, Chris, Beyond the Core: Expand Your Market without Abandoning Your Roots (Boston,
MA: Harvard Business School Press, 2004), Chapter 3, Service Area Competitor Analysis)
Competitive business strategy for teaching hospitals –james langabeer, john napiewocki
http://www.emeraldinsight.com/books.htm?chapterid=1759948&show=pdf
http://www.investphilippines.gov.ph/downloads/sector/Health%20and%20Wellness.pdf
http://www.passporthealthplan.com/pdf/provider/services/recognition/patient-satisfaction.pdf
http://www.allianzworldwidecare.com/healthcare-in-the-philippines, Healthcare in the Philippines
Measuring competition in health care markets, Baker LC, Health Serv Res. 2001 Apr; 36(1 Pt 2):223-51.
Participative Management - organization, levels, style, manager, company, business
http://www.referenceforbusiness.com/ management/Or-Pr/Participative-
Management.html#ixzz1qsKW5kmk

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