Anthem Organization: PEST Analysis

Introduction

Anthem is a company that provides insurance to people across the US. Similarly to other healthcare establishments, the Affordable Care Act (ACA) has affected its performance and revenue due to significant policy changes. The challenges that impact the healthcare industry present a need for a thorough examination of them to create a strategy for enhancement of operations. This paper aims to analyze environmental factors that impact the business, directional statements of Anthem, gaps in desired and actual outcomes, and leadership practices.

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PEST

Firstly, PEST analysis helps identify specific components that influence Anthem’s work. Table 1 presents the results of the research and provides an understanding of the primary factors that will help determine the performance gap. The political factors primarily involve the Affordable Care Act because it is the most recent legislation that has affected the healthcare industry. According to Japsen (2018), Anthem decided to stop working in particular niches under the law and focus specifically on Medicare because of specific difficulties the company experiences with payments. Therefore, the factor affects Anthem negatively and presents challenges to leadership.

Table 1. PEST analysis table (created by the author).

Political Economic Social Technological
  • ACA
  • Medicare and Medicaid
  • Difficulties due to slow economic growth and decreased demand for health services (Smith, 2018)
  • A necessity to control performance through scorecards for improved efficiency and reduce costs
  • Changes in consumers’ behavior due to concerns regarding affordability (American Hospital Association, 2018)
  • More attention to chronic conditions (American Hospital Association, 2018)
  • Information technology advancements (IT) dictate a need to improve cybersecurity policies (American Hospital Association, 2018)
  • Ability to use IT in the provision of remote consultations for patients and increase their engagement

Organizational Assessment

The directional strategy of Anthem implies a need to improve the health of the community simplifying the process of care delivery. The vision statement is as follows: “to be the most innovative, valuable and inclusive partner” (“Mission, vision, and values,” n.d.). The values prioritize community and leadership, together with integrity, agility, and diversity. The strategic direction of the company is to create value and grow by using new opportunities, which is reflected in its culture (“Business strategy,” n.d.).

Table 2 presents an organizational scorecard that reflects the mentioned plans and provides performance measures. Based on this information, it can be concluded that the strategy fits the external environment because it applies challenges from the PEST analysis that Anthem uses for growth.

Table 2. Anthem scorecard (created by the author).

Objectives Performance Indicators Targets (Financial and Quality)
Financial
  • Increase revenue from the ACA programs
  • Improve profit
  • Develop programs for consumers that would leverage the ACA
  • 10 % increase at the end of 2020
Customer Satisfaction
  • Engage more clients in chronic condition care to target the demand for these services
  • Develop programs that focus on chronic diseases
  • Present an advertising company that would help increase engagement
  • Enroll 100,000 clients in the chronic condition care program
Internal Process
  • Create a strategy that would target performance indicators
  • Identify activities that affect the performance adversely
  • Present a scorecard and plan that would help increase revenue
  • Meet all the targets from the scorecard
Learning and Growth
  • Train staff members to provide more patient-centered care based on the alterations of the consumer preferences
  • Ensure that personnel can adhere to the client’s wishes regarding their health
  • Test customer satisfaction in regards to the new approach
  • Increase patient satisfaction by 10% and improve engagement

Gap Analysis

Table 3. Anthem desired and actual outcomes analysis (created by the author).

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Actual Outcome Desired Outcome
Financial
  • The decrease in revenue from the ACA
  • The decision to postpone the ACA program until the end of 2018 (Japsen, 2018)
  • Increase revenue by 10% by leveraging the ACA
  • Improve the quality of services by offering a more extensive selection of programs to clients
Customer
  • Chronic condition program that can be accessed through referrals or directly
  • Lack of advertisement and promotion for the service
  • Increase revenue from chronic condition program by 5% in 2020
  • An additional 100,000 engaged in the chronic conditions care educational program presented by physicians
Internal Process
  • A balanced scorecard for Anthem’s performance and target indicators was not located
  • No plan for improving the measurements following ACA is present
  • Decrease financial losses by 10% through quality improvements
  • A yearly report and balanced scorecard that would present primary information about the leading indicators of successful operations that would help increase revenue
Learning and Growth
  • Patient-centered care is available in selected states
  • Staff members are partially educated on the factor
  • Invest $100,000 into the program that would enhance professionalism and quality of services
  • Provide patient-centered care nationwide

Anthem’s primary directional strategy is to serve the community and use opportunities provided by the external environment of the healthcare industry. The gap analysis revealed that several components are missing in the current strategic plan, most importantly the inability of the company to profit from the ACA program. Therefore, it is necessary to ensure that by 2020 Anthem will create and execute a plan, which would engage the company into the legislation and obtain revenue from clients. Table 3 reflects the primary performance measures derived from the balanced scorecard and presents a gap analysis.

Another gap that was revealed but not included in the table is the need for cybersecurity. In 2015, the company was subjected to an attack and suffered from a data breach resulting in a fine of $15,000,000 from the US Department of Health and Human Services (Landi, 2018). However, while the requirement is dictated by the external environment analysis and previous history, it does not relate to the directional statements; thus, it was omitted from the gap analysis and the scorecard.

Executive Briefing

It is evident that Anthem’s leaders should develop a strategy that would help close these gaps and achieve target outcomes. According to Hall and McCue (2016), the primary issue that insurers faced is the inability to price their services for ACA programs adequately. The authors state that only a quarter of companies was unable to profit after the implementation of the law; thus, the experience of competitors can be used to adjust Anthem’s approaches to the ACA.

Additionally, McWilliams, Chernew, Landon, and Schwartz (2015) state that many companies were able to reduce losses by joining the Pioneer accountable care organizations (ACO), while McCue and Hall (2015) offer to reduce administrative expenses. ACO allows healthcare providers to redistribute financials if income is below the benchmark, and lowering administrative spending would create better margins. The benefit of this method is the ability to reduce risks, while limitations involve the need to invest in ACO.

The recommendations regarding patient-centered care and chronic conditions care are focused on developing an educational program for the staff members. Both will allow Anthem to respond to the changes in client preferences and adhere to new branches of care provision. According to Bowen et al. (2015), continuous education impacts the ability to make health-related decisions and improves the quality of services. Therefore, it is crucial for Anthem to invest in these developing programs for its staff members. The benefit of the approach is the ability to improve professionalism, while the limitation involves a need to create new programs that would focus on chronic condition care.

Hoogg, Lysholm, Garvare, Weinehall, and Nystrom (2016) state that “monitoring, processing, and feedback and communication” are essential for managing large healthcare establishments (p. 133). Therefore, a scorecard and an appropriate process for controlling adherence to it should be implemented by Anthem. Anthem would benefit from this because executives will be able to measure performance and identify improvement requirements. The limitation involves a need to develop realistic targets that would not overburden the personnel.

Leadership Implications

Anthem’s leader has a critical role in shaping and implementing the recommended changes because most require the engagement of all company’s divisions and staff members. Essential competencies of success that determine the outcome of the program are flexibility that allows adjusting plans according to the requirements of the external environment. Friedman (2018) states that “an important truism in healthcare today is that change is the only constant” (para. 1). Thus, transformational practices and approaches should guide the leader in this work. This would allow managing change while adhering to the current culture and directional statements, which emphasize the need to serve the community and use new opportunities.

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Conclusion

Overall, Anthem’s PEST analysis revealed several critical components that the company’s leadership has to consider when creating a strategic plan. Most challenges arise from the ACA and its implications because the establishment was unable to profit from the ACA program in 2018. The scorecard and gap analysis tables present an outline of actions that should be taken to improve Anthem’s performance in regard to the financial and quality targets.

References

American Hospital Association. (2018). 2018 environmental scan. Web.

Bowen, J. L., Hirsh, D., Aagaard, E., Kaminetzky, C., Smith, M., Hardman, J., & Chheda, S. G. (2015). Advancing educational continuity in primary care residencies: An opportunity for patient-centered medical homes. Journal of the American Geriatrics Society Expert Panel on Person‐Centered Care, 64(1), 15-18. Web.

Business strategy. (n.d.). Web.

Friedman, L. (2018). Transformational healthcare leadership competencies. Web.

Hall, M. A., & McCue, M. J. (2016). How has the Affordable Care Act affected health insurers’ financial performance? Issue Brief (Commonwealth Fund), 18, 1-14.

Hoogg, E., Lysholm, J., Garvare, R., Weinehall, L., & Nystrom, M. E. (2016). Quality improvement in large healthcare organizations: Searching for system-wide and coherent monitoring and follow-up strategies. Journal of Health Organization Management, 30(1), 133-153.

Japsen, B. (2018). Shift from Obamacare to Medicare advantage boosts Anthem profits. Forbes. Web.

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Landi, H. (2018). Anthem agrees to record payment—$16M—for largest U.S. health data breach. Healthcare Informatics. Web.

McCue, M. J., & Hall, M. (2015). Health insurers’ financial performance and quality improvement expenditures in the Affordable Care Act’s second year. Medical Care Research and Review, 72(1), 113–122. Web.

McWilliams, J. M., Chernew, M. E., Landon, B. E., & Schwartz, A. L. (2015). Performance differences in year 1 of pioneer accountable care organizations. New England Journal of medicine, 372, 1927-1936.

Mission, vision and values. (n.d.). Web.

Smith, N. (2018). Health-care costs are still eating the U.S. economy. Bloomberg. Web.

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