Liberty Medical Group (Condensed)

Richard Townsend has recently been elected CEO of Liberty Medical Foundation (LMF), a non-profit HMO. Due in part to a rapidly changing competitive environment, LMF has faced serious financial problems over the past two years. Confounding the problem are low morale among physicians and staff and declining patient satisfaction. Townsend will present the two strategic choices that he sees for keeping LMF alive to the board of directors. One choice involves LMF regaining its low cost position that originally attracted so many of its members- LMF’s low cost high efficiency positioning has historically been its competitive advantage. Regaining the low cost position would mean implementing prior authorization requirements, drastically cutting the number of physicians and staff, and copying other of the cost savings measures that for-profit HMOs use. The other option is to radically change LMF’s positioning so that it is the quality and service leader- this option assumes that customers will be willing to pay a premium for excellent service. Either option will require drastic changes to LMF’s culture- a culture not only unique in the world of health care organizations but also the one that attracted many of its physicians. Implementation will also need to be carefully considered to ensure success for the chosen strategy.