Blog Post

Our 3-step process to find the right services for rationalization

By Sebastian Beckmann

April 6, 2021

    Service closure or consolidation can support health system growth, quality, and cost goals. But identifying the right opportunities and building a case for change is hard. Here's how we used a three-step process to help one health system figure out the right service distribution for cardiovascular services and get the right data to build an effective case for change.

    Service rationalization toolkit

    Step 1: Identify where the system underperforms

    We analyzed historical volume, share, quality, and cost trends for this three-hospital system. We found that the system's sites performed consistently for cost and quality but were losing share to their local competitors. That volume and share decline defined the risk: Without action, the system would continue to lose revenue and lose ground to competitors.

    Step 2: Identify the root problems

    Because the system's core challenge was in growth—not in quality or cost—we considered three questions that would indicate whether the system had an opportunity to improve volume and share performance through rationalization:

    • Do the facilities compete with one another for the same patients?
    • Are some sites facing capacity constraints while others have open capacity?
    • What services and markets offer the greatest potential for growth?

    First, we analyzed patient origin by facility for each ZIP code. We were looking for ZIP codes with significant overlap between two or more sites. We found that one hospital served a standalone market, but the other two had significantly overlapping service areas.

    When we layered in capacity, we found that one of the hospitals with overlapping service areas faced significant capacity constraints, which led to long patient wait times to interventional and surgical care. The other hospital had started offering catheterization services a few years ago but still had one inactive lab.

    Based on the growth analysis, we identified an opportunity to capture more outpatient diagnostic and interventional work. We also saw limited opportunity for further growth in one of its two hospitals offering cardiac surgery—on top of the historical volume declines we found at both hospitals.

    That process would have looked different if we had identified quality or cost as the core challenge. For example, if we had focused on a need to improve quality, we would have considered:

    • How does quality performance vary between sites? What explains those differences?
    • How close is each facility to volume thresholds required for quality? Is there opportunity to meet those thresholds by combining volumes?

    Step 3: Compare the current service distribution to growth potential

    We then used our guides for service distribution to define facility identities for each of their sites. Some services, like medical cardiology, are critical for community health and need to be offered at every hospital, even if there’s not much opportunity for growth. Others required higher fixed-cost investment levels and have a clear connection between quality and volume, such as percutaneous coronary intervention. Those local offerings needed to be present in every market, but not necessarily at every site. Lastly, regional hub services such as cardiac surgery only needed to be offered at one facility.

    We then compared the hallmarks of each facility identity—neighborhood conveniences, local offerings, and regional services—to what each site currently offered. Then, we layered on the opportunity for growth for each service in each market.

    Connecting those pieces, we recommended three changes to the system's CV service distribution:

    • Invest further in outpatient diagnostics across ambulatory sites.
    • Keep patients local for interventional services to free capacity at the regional hub.
    • Consolidate cardiac surgery from two hospitals to the regional hub.

    This analysis is just the first step in a complicated process. Read our takes on leading and communicating about service rationalization for subsequent considerations.

    Learn more: Service rationalization toolkit

    researchService closure or consolidation can support health system growth, quality, and cost goals. But health system leaders considering rationalization face a series of challenges in identifying the right opportunities, making collaborative decisions, and implementing change. Use our toolkit on service rationalization to guide your work through each step of the process.

    Access the toolkit

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