Leading service rationalization decisions

Closure and consolidation are difficult in part because they represent dramatic changes from the status quo. To build support, you need to demonstrate that the current state cannot go on and that a change needs to come quickly.

Urgency flows from underperformance. Identify where you are falling short of your goals and explain the consequences in terms of direct costs and missed opportunities. The full leadership team needs to recognize the problem and understand the historical volume, quality, or cost trends that serve as evidence.

In each of these categories, look for data that shows sustained underperformance, declining results, or divergence between sites.

Build familiarity with this data early on to ensure that the leadership team shares a common understanding of the problem. That evidence will anchor every future discussion. While you may not need consensus on the final decision, you do need to achieve consensus on the need for change.

For example, we spoke with cardiovascular leaders at a large regional health system in the South. In reviewing their historical data, they realized that quality and cost for diagnostic caths were diverging between their hub site and a nearby spoke hospital. By maintaining the status quo, the system risked worsening patient outcomes. At the same time, the hub site was nearing capacity for electrophysiology procedures. The leadership team decided to centralize diagnostic caths to the hub site and repurposed the cath lab at the spoke hospital for electrophysiology services.

System leaders had a clear need for change based on shared goals, everyone on the team wanted to maintain high-quality cath services. Urgency came from the needs to prevent outcomes from deteriorating further and to enable growth for electrophysiology care.

Next, explore the challenges preventing you from achieving your goals. Each problem should be grounded in analyses flowing from your existing planning work. The temptation is to overwhelm stakeholders with data and evidence. Instead, show only the analyses illustrating the challenges at the root of underperformance. In particular, include the problems that service rationalization can solve:

• Service investments aren’t matched to where there’s opportunity for growth. The system could achieve greater growth by reallocating existing resources to elsewhere in the system.
• Facilities compete against one another for patients. Redistributing services would enable facilities to specialize and focus on drawing patients away from competitors.
• Facilities do not meet the same standards for patients. The system could offer a greater level of quality if they matched services to sites with greater capabilities or built experience at one site.

The presence of any one of these problems indicates an opportunity for rationalization. By identifying that challenge early in the conversation, you can define what any proposed solution needs to address.

Below, we suggest analytic findings that correspond to each of the problems listed.

Rather than jumping straight to closure or consolidation, bring stakeholders together to identify the best solution for the problem presented. Together, weigh all of the possible options available to the system. Compare the opportunities and risks of each, including the likely revenue and cost impact.

Keep in mind that this should be an open conversation. While you don’t necessarily need full consensus to choose a solution, you are unlikely to win support if your colleagues sense that you are unduly pushing closure or consolidation. By maintaining an open dialogue focused on solving your core challenges, you also create space for unexpected alternatives that may be more appropriate than service rationalization. At the least, it will ensure that you have covered all of the possibilities before coming to a difficult conclusion.

At a minimum, you should explore the common sources of pushback or clear alternatives to rationalization. Can you:

• Make capital investments at all sites to increase performance?
• Reduce care variation without consolidating services?
• Redirect marketing or physician liaisons to improve growth?
• Revamp your operations to improve access?

For each option, estimate the opportunities and risks. Include a frank assessment of feasibility of each solution to maintain a realistic perspective on your ability to follow through.

Example ranking exercise on feasibility and cost

Bubble size represents feasibility: larger size means more feasible

• Before you meet, ask everyone on the leadership team to individually rank each option in two categories. Spend extra time with the likely skeptics to align on the goal of the exercise and how you plan on using the output.
  • How feasible would it be to implement? Consider cost, past experience, and the steps required to make the option work.
  • How much of an impact will this have on the problem you need to solve?
• When you meet:
  • Average the individual rankings in each category
  • Plot options on a feasibility versus impact matrix according to their average rank (as in the example below)
  • Assess options falling toward the top right (feasible and higher-impact)

To help you balance meaningful opportunities and risks, we’ve outlined the questions and analyses to quantify each category.

Even when closure or consolidation have the strongest likely return on investment, you still need to address the risks. To that end, work through how you will mitigate the challenges you identified when weighing the opportunities and risks. For example, how will you retain patients who now need to travel further for care? How can you ease their journey to new care sites?

This is also the time to address uncomfortable personal consequences. First, site leaders involved in the decision to rationalize may have financial incentives tied to their ability to grow. Before you can expect them to sign off on rationalization, you will need to agree on how to prevent anyone on the team from being unfairly penalized.

But the challenge goes beyond compensation. Closure can compromise identity. Facility leaders may define their own roles based on the services their facility offers. To overcome that sense of loss, you need to define the new identity of the site giving up services. How will the site continue to serve its community in a new way? How will you reinvest to support that role?

While system leaders should take a proactive role in each part of those conversations, facility leaders for the affected site need to play the central part. Exclusion will leave site leaders feeling disenfranchised, which could encumber implementation. Moreover, site leaders hold valuable insight into their local teams and communities to inform how you address risk and manage change.

Particularly as you start to confront these difficult issues, close each encounter with a reminder of why you’re considering service rationalization. Restate the problem you are trying to solve, the consequences of failing to do so, and how rationalization will help to solve it. Finally, conclude on the benefits this will bring to growth and quality, and how that will affect the individuals in the room. Everyone should understand the goals you are hoping to achieve and recognize the risks posed by the decision.