The Case for Regionalization

Hospital consolidation is reshaping the healthcare system. For many organizations and systems, merger and acquisition present opportunities for greater geographic reach, enhanced clinical capacity, increased care coordination, economies of scale, and a more robust asset base. But consolidation also creates a congested clinical environment for systems that acquire affiliates with overlapping services.  To clear the crowd, systems must evaluate the distribution of clinical services within given markets and explore alternative service configurations, including closures.

Enter regionalization. Regionalization strategies are designed to centralize or collocate similar service offerings within designated markets. The intent is to contain costs while providing efficient, high-quality care. There is a certain business logic to having a McDonalds or Starbucks every 2 miles; that same logic doesn’t apply to something like cardiovascular surgery programs.  While expanding reach and access are key priorities for any health system, redundancies are not.  Further, systems offering similar services at proximal locations typically do not have the means or need to support duplicate programs.Regionalization_Strategies_14M03D10

With a number of models to choose from, effective regionalization strategies require multihospital systems to delicately balance care quality, organizational efficiency, resource allocation, and patient convenience.  We know that primary care services need to be readily available and in close proximity to where people live and work.  Conversely, organ transplantation should be centralized on a regional or multiregional basis.  The ideal distribution of the majority of specialty health services falls somewhere between these extremes.

Decisions to regionalize or close services, however, have been infrequent due to a complex and potentially combustible array of financial, operational, strategic, cultural, and political considerations.  Regardless of how difficult these decisions are, they are increasingly necessary for systems to address.

As the climate of consolidation continues to envelop and reconstruct healthcare, systems assume a greater responsibility to provide accessible, high-quality care at sustainable costs. Fulfilling these responsibilities requires multihospital systems to demonstrate a willingness to have tough conversations and make difficult decisions regarding the regionalization of health services.

To learn more about the case for regionalization, read the Insight on our Web site.

This entry was posted in Clinical Integration, Hospital Consolidation, Service Regionalization, Strategic Planning and tagged , , , , , , by Kevin Kennedy. Bookmark the permalink.

About Kevin Kennedy

As a consultant since 1990, Kevin has assisted dozens of hospitals, health systems, and medical groups with solving their strategic, financial, and operational problems. He has particular expertise in operations improvement, hospital/physician relationships, and physician compensation planning. His most recent client experience includes assisting hospitals with service line and enterprise-wide strategic planning, working with health systems to define the operational relationships with member hospitals, and facilitating multiple transactions, including hospital/hospital and hospital/physician acquisitions. He is a frequent speaker before industry associations and has received the Yerger/Seawell Article of the Year award for outstanding contribution to professional literature from the Healthcare Financial Management Association (HFMA). Kevin holds a bachelor of science degree in business administration from The University of Arizona and a master of business administration degree from The University of Chicago.

2 thoughts on “The Case for Regionalization

  1. Pingback: Regionalization: Tearing Down Silos Is Hard Work | ECG Management Consultants, Inc.

  2. Pingback: Regionalization: Do You Have A Plan? | ECG Management Consultants, Inc.

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