Regionalization: Tearing Down Silos Is Hard Work

Consolidation is resulting in service line duplication for health systems operating multiple hospitals within a given market area. In an attempt to remedy redundancy, systems are increasingly facing the need to regionalize services in order to deliver efficient, effective, and cost-conscious care. In this case, less really can be more.

However, redistributing services across a system is exponentially more intricate than planning for a single acute care hospital. The truth is, the road to regionalization is long, difficult, and littered with potential strategic, financial, operational, cultural, and political obstacles.

Financially, regionalization necessitates a complete examination of the true costs associated with such strategies.  Regionalizing service lines may have a cascading economic and operational effect on related services throughout individual organizations and entire systems, testing leadership’s understanding of complex cost and revenue dynamics.

Systems also fear disrupting care and alienating important constituencies. Strategically relocating services allows health systems to reduce redundancies and inefficiencies. However, it also tests patients’ loyalty and willingness to accept change, while opening opportunities for competitors to capture hesitant patients and unhappy physicians.

The far-reaching cultural and political ramifications, within and beyond the system, are also of considerable importance. Culturally, there is a strong tendency, especially in recently formed systems, for hospital staff and leadership to gravitate toward a siloed mentality – focused on protecting “my” campus.  We see hospital executives fight to preserve the services and relevance of their hospitals without regard for a larger system strategy.  In any system, protective tendencies and myopic interests can quickly derail regionalization efforts.  Senior leaders must overcome this mind-set by shifting their focus, as well as that of their staff, beyond particular buildings toward what is best for the region, system, and population.  Outside hospital walls, systems must address promises and commitments previously made to surrounding communities, local governments, and donor bases that could be challenged by changes to service offerings and availability.

Regionalization is a demanding, time-intensive exercise that entails complete analysis, a well-defined strategy, and the ability to cultivate influential champions for change. In this climate of consolidation, systems cannot afford to tiptoe around tough conversations and difficult decisions.  Successfully managing the complexities of regionalization demands that leadership ask the right questions, set the appropriate cultural tone, and commit to performing a logical, dispassionate analysis of the intricate issues that accompany these efforts.

Regionalization also requires systems to establish a framework for how strategies will be developed, executed, and maintained – which is the topic of the next post in this series.

To learn more about 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.

One thought on “Regionalization: Tearing Down Silos Is Hard Work

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

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