CFA recently completed an engagement in which the rationalization (consolidation) of cath lab services within a two hospital system was hotly debated. CFA was asked its opinion of closing the cath lab at the smaller hospital (or limiting it to diagnostic-only services) and re-focusing services at the regional hospital some forty miles away. Regardless of corporate strategic direction, it is important to consider the following practical questions when debating a rationalization issue:
1. Will you truly save money? CV services are complex and expensive to start, keep current and maintain. Closing/modifying a service and directing at least some patients to another hospital for a specific service or procedure may save money in the short term, but will the longer term impacts—loss of revenue, loss of patients, negative publicity/community perception—result in a net negative financial impact?
2. Will you lose referrals? Will referring physicians shift their preferences from the local hospital to the regional hospital? Or will loss of market share or outmigration to other competitors become an inevitable consequence of change in local capability? How will the population being served react? Can better services at a regional level ever be fully justified by a perceived diminished local capability?
3. Is the option acceptable? Is hospital “A” as acceptable to the local population as is hospital “B?” Is the travel time between them a factor? Differences in reputation? Other factors? Are there competitive options?
4. How will your cardiologists react? If interventional cardiology and vascular services capability changes at the local hospital, will your staff cardiologists shift their practices to the regional hospital, or will they seek out more convenient and comprehensive alternatives in order to protect their income, save travel time and maintain their efficiency? How will this apply to employed versus non-employed cardiologists? Can the regional hospital absorb them? Will I have dissention in the ranks? Will I lose interventionalists?
5. How will closing an interventional laboratory (for example) impact noninvasive cardiac and vascular services? Losing interventional capabilities will have some negative impact on noninvasive testing due to loss of volume and potential negative perception. What impact will it have and how do you mitigate this impact?
6. What will happen to the local STEMI and stroke program? If, for example, the “local” STEMI program transitions to a “regional” STEMI program, what are the consequences for EMS response times, door-to-balloon times and other factors critical to local healthcare? How will the service population react?
7. Will it harm or enhance the overall clinical reputation of the hospitals? Hospitals gain and keep non-cardiovascular patients given their overall CV program reputation (the “halo” effect). If this reputation is diminished through a change in capability, what are the consequences? Difficult to quantify and very subjective, it is never-the-less a real issue when considering changing any hospital’s CV capabilities.
8. Are low volume versus quality outcomes at issue? If a smaller program is closed, will low volumes translate to higher volumes with better outcomes in the regional program? If low program or individual operator volumes are at issue, or if sub-standard outcomes are at play, how will consolidation impact these metrics?
9. How will the payer community react? Will such a change enhance or diminish a hospital’s capability to negotiate competitive pricing and secure the contracts it needs to thrive? Will any competitive edge be lost or gained by either facility?
10. Will our competitors seek an advantage? If we lose market share and our clinical capabilities change, will our competitors seize this opportunity? Could they realize a competitive advantage that would negate any potential financial savings from operations? Will they try to “poach” our interventionalists?
11. How will capacity and patient throughput be impacted? Can the new volume be absorbed by a single facility, or will it require additional capacity, equipment, staffing, etc. Can throughput efficiencies be enhanced or will they actually diminish given new volume?
12. What unintended consequences may be created? While rationalization decisions are frequently political, there may be unintended consequences that will have to be considered as the decision making process unfolds.
Answering these and other logical questions during the analyses of rationalization or consolidation of services between facilities is a critical exercise that will help to insure a rational and well planned outcome.
As always, CFA invites your comments, questions and suggestions.