health Fininces

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HCA 545 Mini Case 1

spring 2018

The Problem

The competitive battle is fierce in the metropolitan area in which Stewart Regional Health

System operates. Five systems are at war for the hearts, minds, and business of the region's

population. Stewart Regional has identified five key competitive initiatives to strengthen its

position. Given resource limitations, which of these initiatives should rise to the top?

The Situation

Stewart Regional's metropolitan area is experiencing consolidation in healthcare delivery. From

a high of 21 hospitals in 2005, the region now has 16 hospitals, all of which have consolidated

into the five remaining systems. None of the new systems dominates the regional market; system

shares range from 12 to 28 percent. Stewart Regional Health System is in the middle of the pack,

with a market share of 21 percent.

The metro area has an essentially stagnant population base, with moderate growth on its

suburban fringes and modest declines in the urban core. The physician base of about 4,000 total

physicians is roughly half primary care physicians and half specialists, still organized primarily

into small single-specialty groups. Employment of physicians by hospitals (about 15 percent of

all physicians divided evenly between the university's faculty practice plan and primary care) is

growing, but not yet at the breakneck pace seen in other markets. The PPO model is the primary

commercial insurance vehicle in this market; there are no restricted or narrow insurance product

options at this point.

The principal competitive strategies of the other systems are summarized in the exhibit below.

Exhibit 1

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Stewart Regional has focused on building its continuum of care and growing or developing

incrementally in what has been a fairly chaotic and shifting competitive market, at least on the

hospital side, for the past 10 years. However, now that the hospital alignments seem to be

established, the prospect of tremendous change due to healthcare reform looms as the next great

challenge for the area's health system. A strategy of stability and good management execution

may not be enough to carry the day for Stewart Regional going forward.

Alternatives Considered

Management has identified five significant competitive initiatives on which to base the system's

primary competitive strategy for the next few years (please see questions section for more

information).

Recognizing that each initiative presents clear positives and negatives, Stewart Regional's

executives also understand the importance of viewing each one in the context of today's

environment, tomorrow's likely environment, and current and future competitor strategies.

Some of the leaders advocate for roughly equal efforts on all fronts, while others argue for the

need to make choices and identify clear priorities because they recognize the substantial time and

financial commitment required to move forward on each front.

So the question to be answered by Stewart Regional's leaders is, what should be our priorities to

ensure we can compete effectively for the next few years? Please see the HCA 545 Mini Case

Questions for information on how to proceed.