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The 5 Key Components of a Rationalization Framework

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As the healthcare industry shifts its focus to population health, health systems need actionable strategies to help them meet new cost and quality goals. Rationalization—whereby a health system centralizes or co-locates similar services within a given market—is one such strategy. With the right framework in place, rationalization can position a health system to avoid duplication of services, ensure its services are delivered in the optimal setting, and reduce the overall cost of care.

However, rationalizing services can be a complex and even potentially contentious exercise, requiring careful analysis, a well-defined strategy, and the ability to cultivate influential champions for change. To set the stage for effective rationalization of health system resources, we recommend the following five-part framework:

1. Build cultural readiness: Perhaps the biggest challenge is motivating leaders, providers, and staff to think beyond their separate facilities. Here are a few strategies that can help shift thinking to the big picture:

  • Demonstrate the connection to other system-wide initiatives that have already garnered support, such as population health
  • Establish a service line governance model that encourages stakeholder leadership and influence across multiple organizations within the system
  • Focus conversations about executive compensation on system or regional performance instead of individual hospital performance

If hospitals within the system are competing, rationalization cannot succeed, so these efforts should be prioritized.

2. Apply a transparent, collaborative process: Take the time at the outset to develop guiding principles, communicate the intent behind them to stakeholders, and obtain their long-term buy-in. These up-front efforts will lay the groundwork for evaluation and approval of specific initiatives. While it is not necessary or even useful to involve all stakeholders in initial discussions, it is important that all stakeholders are well represented when the health system decides to pursue a rationalization strategy. When it comes to consolidating specific services, be sure to create mechanisms for local stakeholders to provide guidance and feedback.

3. Gain physician support: Steps 1 and 2 of this framework are designed to cultivate executive support. Physician support is no less important, as rationalization efforts are likely to have a direct impact on physicians’ daily operations. The case for rationalization must be supported with credible clinical and financial data so that physicians do not see new cost allocations as arbitrary or unfair. It is also critical to explain how new, rationalized service structures can benefit physicians, bringing them more money, greater control, improved efficiency, better patient outcomes, and even new gadgets. Assure physicians that they will retain control over quality and safety standards.

4. Prioritize key opportunities: Rather than going after the opportunity with the highest ROI right out of the gate, look for low-hanging fruit in programs that can discretely consolidate a set of services (e.g., high-acuity procedures that benefit from combined volumes) and have the support of strong physician leadership—these programs have the best chance of success. Racking up some early wins will build support for rationalization efforts. More politically charged opportunities, which also often have greater potential for value, can come later, after the system has gained momentum and the culture has embraced the rationalization efforts.

5. Adhere to a well-developed implementation plan: Create a work plan that defines the who, what, where, when, and how to ensure all stakeholders have a common understanding of the process. To avoid delays from competing interests, hold key stakeholders accountable by asking them commit to a schedule at the outset. There is no such thing as over-planning or over-communicating a rationalization initiative, so also invest the time to develop risk management processes and contingency plans.

There is a common misperception that rationalization is code for service reduction. Instead, think of efficient utilization of resources. Rationalization allows organizations to better optimize their resources and enhance patient access across a health system. If approached thoughtfully, thoroughly, and inclusively—as mapped out in this framework—rationalization can transform a health system into an exemplar of value-based care.

For more information on the framework, read our full-length article in hfm Magazine.

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