Evaluation and Strategic Decisions in Health Care
Overview
In this assignment, you will work through three scenarios that each require a strategic response to changing market conditions. For each scenario, you will analyze the situation, identify possible strategic options, and evaluate those options to determine how the organization should respond.
Note: Later in the Week 10 assignment, you will build on this analysis by selecting and justifying the most appropriate course of action for each of the scenarios.
Preparation
Before completing this assignment, review Chapter 6 in your textbook on identifying strategic alternatives. Focus on how organizations analyze strategic situations, identify possible options, and evaluate those options, including how they decide whether to expand, maintain, or reduce operations and weigh the tradeoffs associated with each choice.
Scenarios
Scenario 1: Direct-to-Employer Deal
You are the Director of Strategy at Redstone Medical Center. Over the past several years, your organization has maintained a stable patient base and strong financial performance, supported in large part by commercially insured patients from a major regional employer called Raven.
This stability was disrupted last week when it was announced that Raven has entered into an exclusive agreement with Redstone’s competitor, Pinnacle Health System, to serve as its designated provider network. Under this new arrangement, Raven employees and their families will now be directed to Pinnacle for most services, with financial incentives tied to using their facilities and providers. Raven has cited cost predictability and coordinated care as key reasons for selecting Pinnacle, aligning with broader value-based purchasing trends. The agreement also includes integrated data systems that will allow Pinnacle to track patient utilization, coordinate care across providers, and report performance metrics tied to cost and quality outcomes. This change is expected to result in an estimated 12–18% decline in commercially insured revenue at Redstone.
Pinnacle has positioned this agreement as a “high-value care partnership,” emphasizing coordinated care, predictable pricing, and access to a broader network of specialists. Initial communication to Raven employees highlights convenience, lower out-of-pocket costs, and streamlined access to care within a single system.
Internally, leadership at Redstone is trying to assess the impact. Some executives believe Redstone can offset the loss by attracting new patients from other segments or improving retention among existing patients. Others are concerned that the loss of this employer group will have long-term financial consequences, particularly for high-margin service lines that depend on commercially insured patients.
At Redstone, there is no clear consensus on how to respond. Some leaders suggest pursuing similar employer partnerships, while others argue for expanding into new markets or service lines. A few believe the organization should focus on strengthening its existing operations and wait to see how Pinnacle’s agreement performs over time.
Scenario 2: Unprofitable Service Line
You are the Director of Strategy at St. Luke’s Medical Center. One of the organization’s most visible service lines, its oncology program, has long been considered a source of pride. It attracts attention in the community, supports the hospital’s reputation for advanced care, and is frequently highlighted in marketing materials.
However, recent financial reports show that the oncology program is operating at a consistent loss. Over the past three years, the program’s operating margin has declined from +4% to –8%, with losses driven by lower reimbursement rates and rising treatment costs. Recent payer policies have also shifted more oncology care toward outpatient and community-based settings, reducing inpatient volume. At the same time, overall patient volume has declined over the past several years as competing organizations have captured a larger share of commercially insured patients, often by expanding access, improving coordination of care, or focusing on more efficient service models. As a result, St. Luke’s is treating a higher proportion of complex and publicly insured patients, increasing costs while reducing overall margins. At the same time, the cost of maintaining specialized staff, advanced technology, and comprehensive support services has continued to rise.
Internally, opinions are divided. Some leaders argue that the oncology program is essential to maintaining St. Luke’s reputation and should be protected, even at a financial loss. Others believe the organization can no longer justify the cost and should consider reducing or restructuring the program. A third group suggests that the program could be redesigned to improve performance, though doing so would require additional investment and time.
Scenario 3: A Growing Opportunity
You are the Director of Strategy at Meadowbrook Health System. Over the past year, demand for services related to metabolic health has increased significantly. Internal data shows a 35% increase in patient inquiries and a growing waitlist for metabolic-related services over the past 12 months. At the same time, reimbursement for GLP-1–related care varies widely across payers, and long-term coverage policies remain uncertain. Much of this growth has been driven by the rapid adoption of GLP-1 medications across a broader range of conditions, including diabetes, weight management, and cardiovascular risk reduction.
Currently, Meadowbrook offers limited services in this area, with fewer than 10% of eligible patients enrolled in structured metabolic health programs. Internal data shows that appointment wait times have increased to over four weeks, patient no-show rates are rising, and referrals to external clinics have increased by 25% over the past year. Financial analysis indicates that existing services operate at a modest margin, but expansion would require an estimated $4–6 million investment in staffing, technology, and program development.
Competitors in the region are responding in different ways. Some organizations have developed comprehensive metabolic health programs with integrated services, while others have partnered with specialty groups to offer targeted weight management solutions. These programs emphasize convenience, personalized care, and coordinated services beyond traditional clinical visits.
Leadership at Meadowbrook sees this as a major opportunity but recognizes that expanding would require significant investment. Options being discussed include building a larger internal program, recruiting specialized providers, partnering with an external group, or acquiring an existing clinic. Each option carries different costs, timelines, and risks, and resources are not unlimited. Expanding into this area would require prioritizing it over other potential investments. Some leaders believe this is a defining growth opportunity, while others question whether it aligns with the system’s broader strategy.
Instructions
In a paper of 3 to 4 pages total (about one page per scenario), please complete the following for each scenario above:
Analyze at least two external or competitive factors affecting the organization.
Evaluate at least two internal strengths or weaknesses that affect the organization’s ability to respond.
Formulate at least two strategic alternatives the organization could consider, including how each addresses the situation.
Present analyses using logical organization and proper grammar and mechanics, including utilization of references and in-text citations in proper SWS format.
This course requires the use of Strayer Writing Standards (SWS). The library is your home for SWS assistance, including citations and formatting. Please refer to the Library site for all support. Check with your professor for any additional instructions.
The specific course learning outcome associated with this assignment is:
Formulate strategic alternatives for a healthcare organization based on its competitive conditions and capabilities.
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