HA580 Unit 3 Strategic Options Analysis Example

Take the Risk Contract, Keep the Surgery Center: A Strategic Analysis Scoring a Composite Five-Hospital System's Three Surviving Options on Suitability, Acceptability and Feasibility, Then Auditing Whether It Could Carry the Winner Against Porter and Lee's Value Agenda

[Student Name]

Purdue University Global

HA580: Leading Health Care Transformation With Strategy Integration

Unit 3 Strategic Analysis

[Instructor Name]

[Date]

The system, the options and every rating are composite and bracketed for the writer's own data; the frameworks are real.

Recommendation

Accept the insurer's shared-risk contract on its proposed schedule, with downside risk from year three. Keep and accelerate the orthopedic surgery center joint venture as the margin that pays for the transition, and defer the academic affiliation decision until its terms are known.

The Criteria

The analysis uses three tests from a standard strategy text (Johnson et al., 2020). Suitability asks whether an option answers the findings of the environmental scan. Acceptability asks whether the people who must agree, here the board, employed physicians and orthopedic partners, will support it, and whether its risks and returns are tolerable. Feasibility asks whether the money, people and systems exist to carry it out. All three options face identical questions, so the verdict cannot be tilted by using a different test for a favored option.

Grid 1: Options Against the Criteria

Risk contract. Suitability: high; it answers the rising Medicare Advantage share and the insurer's dominance by aligning with the insurer rather than competing. Acceptability: medium; the board is wary of downside risk, and primary care physicians are paid on volume. Feasibility: medium; care management needs nurses in a market with [14] percent vacancies, and the system lacks claims data. Orthopedic joint venture. Suitability: high; it moves joint replacement to a lower-cost site before the academic system's center opens. Acceptability: high; surgeons want ownership, and the board sees new margin. Feasibility: high; a site and partners exist, and the system's prices are already lower. Academic affiliation. Suitability: medium; it adds specialist coverage and possible capital, but does not answer the payer shift. Acceptability: low to medium; the board fears loss of control. Feasibility: unknown; terms have not been offered. The option the board likes most, the surgery center, is the one that pays for the option it fears most, the risk contract.

Who Must Agree, and What Each Needs

The board must approve the contract and the joint venture. Its finance committee will want to see the funding bridge from the surgery center to the care management program, and a cap on year-three losses. The employed primary care physicians must change how they work, calling high-risk patients and working with care managers, while their pay still rewards visits; without a change in pay, acceptability will stay medium at best. The orthopedic surgeons must commit cases to the new center for at least [five] years, which they will do in exchange for ownership and a voice in scheduling. The insurer must share monthly claims data, which the contract should require, since without it the system cannot see costs incurred outside its own hospitals.

Why Both, Not One

The risk contract carries the future but loses money at first, because every avoided admission at the system's own hospitals reduces revenue more than the shared savings return, as Unit 1 showed for heart failure. The joint venture produces margin within [18] months. Pairing them gives the system a funding source for the transition. Early results from Medicare accountable care organizations show that savings under shared-savings contracts were modest in the first years and larger among physician-led groups than hospital-integrated ones (McWilliams et al., 2016), a warning that a hospital system should not expect quick gains.

Grid 2: The Value Agenda Audit

Porter and Lee (2013) describe six connected components of a value-based delivery system. Each is rated for this system from absent to established. Integrated practice units organized around conditions: emerging; only the heart failure clinic resembles one. Measuring outcomes and costs for every patient: absent; outcomes are tracked by hospital, not by condition, and costs by department. Bundled payments for care cycles: absent outside a single orthopedic bundle with one employer. Integrating care across facilities: partial; the five hospitals share a record but not service lines. Expanding geographic reach: partial; clinics exist across the six counties but refer inconsistently. An enabling information platform: partial; one electronic record, but no claims data and no risk stratification.

What the Audit Means

The system is weakest where the risk contract needs it most: cost measurement, claims data and condition-based teams. Those gaps become the first workstreams of the plan, and the contract's two upside-only years are the time to close them.

Risks

If the joint venture is delayed past the academic center's opening, the funding source weakens. If care managers cannot be hired, the contract's savings fall short. The board should set a gate before downside risk begins in year three.

Limits

Ratings are judgments from documents and interviews. The academic system's terms, when offered, could change the analysis.

Conclusion

The recommended pairing uses the option the system can do well now to pay for the option it must learn.

References

Johnson, G., Whittington, R., Regnér, P., Angwin, D., & Scholes, K. (2020). Exploring strategy: Text and cases (12th ed.). Pearson.

McWilliams, J. M., Hatfield, L. A., Chernew, M. E., Landon, B. E., & Schwartz, A. L. (2016). Early performance of accountable care organizations in Medicare. New England Journal of Medicine, 374(24), 2357-2366. https://doi.org/10.1056/NEJMsa1600142

Porter, M. E., & Lee, T. H. (2013). The strategy that will fix health care. Harvard Business Review, 91(10), 50-70.