Strategy Challenge

Alan M. Zuckerman

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


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. The initiatives and their major advantages and disadvantages are summarized in the exhibit below.

Exhibit 2


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?

Exhibit 3


The Decision

The system's leaders decided to convene a strategy retreat to thoroughly review the competitive situation, discuss the future environment and how each initiative could play out and support (or not) the system's future competitive position. The retreat involved all members of the board, medical staff leaders, and senior management.  

At the end of the review and discussion of the competitive situation at the retreat, attendees were asked to rate each initiative on a one-to-five scale (with one being low and five being high) along three dimensions:  

  • How desirable the initiative is for advancing the system's competitive position  
  • How feasible the initiative is to be implemented successfully  
  • How significant the impact on the system's competitive position would likely be if the initiative were not pursued  

Alignment with primary care physicians was identified as the clear, highest priority for the leadership group, followed closely by alignment with specialists and developing ambulatory care. As a result of the retreat, Stewart Regional is moving forward most aggressively in primary care, with secondary emphasis in the other two high-scoring areas.  

Alan M. Zuckerman, FACHE, FAAHC, is president, Health Strategies & Solutions, Inc., Philadelphia (


Publication Date: Wednesday, August 01, 2012

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