2026 Summit Recap: Service Line Rationalization, Scenario Planning, and AI

This episode recaps three key themes from the 2026 Strategy Catalyst Summit: what it takes to move service line rationalization from theory to action, what a live scenario planning exercise revealed about strategic preparedness, and who should be owning the AI agenda.

Watch our highlight reel from the summit here. And for more on the content referenced in this episode, read our analysis in The Strategist here and check out our Stress Test Scenario Planning Guide here.  

Transcript

Caitlynn Dargan 0:00

ever since I've been in healthcare, service line rationalization it's a theme that comes up a lot, but I think the consistency is that, is it actually being implemented or is it just a theory?

Anika (2) 0:16

Welcome to the Strategy Catalyst Dispatch, a podcast from the Strategy Catalyst team at the Health Management Academy. I'm your host, Anika Rashid Senior Analyst, and each episode we'll explore The trends and insights shaping healthcare strategy today. Let's dive in.

Anika 0:38

In March, the Health Management Academy brought together more than 75 strategy leaders representing nearly 50 health systems for our third annual strategy Catalyst Summit in Arlington, Virginia, over two days. The room covered federal policy, ambulatory strategy, AI deployment, and some of the hardest strategic decisions health systems are wrestling with right now. The backdrop for every conversation at the summit was a shared reality as shared by Brian Contos, SVP at the Health Management Academy. Health systems are in a structural squeeze. Margins are thin, and they've been thin long enough that a lot of organizations have normalized it. and the incremental playbook that got systems through the last few years may not be enough for what's coming next. That urgency through line ran throughout the entire two days. I wanna A focus on three themes that kept resurfacing across different conversations. The first is service line rationalization and what it takes to move from talking about it to actually doing it. The second is what happened when we put strategy leaders through a live scenario planning exercise and ask them to confront how prepared they actually are. And the third is the ongoing question of who in the health system should be owning the AI agenda? Let's get into it. One of the sessions that generated the most energy at the summit was a closed door conversation on service line rationalization with IU Health. And the reason it resonated is that every strategy team in the room is dealing with some version of this challenge. in your portfolio of services, some are growing, some are shrinking, some are getting harder to staff some aren't generating the margin they used to. The question of what to keep, what to consolidate and what to stop doing entirely comes up in every strategic planning cycle. But actually executing on those decisions is where things can get difficult. And the room is pretty candid about why. first without a clear triggering event like a financial crisis, a staffing emergency, or a competitor move Rationalization tends to lose momentum to other priorities. strategy leaders in the room described it as a constant item on the strategic agenda that has a really difficult time making it to the front of the line. The business case might be there, but the organizational will isn't because the people affected Hospital leaders, physicians, operational teams have their own incentives, their own p and ls, and their own reasons to resist change, not to mention the hospital missions. Second, there's a framing problem. Rationalization sounds like taking things away, which immediately puts people on the defensive. some leaders in the room reframed it as a distribution question. Given our network, where should each service live to optimize quality, access and economics That shift from what are we cutting to? Where does this best belong? Opened up different kinds of conversations with their operational partners. And third, and this also came up in every discussion at the summit, not just this session, that strategy, can't do the work alone. You need operations at the table, not as a stakeholder to be convinced after the analysis is done, but as a true partner in building it, they know the business, they know where the inefficiencies are, and without their buy-in early even the best strategic recommendation doesn't survive implementation. I wanna share two perspectives from members we spoke with at the summit who are navigating this work in real time. Caitlyn Dargan is the Director of System Strategy at Baptist Health Jacksonville.

Caitlynn Dargan 4:05

Coming out of the service line rationalization discussion we just had, I think where I wanna start is really trying to take. Service line rationalization and make it into action and not just a buzz phrase. ever since I've been in healthcare, it's a theme that comes up a lot, but I think the consistency is that, is it actually being implemented or is it just a theory? And so when I think of making sure that this work actually gets. Done. It's ensuring that the right people are at the table. And so a big group is operations. So we think of service line rationalization. It's really strategy driven, service line driven horizontally across the care model. But your operations, whether it's your hospital leadership, your medical group leadership, they have to be part of those decision. and part of how do you operationalize that plan? Because if you have one segment of care that's being rationalized, there's downstream impacts that span across more than just acute facility, but as well as the ambulatory footprint. I also really appreciated the idea of using data to drive these decisions. A lot of times what people want to hear, whether it's a physician, whether it's an administrative leader, is that you have a background and there's, it's very intentional and data off. Often helps make those decisions for us because then there's something to point to and it's not just someone's idea off the street.

Anika 5:21

And here's Ashley Hodge Harris, executive Director of Provider Development and Strategic Outreach at Baptist Health Pensacola. She shares a concrete example of what this looks like when you actually pull the trigger, including the stakeholder management that comes with it.

Ashley 5:35

One of the questions that the group really focused on was how do you actually discontinuous service? You know, that's never popular. How do you approach that with your constituents, the system, the community? I can think of two examples with our senior health program as well as our hospitalists that we found that we could partner with other groups that could do it more efficiently. Oftentimes, I think we think of rationalizing services as completely discontinuing them, but you as a health system can likely find a partner who already provides said services, a core business, and who can parlay subject matter expertise, not only to continue the service under their business construct and balance sheet. But deliver a potentially superior patient experience. Going down that pathway takes a lot of planning, a lot of messaging, a lot of stakeholder engagement, but it can be done. Sometimes it does get a little bloody, but you know, it's nothing that a quick bandaid can't treat again. If you engage the right folks, invest the time in proactive planning, you're able to show success of what you can gain from using an aligned partner. That rationalization in the service line space can be done successfully.

Anika 6:49

So a little bit of pain in the short term, but a lot of gain in the long term.

Ashley 6:53

Absolutely. And even when we talk about the pain, it's just normal elements that happen with change management. There's different processes of change. You have to have the denial, the acceptance, and then you just work through it. As long as the team's there, it'll be successful.

Anika 7:10

I think the key takeaway from Ashley's example is that it shows discontinuing service doesn't have to mean the community loses access. Finding a partner who can deliver the service more efficiently under a similar umbrella as she put it, can actually be the better outcome for everyone. But getting there takes deliberate planning, clear messaging, and sustained stakeholder engagement. And yeah, as she said, it doesn't always feel nice, but the short-term discomfort is worth the long-term positioning. For the summit's final working session, instead of a presentation or a panel, we ran what we called a stress test, a scenario planning exercise designed to pressure test strategic assumptions in real time. Here's how it worked. Members were broken up into small groups. Each group received a different scenario, a plausible but provocative policy shift or market disruption, and had the session to work through a few questions How big of a problem would this be for your system? What would you actually do about it? Where would you start and what was surprising about it? Then each group reported back to the full room. The scenarios covered a range of topics, payment reform, regulatory shifts to key programs, changes to reimbursement models, fragmentation of primary care. But what I wanna share is what the exercise revealed about the state of strategic preparedness in the room. because the pattern that emerged cut across every table, regardless of which scenario they had. I have Matt Gunther, senior Vice President and leader of the Strategic Partnership Alliance at the Health Management Academy to walk us through those today.

Matt Gunther 8:39

At the highest level, everything pointed back to one core reality that mounting financial pressure is here across health systems. This isn't just something that's theoretical. Leaders are facing it right now. the consensus was clear that the is only going to intensify and organizations need to be taking action today. When we talk about that action, two major themes really emerged. One is on cost management. importantly, it's not just on the administrative side. There's equal attention being paid to the cost side of clinical as well. Organizations are really trying to take a comprehensive view of where efficiency can be found. we need to also focus on growth at the same time. many people pointed out that we're at a period of rapid technolo-technological change, and the reality is that organizations that fall behind in adopting and leveraging new technologies are at risk of being left behind altogether. So maintaining a growth mindset and continuing invest in innovation is essential.

Anika 9:37

The group also unpacked a few key ways they needed to reframe their thinking.

Matt Gunther 9:42

there were two specific mind shifts that really stood out as necessary for success. First is proactivity. There was a shared recognition that many health systems have historically been more reactive than proactive, and that needs do change. Strategy teams are looking to get ahead of those challenges, anticipate what's coming and act earlier rather than just responding after the fact. The second was collaboration. There was a strong call to break down silos, particularly across strategy, finance, and operational teams. Whether that operational team is in pharmacy, clinical operations, or administrative leadership, often two times we're operating independently and waiting from direction from some other side of the organization. But in a time of pressure and rapid change, the group really felt that the approach doesn't work. We need to get more aligned, more integrated, and become more collaborative. When we step back and I just think about all of the kind of the major takeaways from the session, it was that, you know, winning organizations need to balance four things. One, cost discipline, two, growth and innovation, three, a proactive strategy, and then finally, kind of really driving it cross-functional collaboration

Anika 10:57

So the big theme was that most systems are overwhelmingly reactive when it comes to scenario planning and policy or market shifts. The current model is still keeping us afloat, so there's always a reason to keep sprinting at it. The hard question is how you carve out the bandwidth to prepare for tomorrow, when today is demanding everything you've got already. Another Theme was a disconnect between strategy and operations on the urgency of these threats. operational leaders who are focused on running hospitals and clinics today sometimes don't feel the same urgency, especially when they've been hearing about the same risks for years. Multiple groups arrived at the same conclusion. If operations isn't at the table, Sometimes strategies work ends up on the shelf. The most productive conversations weren't the ones where groups tried to solve the scenario. In fact, most of them didn't. They weren't designed to necessarily be solved. The most productive conversations were the ones where groups were honest about what they didn't know, where they admitted that they hadn't quantified their financial exposure. Or hadn't aligned strategy with operations or hadn't identified who in the organization would own this response. That's what made the exercise valuable. One concept that came up was the idea of no regrets, strategies, moves that make sense regardless of which specific scenario plays out. things like improving operational efficiency, reducing your cost to serve, diversifying revenue and strengthening payer relationships. There's the thought of, instead of trying to predict which disruption is coming, just focus on building the kind of organization that can absorb and adapt to any of them. The summit also devoted two sessions to ai, one walking through strategic dilemmas that health systems are navigating around AI deployment. And a second where members actually built AI powered tools in real time during a hands-on hackathon. Supported by our AI catalyst team at THMA. Some of the headlines of the dilemmas we discussed were value capture versus value creation, centralized governance versus frontline freedom. Epic versus best of breed, perfect versus good enough. Those are all worth a deeper conversation. But the thread I want to pull in this episode is the question of who in the health system is actually owning the AI strategy? Because what we heard from multiple leaders is that their IT teams are enthusiastic about implementation, but they're not always connecting AI deployments to broader strategic goals. One leader described a landscape of point solutions with murky ROI and limited connection to enterprise strategy. Another said their governance framework hadn't caught up with the pace of deployment. How do systems maintain strategic discipline at the center, while staying nimble enough on the fringes to actually get things deployed. More than half of the health systems in the room had some kind of formal AI oversight structure, whether that be a steering committee, a chief AI officer, or both. But the session surfaced a paradox. If you centralize too tightly, everything stays in pilot and nothing gets to scale. If you decentralize too much, You end up with a bunch of disconnected point solutions that nobody's evaluating against the broader strategy. One model that was highlighted during the session was a health system that set up a high level central committee for strategic alignment and risk evaluation, but then created semi-autonomous subcommittees closer to the clinical and operational work. Those teams had enough freedom to move quickly on implementation without having to escalate every decision. The central committee sets direction and handles the hard questions while the subcommittees do the, That way the system can still have guardrails without getting stuck. But the honest submission from multiple leaders was that organizations haven't fully figured this out yet. One phrase that stuck with me. We need to slow down to go fast. I think that captures the tensions from the sessions well. You need to have enough structure to make sure AI is solving the right problems, But structure without speed means you never get past the pilot phase. We spoke with Christie Coo Bee director of Strategy and Planning at Cone Health, who put it this way.

Kristy Kubida 15:00

we have to begin a closer alignment with. our technology and AI leadership team, they really are very siloed. They're not considered part of strategic decisions. They sit on a lot of our operational committees, and so I do think there's an opportunity for them to be integrated into the strategy conversations. And for us to also be integrated into those operational committees so that we can begin to make those connections, and really move things forward based on what's needed for our strategy. So that we're not making decisions that are just one offs that are not going to get us to where we wanna be in. Future. building off of that, I know something that we hear a lot from our members is that, AI use cases can constantly feel like chasing the next new shiny big thing. How do you kind of get away from that mindset to sort of the long term value creation? So I think it goes back to the enterprise strategy and how it's built out, and do you have those leaders that really are looking at technology and artificial intelligence at the table so that whatever you're deciding to do as far as strategy, enterprise strategy, all those different strategic objectives, goals that technology and artificial intelligence it weaves through those decision points. It may be something comes out that we don't have a need for artificial intelligence in, and that's fine. But then there may be three other things that we're focused on for next year. So then that helps them also plan as far as resources if they need to look at different options in order to, solve what we're trying to solve

Anika 16:47

Essentially, the argument we heard was that technology and AI leadership are often siloed from strategy. They sit on operational committees. They're involved in implementation, but they're not part of the conversations about where the organization is headed. And if AI investments aren't mapped to enterprise strategic objectives, you end up with tools that solve individual problems, but don't compound into something bigger. The other Thing I want to cover is what we dubbed the Arms race problem. One of the anecdotes from the session was that a health system deployed an AI powered coding tool that captured$15 million in additional revenue in year one, What about in year two? 7 million. So why the drop? their payer adopted. The payer's own AI got better at denying what the system's AI was capturing. and that dynamic your AI against their AI with the gains shrinking. Every cycle is the logical endpoint of treating AI purely as a revenue capture tool. The counter argument which the session explored in depth is that AI investments aimed at value creation compound over time. Rather than erode the savings from ambient documentation don't disappear because the payer got smarter. the capacity free up by automating scheduling doesn't get clawed back. The case for shifting more of your AI investment toward value Creation is strong, but it requires longer time horizons and softer ROI. Which is a harder sell internally when your revenue cycle team can show immediate returns. I think the thing to think about here is that leadership often says that they wanna focus on value creation. But we should be thinking about what kinds of metrics and KPIs we're expecting our teams to uphold. if you're saying you want long-term value creation, But your teams are expected to show X, Y, Z revenue capture to justify their decisions. There's a disconnect and there's a choice to be made. And the truth may be that you wanna do both, but it's important for leaders to think about the messaging and where they're prioritizing. The Health Management Academy is actually running an in-depth AI use case benchmarking survey across our health system members who have at least one catalyst membership. stay tuned for the results of that survey, which will cover AI adoption maturity vendors, ROI trends. We'll cover those results in our state of healthcare AI 2026 Webinar on June 18th. And on a practical level, the summit included an AI hackathon where members use platforms like Claude and Chat T to build strategy tools in real life. Things like market prioritization indices, service line assessment frameworks, stakeholder simulators to prep for difficult executive conversations. Things that would normally take a team days or weeks to put together, built in 20 minutes with the right prompt. The range of fluency in the room was wide. Some leaders had already integrated these tools into their daily workflows and moved through the exercises with ease. Others were getting their first real exposure. But the folks that hadn't been experimenting with these tools walked away recognizing that these platforms are significantly more powerful and more capable than most people assume. And the key differentiator is learning how to prompt well. That's a learnable skill and for strategy teams that are stretched thin and constantly being asked to do more with less, it's one worth investing in. The stress test session at the summit ended with a provocation that I think applies well beyond that exercise. The facilitators asked the room of the scenarios you discussed today and the ones you heard about from other tables, which one are you least prepared for, and what is the first conversation you need to have when you get home? I'd extend that to everything we covered in this episode, whether it's a service line decision or an AI governance structure, or a scenario, you know, is plausible but haven't fully modeled. What are you least prepared for, and what is the first conversation you need to have and start there. If there's one thing I'm taking away from two days with this group, it's that the hardest part of strategy right now isn't seeing what's coming. most people in the room could describe the numerous threats. Clearly the hardest part is acting. The work is often messy. Political, doesn't necessarily have a clean finish line, but it's the work For more on the summit, check out our piece on it. In the strategist, You can also find the full stress test scenario planning guide for market and policy disruptions on our website if you'd like to run these exercises with your own team. That's it for this dispatch. Thanks for listening.