BUSI 494 Week 5 Group Assurance of Learning Exercise 2 Example

Close, Keep or Transform? A Group Analysis of a Community Hospital's Money-Losing Obstetrics Service

Case Situation

Our case hospital is a 150-bed community hospital whose obstetrics unit delivers about 400 babies a year. More than half of those births are covered by Medicaid, and the unit lost about $1.8 million last year once the costs of round-the-clock obstetric, anesthesia and nursing coverage were counted. Two of the four obstetricians plan to retire within three years, and the unit relies on agency nurses for many night shifts. The nearest hospital with a larger maternity service is 35 miles away on rural roads. The board has asked whether to close the unit. Community leaders, local physicians and the hospital's own nurses have already spoken against closure at public meetings, while the finance committee warns that continued losses threaten other services, including the hospital's emergency department.

Strategic Issue

Moseley (2018) asks strategists to define the problem before choosing among solutions, and our group framed it this way: the hospital must decide how to provide safe childbirth for its community at a cost it can sustain, given shrinking volume and an aging physician workforce. Framed only as a financial problem, the answer would be to close; framed only as a mission problem, the answer would be to keep the unit at any cost. Neither framing would survive scrutiny from the full board. In the Middleboro cases, service line choices force community hospital leaders to keep both perspectives in view together (Seidel & Lewis, 2017).

Alternatives

The first alternative is to close the unit, refer births to the regional hospital and keep prenatal care in local clinics. It is the simplest financially but shifts the burden of travel to families, some of whom lack reliable transportation. The second is to keep the unit with a new staffing model, adding family physicians and certified nurse midwives, sharing call with the regional hospital and joining its perinatal network for telehealth consultation and transfers. This option protects local access but depends on recruiting clinicians in a tight market and on the regional hospital's willingness to partner. The third is to convert the unit into an outpatient prenatal and postpartum center, with emergency obstetric capability in the emergency department and a formal transfer agreement. This option keeps much of the care local while ending the expensive commitment to round-the-clock delivery coverage, but it still requires families to travel for birth itself.

Evaluation

The research on closures is mixed, which our group took seriously. Dissanayake et al. (2026) studied rural North Carolina births from 2014 to 2019 using birth certificates linked to Medicaid claims and found that hospital and obstetric unit closures were followed by declines in postpartum acute care, meaning fewer emergency visits or admissions after birth, with the largest declines among Black birthing people. The authors interpreted the drop as a loss of access during a period when complications can be serious. Wehby (2025), studying Iowa births from 1994 to 2009 linked to children's later test scores, found little evidence that closures affected children's academic achievement or most infant and maternal outcomes, though one model showed small reductions in gestational age and birthweight. Together, the studies suggest that closure does not always produce measurable harm but can reduce access to care after birth, especially for groups already facing barriers. Because more than half of our case hospital's births are covered by Medicaid, the North Carolina findings are especially relevant. Financially, closure saves the most, but it also risks losing gynecologic surgery and pediatric visits that often follow a family's birth experience, which would reduce part of the savings over time.

Recommendation and Plan

Our group recommends the second alternative for a two-year period, with explicit thresholds that the board approves in advance and reviews in public. If the unit cannot recruit two family physicians or midwives, reduce its annual loss by at least half or maintain safety measures within two years, the hospital should move to the third alternative through a planned transition rather than an abrupt closure. A service line decision made with a timeline and thresholds can be defended to both the finance committee and the community. The psalmist calls children a heritage from the Lord (English Standard Version Bible, 2001/2016, Psalm 127:3), and a decision about where children are born deserves the patience of a staged plan. The two-year window also gives the community time to help, for example through local foundation support for recruitment or transportation.

Risks and Monitoring

The main risks are failed recruitment, continued losses and staff departures if the unit's future appears uncertain, which could make the unit less safe before any decision is made. The group would report recruitment progress, births, transfers, safety events and financial results to the board each quarter, and it would communicate openly with staff and the community about the thresholds so that any later transition is understood rather than sudden. If a transition does become necessary, the postpartum follow-up program launched in the first year would continue, preserving the access the research suggests is most at risk.

References

Dissanayake, M. V., Jackson, J. W., Urrutia, R. P., Martin, C. L., Funk, M. J., & Wood, M. E. (2026). Effects of hospital and obstetric unit closures on postpartum acute care across county racial composition in rural North Carolina. The Journal of Rural Health, 42(1), e70114. https://doi.org/10.1111/jrh.70114

English Standard Version Bible. (2016). Crossway. (Original work published 2001)

Moseley, G. B., III. (2018). Managing health care business strategy (2nd ed.). Jones & Bartlett Learning.

Seidel, L. F., & Lewis, J. B. (2017). The Middleboro casebook: Healthcare strategy and operations (2nd ed.). Health Administration Press.

Wehby, G. L. (2025). Obstetric unit closure effects on child academic achievement, infant health, and maternal care. Maternal and Child Health Journal, 29(6), 825-834. https://doi.org/10.1007/s10995-025-04112-8