It has been an incredibly busy and exciting year for our Strategy & Business Transformation practice at Kaufman Hall. In 2024, we observed hospitals and health systems take steps to reinvigorate their strategic efforts amid a stabilizing, but still challenging, outlook.
We are grateful to our clients for their partnership and for placing their trust in us as advisors. The healthcare leaders we work with encountered a wide range of intriguing strategy and business challenges that we helped them think through, including:
- A return in earnest to long term strategy development after a pandemic-era pullback. In the 10-15 years prior to COVID-19, many organizations would update their strategic plans every five years as a routine, often procedural, exercise without much differentiation in approach across the industry. Given the dramatically altered post-pandemic operating environment, organizations are thinking through their unique value proposition and developing a vision for their strategic direction over the next decade—and then crafting focused, tactical three-year plans to help realize their vision.
- Determining the role of “smart scale” for an organization – and thinking about potential partnership growth pathways for advancement. In recent months, we have worked with several large, historically successful, market-leading organizations intent on developing future-focused growth strategies. These efforts have been launched by organizations aiming to stay a step ahead of market developments, while also responding to challenges that include diminished opportunities for local market share; struggles with how to best evolve revenue mix to sustain mission; and whether and how additional organizational scale could accelerate sustainability and success. The leaders of these organizations are asking tough questions to chart their future course, including:
- Must we enter new markets to sustain growth of the system?
- What is the best fit way to diversify our revenue base?
- We know that scale can enable performance and advance capabilities, but we also know that scale can add risk to overall operations, so how do we scale the organization in a smart and thoughtful way?
- Making choices about what an organization will be known for in terms of its service lines – and determining how this impacts service line planning for facilities, physician alignment and other key investments. In practical terms, organizations must be able to identify the service lines that are most important to their future success and ensure they can grow those services in alignment with the organization’s overall value proposition. In some cases, organizations must figure out how to provide access to care for service lines that they may not be best positioned to deliver directly.
- Identifying revenue diversification and growth opportunities, including ambulatory, business services and value-based care, that support the organization’s overall vision and value proposition.
Together, these strategic needs present a challenging existential question for both health system leaders and Board members: how do we fulfill our mission, serve the needs of our communities, ensure the provision of safe and reliable care, and be competitive, all while the landscape is rapidly changing?
Looking forward to the New Year…
As we reflect on our work with our clients in 2024 and look ahead to 2025, we anticipate a growing focus on being highly organized around strategy implementation. To that end, we expect organizations will consider strategic efforts in areas including:
- Precision planning for service lines and facilities, including the ambulatory network
- Determining how to leverage the physician enterprise to support the overall value proposition
- A renewed focus on payer strategy, including navigating continued changes and tensions in the Medicare Advantage space. Organizations will also have to monitor potential changes by the incoming administration to the physician compensation pay schedule—at a moment when many organizations have only recently realigned their economic structures post-pandemic.
- Making good on the value proposition of partnerships and greater scale (including integration planning and realizing economies of scale)
- Operating model and organizational structure redesign. Many organizations that have grown substantially over the last decade have not changed their leadership, governance or service line structures, and may need to re-scale and rethink those structures accordingly to successfully implement strategies.
- And of course, a continued energy around enterprise strategy
Where do you think hospitals and health systems will focus their strategic efforts in 2025?
