The other day, the long-time, highly successful CEO of a major U.S. health system asked me a question as direct as it is important.
The question was simply this: What are the things that a system needs to do to be successful into the future?
Wanting to get our best thinking for an important question from a valued client, I passed the question along to some of Kaufman Hall’s smartest consultants, and I received many excellent and diverse reactions. Below is the list I culled from those responses.
Commit to a strategic, operating, and capital decision model that is aligned with a deliberately developed value proposition. Then create an operating model with carefully chosen services and a level of scale that assures economic sustainability for both the value proposition and the operating model. For some, perhaps many, organizations, the creation of this operating model will require a fundamental recalibration of the system.
Maximize opportunities in your existing markets while identifying new accretive markets and revenue streams. We see some systems get too focused on new growth while some are overly focused on their existing footprint. Doing both at the same time is very necessary, but is difficult, understandably, for many organizations, in part because the two strategies can require coexistence of two different skill sets, mindsets, and cultures.
Use analytics and operational science to understand your business and make critical organizational decisions. This likely will require a more robust digital footprint and using these tools to improve workflow and efficiency. It is critical not to add AI or advanced analytics to broken operating processes. For major corporations around the world facing complex strategic and operational challenges, sophisticated data science and analytics have become Management 101. Health systems, which face challenges just as complex and even more personal, need to quickly get up to speed on these essential analytical techniques.
Very important: Do everything you can to become an “access company” that enables consumers to easily enter your health system. This includes access in all forms: digital, clinical, physician access, ambulatory, and referrals. Health systems are aware of this imperative and have been working on it for years. However, innovative competitors have been making even greater financial, technological, and intellectual investments in improving access. For health systems, a redoubled access strategy should have the very highest priority.
It might be time to give up the ghost on protecting the health system’s bond rating and balance sheet at all costs. Some systems need to more aggressively invest in growth and relevance, and this strategy may lead to investment decisions that result in a rating downgrade. However, the long-term benefits of a more aggressive investment strategy may outweigh the downsides of a rating downgrade.
A sense of urgency is a critical health system competency going forward. Use a sound financial plan to place guardrails around the strategic decision-making process, but organizationally understand that “going faster” is likely to be a key competitive advantage.
Have a never-ending focus on cost and efficiency. This includes labor, supplies, purchased services, and an extra focus on all procedural areas such as OR and cath lab. In addition, place maximum emphasis on revenue cycle and clinical documentation efforts to improve margins. Finally, constant improvement of length of stay and patient throughput will have a powerful impact on both short-term and long-term profitability.
As I review this list, one common element stands out. That is the necessity of making and sticking with really hard decisions.
In some cases, the items on this list are issues health systems have been working on for years—cost containment comes to mind—but have not achieved the level of results needed, or have not been able to sustain those results. In part, that is because the decisions required are difficult organizationally, culturally, and even personally, despite the decisions being in the best interests of the organization’s ability to serve patients over the long term.
In other cases, the items on this list represent serious departures from long-held organizational tenets—for example, consciously embarking on a strategy that could lower an organization’s credit rating. For decades, maintaining the very highest credit rating possible has been an article of faith for health system executives and boards, and for good reason. Implementing a strategy that might result in a lower credit rating is so fundamentally counterintuitive for many executives and boards that it will be hard to even propose, much less commit to.
In other cases, the items on this list entail broad-based organizational changes that require significant investment, sophisticated planning, and complex implementation, along with a willingness to accept new health system priorities—the sort of changes that are far easier to conceptualize than to carry out.
This list of organizational strategies is very helpful in showing what a health system needs to do to be successful in the future. Perhaps more important, this shows that putting these strategies into action involves hard choices and long-term commitments that will require leadership initiative and courage at the very highest level.
Many thanks to Venny Arquilla, Dan Clarin, Lisa Goldstein, Dan Majka, Lance Robinson, Anu Singh, Amanda Steele, and Erik Swanson for their outstanding contributions to this piece.
