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CEO Corner: Achieving the ROI on Strategy


Over the past four years, health systems have resourcefully responded to COVID-19 and the subsequent changes in cost structure due to higher labor and supply chain costs.  Virtually all health systems have placed an intense focus on cost management and improved operational efficiency.  During this time, we’ve seen a pullback from new initiatives due to limited bandwidth and a reduction in all-but-essential spending.  We believe it’s time to catch-up on strategy.  Many organizations tell us they have retrenched from risk to focus on “commercially-insured heads in beds,” for that’s what drives margin. 

 

In response to all those efforts, operating margins are recovering, and we ask, is there a backlog of strategic thinking?  Or has it shifted?   Without doubt, operational excellence is essential, but operational improvement alone in a rapidly changing healthcare ecosystem is risky.

 

We encourage healthcare leaders to ensure their strategic planning efforts are linked to ROI by prioritizing as follows:

 

1.      Payer contracting strategy and renegotiation of rates:  Payers (and employers) need to respond with appropriate payment for the increased cost of delivering care.  The impact of being underpaid is compounded year over year – and not sustainable.

2.      Physician strategy and alignment:  Payers, retail, and private equity are acquiring physicians with agile recruitment teams.  PCPs are being acquired to gain attributed lives; specialists to gain ancillary revenue.  Independent physicians have never been so vulnerable.  New alignment and operating models that enhance stickiness and satisfaction with the clinical practice of medicine are essential to ensure continued access for patients.

3.      Address the need to fundamentally transform the health system:  The delivery of care is rapidly shifting to non-hospital settings.  Yes, we’ll always need hospitals – but health systems must respond effectively to their unique market dynamics that include new competitors, many of whom are no longer need to be in your same geography.

4.      Address scale:  The number of subscale provider initiatives, for example, provider-sponsored health plans, call for new solutions.  Whether M&A, JVs, or new models of multi-institutional collaboration, you need to be thinking about benefiting from scale as appropriate. 

 

Join us in embracing the ROI on strategy!

 

Best regards,





Andy Ziskind, M.D.

Managing Director and CEO

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