Part One of a Four-Part Series by Michael Nugent, Rulon Stacey, Timothy Kan, and Sushil Bose
Leading health systems are undertaking extraordinary work to calibrate their margin, mission, market position, and operating model as the industry faces mounting margin pressure, which is now the “new normal.”
Despite traditional margin improvement initiatives in such areas as supply chain, throughput, clinical documentation improvement, and revenue cycle, margins continue to decline. FFS reimbursement cuts, both past and future, promise to cost the industry billions as entitlement reforms are addressed. Recent downturns in hospital inpatient and ambulatory volumes due to affordability problems have exacerbated provider margin gaps.
Some health systems have attempted to diversify their margins through provider-sponsored health plans, but several have failed because of insufficient enrollment, planning, revenue, undersegmentation, significant losses, and/or competitive responses.
Fortunately, for many large systems, the “boat vs. dock” or “volume vs. value” decision does not have to be one or the other, but rather how much change and how fast. The ultimate call to action is for organizations to calibrate future margins, missions, and market positioning with their operating model and underlying technology platforms.