Introduction
As the healthcare industry continues to grapple with the unfamiliar currents resulting from the pandemic, an uncertain economic environment, and rapid advancements in technology and artificial intelligence - adaptation, evolution, and innovation are critical. While an impending financial crisis driven by these external factors might seem to warrant across-the-board layoffs - often enacted by consultants without experiential knowledge of the operations or customers, there is an alternative strategy.
Most studies suggest that while this type of cost-cutting does yield financial benefits, they are short-term and likely shortsighted. A more intelligent and energizing way for leaders to gain a competitive advantage is to explore new ways of growing organically. Organic growth encompasses both expansion (e.g., adding new service lines or enhancing capabilities within a service line) and extension (reaching back into referral streams or following patients home through recovery and well-being services) within the existing footprint of a health system. This growth can be achieved through a three-step process: improving efficiencies to increase supply, designing better patient pathways and experiences, and executing on new revenue opportunities.
Improving Efficiencies to Increase Supply
Efficiency is crucial for any healthcare organization seeking organic growth. Streamlining operations and eliminating waste saves money and frees up resources for new initiatives. For example, Virginia Mason Medical Center in Seattle implemented the Toyota Production System, which reduced defects by 50% and increased productivity by 93% (Harvard Business Review). In the face of labor shortages, health systems could enhance or find solutions that offload human tasking, such as investing in automation and artificial intelligence. This might also involve understanding processes accumulated over time and evaluating whether they align with current reality and achieve the intended outcome. For instance, many hospital-based medical groups set physician visits at a standard of 15 minutes. What if this could be adjusted to the actual needs of patients visiting their doctor throughout the health system?
Designing Better Patient Pathways and Experiences
Patient pathways represent the steps patients take through a health system to receive care. Improved patient pathways can enhance patient outcomes, satisfaction, and cost-efficiency. For example, Kaiser Permanente's integrated care model coordinates care across departments, ensuring patients receive the right care at the right time, reducing errors and duplication of services. Rothman Orthopedics evaluates any patient with an injury within 24 hours, and if they need surgery, it will occur within a week. These approaches help retain patients within the network, achieve better clinical outcomes, and enhance the overall patient experience. Health systems should evaluate the design of their pathways, identify gaps in existing services and patient experiences, and evolve them to keep more patients in their system and identify new or missing services in their network.
Executing on New Revenue Opportunities
Health systems must be willing to experiment with new technologies and approaches to meet patients' changing expectations. For example, the Mayo Clinic established a Center for Innovation, which focuses on developing novel care delivery methods that improve patient experiences and outcomes. Health systems can also collaborate with other organizations to expand their services and reach more patients. Partnerships with commercial companies can provide additional resources and expertise, fostering innovation to identify and implement expanded and extended services. What is required is a different level of organizational agility to listen to patients, caregivers, and those who live closest to the customers.
Cost vs. Revenue: Striking the Right Balance
In the pursuit of organic growth, it's crucial for health systems to strike the right balance between cost and revenue. Revenue must increase, while waste and waiting times are minimized. This approach to growth requires effort, but is more sustainable than formulaic cost-cutting and less risky than building or buying new facilities or businesses.
Conclusion
Organic growth, realized by refining efficiencies, crafting superior patient pathways, and seizing new revenue opportunities, can serve as a formidable set of actions for health systems aspiring to broaden their services and address patient needs. By concentrating on these three pivotal concepts, health systems can secure their position for success in the new normal and attain a competitive edge as others relying on more traditional approaches falter.
Ryan Paradis has a broad educational background with a degree in Accounting/Finance, Master's in Health Administration. Previously, Ryan was a Practice Administrator with AdventHealth Medical Group – the fourth largest nonprofit health system in the United States. Ryan is a Senior Advisor working on strategy and leads our Curated Solutions Network at Csuite Growth Advisors.
Sources:
- "Strategies for Sustainable Growth in Health Care," Harvard Business Review, https://hbr.org/2013/10/strategies-for-sustainable-growth-in-health-care
- "Improving Health Care Efficiency: Opportunities and Challenges," National Academy of Medicine https://www.nationalacademies.org/our-work/improving-health-care-efficiency-opportunities-and-challenges
- "Patient Pathways in Healthcare: A Framework for Evaluating and Improving," International Journal of Health Policy and Management, https://www.ncbi.nlm.nih.gov/p
- Cascio, W. F. (1993). Downsizing: What do we know? What have we learned? Academy of Management Perspectives, 7(1), 95-104. This study reviews the existing literature on downsizing and concludes that while there may be short-term cost savings, downsizing can lead to long-term negative consequences for both employees and organizations.
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