Health system margins are the "lifeblood of a healthy, patient-centered, innovative health care system and community," according to a report from consulting firm Deloitte.
"Claims that profits are not important in fact undermine the ability to fund the mission, serve the community, and deliver better, equitable care," Deloitte said in the report.
Deloitte pointed to routine capital replacement, community benefit and complex care as important factors for why margins are so important. The firm added that the healthcare industry "is undergoing a significant and continuous innovation and reinvention, requiring health systems to make additional strategic investments to address evolving consumer demand for improved access, equitable outcomes/quality, convenience, and digital engagement."
The firm said that reducing costs has long been the go-to approach for improving margin, along with focusing on revenue cycle, capital deployment and strategic growth. These efforts and results, however, "are often fragmented or not properly aligned and harmonized for value."
Instead, systems should consider a holistic approach that integrates margin drivers to create a balanced transformation portfolio, according to the report. Timing and sequencing are important within each driver and "a full understanding of the dollar impact and priority of each is necessary for margin improvement to be successful."
Read the full report here.