Hospitals and health systems need to pinpoint their operational focus and differentiating characteristics before they do anything else related to strategy, according to a new white paper from Booz & Company.
The paper, authored by Booz partners Minoo Javanmardian and Joyjit Saha Choudhury, outlines four strategic imperatives for providers and payers. The authors point out two broad themes shaping strategic planning: consumerization and the evolution of risk, which is migrating from payers more toward providers. The following tasks are imperative in light of those wider themes.
1. Determine an operational focus. Providers need to do this before anything else. They must identify a clear strategy for how they want to compete and win in the market, and this includes finding the best ways to differentiate themselves. For instance, some systems may decide to be the value providers, focusing on low-cost care at high volumes, while others might develop a center of excellence for a particular condition or disease state, providing specific types of care at high margins, according to the report.
2. Reduce the cost of care. The next step is figuring out how to reduce costs without affecting the quality of care. "But straightforward cuts will not be enough," according to the report. "This goal will require fundamental transformations on both the clinical and [administrative] sides of the business, with a baseline of 20 to 25 percent in reductions."
3. Develop consumer-centric care models. "As the clout of individual consumers grows, it is not enough to achieve better health outcomes at lower costs," according to the report. "Providers must also deliver a better patient experience."
4. Manage the transition. Most providers will still generate the bulk of their revenue through fee-for-service reimbursement for the next several years, even as new care models gain traction. This transition may prove painful. "Management needs to strike the right balance between both approaches and shift that balance over time, while ensuring that the organization remains financially viable," according to the report.
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