Becker's Hospital Review

Executive Briefing: Hospital & Health System Strategy 48 20 percent compared to traditional plans.18 Employers are taking a larger role in providing insurance, with large-size private-sector employers driving a trend toward more "selfinsured" health plans.19 In 2011, 58.5 percent of workers with health coverage were in selfinsured plans, up from 40.9 percent in 1998.20 Employers are also providing new incentives to their employees to use "preferred providers," narrowing provider networks. Eleven percent of large employers use direct contracting for surgical centers, hospitals and patient centered medical homes with an additional 20 percent contemplating such provider agreements.21 Large retailers and equity investors are also creating new substitute delivery models. Consider that Walgreens has some 2 million retail clinic visits across the country and still has more than 7,500 additional stores in place today that could serve as future clinic sites. In other cases, private equity investors are able to move into a market and dramatically outspend traditional non-profit healthcare systems. Examples include Blackstone Group investing in Vanguard Health Systems, Oak Hill Capital joining forces with Ascension Health, and Cerberus Capital Management financing Steward Health Care System. Even though finding partners is a natural response for hospitals and health systems in an uncertain world, it will be years before many of these systems recognize any significant benefits from coming together. To remain relevant, health systems must rapidly reinvent themselves. This reinvention is particularly the case where consumer demands have shifted, technology has created viable substitutes and reimbursement changes the way value is monetized. Some of the strategies will include: mind for organizations. As Charles Darwin said, "It is not the strongest species that survive, nor the most intelligent, but the ones most responsive to change." Those who understand and embrace this concept will be the ones who excel, because they will focus their energy on creating new capabilities and options for the future. • Trusted relationships with populations for the coordination of health and care Examples of companies that lacked the ability to change can be found across all industries and often fall into the three categories summarized by Vijay Govindarajan, a professor at Dartmouth's Tuck School of Business • Building primary care and infrastructure to manage the systems of health rather than only the systems of care Are you a strategy consultant who wants to join the team transforming the healthcare delivery industry? • Customer service strategies such as move ment from scheduled (traditional primary care clinic) to on-demand (urgent care, retail clinic) health solutions • hysical: Investment in old systems and P equipment leave industries cash strapped and unable to move on to newer, more relevant ideas. • Delivery channel management and the movement from inpatient to outpatient B orders, for example, was the pioneer of big box retailers and began to falter in the mid 1990s at the same time technology took off. During this time, Borders failed to recognize this monumental shift, investing money instead in expansion and renovation of physical space, while outsourcing their online platform to Amazon in 2001. By 2008, Borders had restructured twice and was $350 million in debt. As digital technology began to takeover, they were in a poor financial position to effectively move as a result of long-term leases and large amounts of debt.23 • Leverage of technology to improve access, convenience and costs such as use of online or smartphone apps to deliver primary care diagnosis and treatment • Partnerships with non-traditional provid ers JOIN THE TEAM: HealthSystemAdvisors.com Living in the changing world requires health systems to better articulate their relevance (or differentiation) to their customers, whether patients, providers or payors. Relevance tends to focus on influence and knowledge of the customer and ensuring they receive services or care that satisfies their needs better than current and emerging substitutes. Capabilities strategies Definition: strategies that create organizational potential and ability HEALTH SYSTEM ADVISORS Capability strategies focus on developing the abilities and talent needed to coordinate and manage both systems of care and systems of health. In the changing environment of healthcare today, adaptability and innovation need to be top of • sychological: An intense focus on P what was successful the past without regard for innovations which may be replacing them. K odak exemplifies a business that continued to focus on strategies, which initially made it successful. Once the leader in the film industry, it did try to adapt to digital technology but continued to hold onto the old business model of consumers printing photos, not realizing that digital was replacing printed photos.24

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