Becker's Hospital Review

Executive Briefing: Population Health time by insurers and physician organizations. In fact, the same large capital asset base that has made health systems strong can be turned to a liability as systems need volume at any cost above variable cost to maintain their returns. The solution is to shift the health system's strategy from a capital asset strategy to a capability strategy. Successful systems are doing this by focusing on building both the systems of care and manage systems of health The need to manage systems of care and systems of health As more attention and payment is focused on keeping populations healthy, health systems must develop the capabilities to both build systems of care and manage systems of health. • ystems of care focus on patients S seeking medical attention, whether prevention, diagnostic or treatment services • ystems of health focus on populaS tions seeking ways to prevent, manage and improve health While building systems of care continues to require capital assets, managing systems of health requires very little capital assets and instead requires a broad set of new capabilities. Moreover, while the revenue model for systems of care can be linked to assets, the revenue models for systems of health must be linked to health, and thus, the ability to maintain health. As such, health systems must begin to shift their value equation from simply providing the assets necessary for systems of care to building the capabilities to coordinate systems of care and manage systems of health. Capability strategies Definition: Strategies that create organizational potentiality and ability Capability strategies focus on developing the abilities and talent needed to coordinate systems of care and manage systems of health. In the changing environment of healthcare today, adaptability and innovation need to be top of mind for organizations. As Darwin said, "It is not the strongest species that survive, nor the most intelligent, but the ones most responsive to change." The systems that understand and embrace this concept will be the ones that excel because they focus their energy on creating new capabilities and options. 23 The rapid commoditization of traditional hospital-based health system assets is causing a shift away from competing on capital to competing on capability that will accelerate over the coming decade. Capability-based strategies stem from the premise that core competencies derived from distinctive capabilities provide strategic advantage, profitability and sustainability in the market. In the seminal business paper on the topic, Stalk, Evans and Schulman identified four principles that serve as guidelines to achieving capability-based competition:4 1. orporate strategy does not depend C on products or markets but on business processes in duplicating services for populations, but the value is organizing, managing and integrating these services into a coordinated offering that individual organizations cannot do on their own. It matters less who owns the services and more that the delivery model across the care continuum works for individuals and results in better health. Partners in systems of health will range from retail partners (e.g., CVS, Walgreens) to technology vendors (e.g., Siemens, McKesson) to employers and payers. 2. ey strategic processes are needed K to consistently provide superior value to the customer 3. nvestment is made in linking across I functions and departments 4. ecause capabilities cross funcB tions, the strategy must be top-down Applying a capability strategy framework to health systems causes a radical shift in strategy for most health system leaders. It starts with the envisioning the role of the health system in the future environment and the shift away from sick care towards population health. In this journey there are four roles health systems must play: partner (system of health), innovator (system of health), expert (system of health) and improver (system of care). We provide innovative longterm strategic advice to hospital and health system leaders. We are strategy consultants. HealthSystemAdvisors.com Partner: One that shares Developing the partnership capability is critical for success in managing systems of health. To affect populations' health, a mindset of partnership is the most important capability a health system can have. As most of the population health depends on the individual's own actions, health systems must create partnerships across a wide range of organizations to create the environment for health. Moreover, health systems who take on the partner role know the value is not HEALTH SYSTEM ADVISORS

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