Issue link: https://beckershealthcare.uberflip.com/i/370870
73 Executive Briefing: Health System Strategy Health systems thus are wise to focus on the other way to grow market relevance: improve the value proposition. 2. Increase value The healthcare value proposition has been presented as some form of cost, quality and service. In practice, it is often not that simple. In fact, our research has shown organizations face a choice in how they improve their value equation; suc- cess usually requires the organization to be expert in one of the three areas. Low-cost market leader To remain relevant, the health system can run a more efficient model and be the overall low-cost leader. This approach appears to be the required strategy for success under an accountable care organization or popula- tion health reimbursement model. Through bringing together all the components of care, systems can rationalize out the high-cost el- ements. Of course most of these high-cost elements are sitting in the hospitals of the health system that is trying to profit from this strategy! Moreover, once the costs are out, the organization must go further next year as others will continue to try and compete for the volume at lower and lower prices until everyone has reached the marginal variable cost for each unit. In a high-fixed cost indus- try such as hospital-based health systems, attempting a low-cost market strategy with- out a fundamental, sustainable cost com- petitive advantage is a race to the bottom. High-quality market leader The health system can run a higher-quality model. This approach depends on the abil- ity to improve quality, accurately measure the improvement and communicate that improvement to the market in a convinc- ing manner. For the sickest of the sick, this is often easier than for the majority of the patients in the health system's hospitals. Most processes, procedures and interven- tions simply do not have dramatically differ- ent enough outcomes for the public to un- derstand the difference. Moreover, quality outcome is often judged differently by the clinicians and the patient. Consider two patients who have had a major complex surgery where both survive without major infection, but one was in the hospital for fourteen days and lost twelve percent of his body weight while the other was in the hos- pital for five days and only lost five percent of his body weight and was able to resume normal activity without pain within a month. Best-service market leader As the two examples above illustrate, cost and quality are difficult roads to pursue without fully embracing the strategy in a no-return manner. Service is much more in- cremental and thus often the focus of many health systems. Many health systems have quickly garnered share through providing better service to physicians or more conve- nient options for patients. The service tactics of the past, however, need to be updated for today's well-connected patients. For in- stance, the commercial populations upon which every health system heavily depends for its financial viability now have immediate access — through an iPhone app — to wait times, crowdsourced price lists or clinic rat- ings. As a result, health systems are rapidly losing the opacity of healthcare operations. Moreover, tech firms like Zipnosis and al- ternative delivery models like MD Live are teaming with communications and insur- ance giants to change how we view access to basic primary care, while retail giants Wal- greens and CVS contemplate using buying habits to predict a person's lifestyle choices and future disease load — an important con- sideration if they want to move into popula- tion health. The patient demands for conve- nience continue to increase, and when told