Part 3: Despite Cost Challenges, Health Systems Keep Focus on Growth

Health systems are currently navigating one of the toughest financial performance periods on record, and as we discussed in Part 1, negative operating margins have become the norm thanks to runaway inflation.

Now Leading Health Systems (LHS) are pursuing a combination of cost cutting and revenue growth strategies to ensure longevity. In Part 2, we highlighted some key cost containment strategies, and today we conclude our finance series with a closer look at how LHS are diversifying their revenue streams to support long-term growth in an increasingly competitive market.?

Focus on the Long-Term Growth Objective??

“The risk is we focus too much on cost management and not enough on growth during these challenging times.” -CSO, Leading Health System?

Despite the financial struggles health systems face, Chief Strategy Officers are challenging their leadership not to pull back on growth and revenue diversification, but to take this moment as an opportunity to push new, bold strategies that differentiate them as contenders against market disruptors.?

Key Revenue Diversification Strategies

Capturing the premium dollar: Health systems see their transition to value-based care as an opportunity to generate additional revenue. While the investments required and challenges to success are considerable, they’re expanding risk via partnerships with payors, increasing employer contracting, and growing their own health plan –often through Medicare Advantage.?

Mergers and Acquisitions: Based on lessons learned from the past, LHS are taking a more cautious strategic approach to M&A that focuses on optimal organizational and cultural alignment. There’s also a trend of LHS pursuing deals in non-contiguous markets to expand geographic footprint and reduce regulatory scrutiny.?

Venture Capital: In recent years, LHS have deployed venture capital towards revenue streams that support their mission and compliment the growth strategy of their traditional business (e.g., commercialized staffing agencies, and specialty pharmacies). Some health systems are taking a broad approach to their investment portfolio to minimize investment risk while others have been more targeted on investments that support value-based care or consumer markets.??

For more insight into the LHS financial landscape, including a deeper dive into cost management and growth strategies, click here.