The symptoms are clear. Hospital beds are full, yet operating margins are down. Bottom lines are being eroded by a myriad of challenges, including a rise in acuity and lack of step-down, post-acute care options that has resulted in a drop in outpatient and surgical revenue and increased average lengths of stay.
According to a 2022 analysis by Kaufmann Hall, the median year-to-date operating margin index was -0.98 percent, marking the seventh straight month of negative margins. And the median percent change in operating margin in July was -63.9 percent as compared to June 2022 and -73.6 percent from July 2021.
As hospitals’ bottom lines suffer, ambulatory surgery centers (ASCs) are on the rise. Elective procedures are shifting out of hospitals and into ASCs, where they can be done at lower costs. New entrants are disrupting the market with consumer-friendly offerings that cherry-pick the most profitable patients and services. Health systems are seldom the owners of ASCs, with a majority being physician-owned or under a hybrid ownership model. And competition is tough as physician groups and national players enter the market and focus on excelling in this single, targeted aspect of care.
Health systems have been slow in responding to the threat. Given the economics of their current situation, many are looking for ways to cut back instead of investing, prioritizing short-term solutions over long-term sustainability. But cutting back won’t address the challenge or reverse the trend. In order to exist profitably in the years to come, health systems must develop an efficient and robust ambulatory network strategy.
So how can your health system turn this existential challenge into an opportunity for growth, profitability and sustainability?
While an impending recession may feel like the wrong time to think about growth, a strong ambulatory network strategy is essential to surviving the headwinds of healthcare costs, inflation, increased inpatient acuity, workforce challenges and nimble disrupters. Health systems that fail to act will be left with the sickest patients, little negotiating leverage, and an unsustainable financial picture.
- So how can your health system turn this existential challenge into an opportunity for growth, profitability and sustainability?
- What’s your vision for the ambulatory network of the future?
- How can you leverage it to integrate care across the continuum in a way that drives better outcomes, lower cost and more efficient access?
Building a modern ambulatory network and delivery model that integrates physical and digital care options will position your network to create exceptional experiences for your patients and care teams.
Reframe, Differentiate, and Take Action Now
We see ambulatory care as a critical piece of a fully integrated care model that provides the seamless, customer-centric, omnichannel access needed to set your organization up for success. These factors are particularly important in a value-based world, where value is defined and measured by outcomes, cost and experience. We’re helping health systems develop business cases and go-to-market strategies for ambulatory care—with a bias for action that reflects its importance.
Our approach brings expertise and empathy to the challenges leaders face, both internally and externally, when seeking to drive change. Since creating sustainable change requires personal investment across diverse stakeholders, we work with you to co-develop a strategic roadmap that turns theory into practice and builds buy-in across the organization.
Here Are Three Key Things You Can Act on Now to Build a Winning Ambulatory Network Strategy And Successfully Compete With The Disruptive Forces in Your Market
1- Develop a differentiated go-to-market strategy
Every market is different, and so are the players in it. The disruptors’ advantage is that they are efficient, nimble and targeted. As a health system, your advantages will be different — make them count. Maybe you have strong community relationships or a prestigious academic reputation. In order to win in your market, focus on strengths that create unique value for healthcare consumers and potential partners.
To identify your most meaningful competitive advantages, assess your market and ambulatory footprint using these strategic questions to the right.
Once you’ve identified your market position, you’ll have the insight needed to make choices about how you plan to win & what you will and won’t do. This can help you build internal alignment around what success will look like over the next several years and develop a measurable plan to achieve it.
When developing a differentiated go-to-market strategy, ask yourself:
- What is our vision for the ambulatory network of the future?
- How do we manage channels (physical & digital) to create access to care?
- Who are our customers and what do they want/need?
- Where do we have opportunities to grow and how do we optimize access and integrate care across the continuum?
- How should we approach the market and payers to drive value and manage risk?
- How do we structure our clinical and support teams to optimize access to care and resourcing while preventing clinician burnout?
- What part of the network do we need to own?
- Where can we partner for success?
2- Build digital competency
Disruptors are digitally adept, making digitally enabled business models table stakes for ambulatory providers. Health systems need to find future efficiencies by investing in digital infrastructure now. Look for ways to deliver customer-friendly convenience and processes that integrate digital health—including virtual visits, wearables, and seamless billing. Improving access and reducing friction will improve the patient experience and, subsequently, outcomes. Patients are not the only benefactors of well-designed digital tools. Technology that enables and extends providers and staff can help reduce employee burnout, too.
The Shifting Landscape
The care continuum is a shifting landscape, with disruptors affecting the profitability, strategy and health systems’ positioning of ambulatory care
3-Build partnerships that increase speed and expertise
The version of your organization that can win in your market may require new capabilities and expertise. Given the broad scope of challenges that health systems already face, and the speed at which disruptors move, new partnerships are likely to be a critical part of your ambulatory network strategy. Are there post-acute or behavioral health partners that can align with your ambulatory network to successfully deliver high need services? Can you align with a digital platform or pharmacy partner for certain low acuity services as part of your network strategy?
You’ll find potential strategic partners across a wide range of the healthcare-related spectrum. Which ones will be the best fit to further differentiate your ambulatory offering and add horsepower to your go-to-market strategy?
Independent Physician Groups- Consider joint ventures to build ASCs, senior wellness centers or mobile care units. These groups may also be interested in partnering with you to take on risk capitation or episodes of care. If you don’t partner with these groups, be aware that national specialty groups, payers and private equity will try to move in.
Employers- Determine a direct to employer strategy where key services can be built to drive value in a benefit that is contracted outside of traditional payers.
Community-based Organizations- Identify key entities where patients can access preventive services or virtual visits. YMCAs, social services agencies, schools, fitness/community centers are all potential access points for patients.
Payers- Move beyond the typical transactional relationship to partnerships that can move market share, improve outcomes, and enhance reimbursement. Find payers that are willing to invest in pilot programs with you, and willing to share meaningful data that supports better care.
Home Health Companies- Look for new entrants with private-equity backing that may have the ability to invest in improved care models and technology support.
Digital Health Companies- Consider a partner with robust digital health technology. During the pandemic, many health systems quickly stood up virtual capabilities but lacked the infrastructure to seamlessly embed virtual services within their care model. It pays to partner with a company that already has these capabilities, as the new ambulatory footprint has a strong digital component.
Retail Companies- Health systems typically have deeply embedded relationships with local providers, and that should continue to be a key priority. However, if patients are receiving low-acuity care at retail locations (such as pharmacies or retail start-ups), health systems may be able to capture higher-value care downstream through partnerships with retailers.
The market for ambulatory care is growing, and the practice is key to creating a continuum of care that builds patient loyalty over a lifetime.
Growing an Ambulatory Footprint
We recently helped a health system expand their ambulatory footprint across both primary and secondary specialties. Their goal: to better serve their community, expand their patient base, and meet value-based payment pressures.
Leadership wanted to leverage strong clinical specialty services and programs that had not originally been built to support such a broad-scale network. The challenge? To evolve their model to successfully support growth in a competitive marketplace.
Based on input from diverse stakeholders, we developed a three-year strategic plan that defined the expansion of their ambulatory footprint, with detailed growth plans by submarket. We created a framework for clinical programs within the ambulatory network, defining levels of care, ambulatory network guidelines, and the capabilities needed to add new services. We accelerated progress by developing a program structure, a practical roadmap and, most importantly, gaining organizational buy-in to invest in and implement the plan.
Build Your Sustainable Network Now
For hospitals and health systems, ambulatory care can play a strategic role in an integrated, value-based model. The market for ambulatory care is growing, and the practice is key to creating a continuum of care that builds patient loyalty over a lifetime. Despite the short-term financial challenges hospitals and health systems face, it’s critical to think forward and make strategic investments now to strengthen long-term performance.
Delivering on a new vision for modern ambulatory care across a clinically integrated network is essential for success today and into the future. Health networks and delivery systems that want to grow need to attract members to their network through a robust ambulatory footprint with a variety of access points, from digital to same day, convenient care to comprehensive primary and secondary specialty care. And systems with strong primary care networks and expansive ambulatory footprints will be attractive to employers and payers and able to integrate care with high-quality acute services for a full network experience. Invest in your network now to drive long term performance and sustainability.
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