At the annual Becker’s Hospital Review CEO Strategy Roundtable Nov. 14 in Chicago, Michael Sachs, chairman of Sg2, a healthcare analytics firm, discussed how healthcare is changing and how hospital executives can develop a strategic framework for success in light of those changes.
One of the main changes Mr. Sachs emphasized was the how healthcare is becoming a retail industry. “The world we’re moving into now is a retail marketplace, driven by changes on the insurance side…and consumer command and connectivity.” He noted many CEOs are comfortable in a business-to-business world, but those leaders need to change their mindset and position their organizations’ brand “just as a consumer brand does.”
Another large industry change that will drive strategy change is the move toward population health management. Strategically, hospital executives must decide if their organization will take on risk and be in the population health business, which Mr. Sachs expressed caution over: “It may sound sexy and be the right thing to do, but from a business standpoint, the exposure might not be worth it,” he explained.
In light of these, and other, changes, “the whole notion of how you think about your strategy takes on a sense of urgency,” Mr. Sachs said. Overall, hospitals executives need to think about what is going to define their hospital’s services. For instance, organizations could be a “transactionalist” and own encounters, or be an “orchestrator” and own diseases as a system of care, or be a “manager” by owning the population and being an integrated health enterprise, he explained. Any of these strategies could work, but executives need to pick a path.
Indispensability asses
sment
In addition to choosing what will define services at their hospital, executives also need to consider partnerships, affiliations and/or acquisitions. “As an industry slows, industry consolidation occurs,” Mr. Sachs said, and that is precisely what is happening in healthcare today. So, hospitals and health systems need to determine if they can make it on their own or if they will need a partner.
To help with the decision process, Mr. Sachs encouraged executives to perform an indispensability assessment by looking at their market position and financial performance. For example, if an organization has strong market position and financial performance, they can choose any potential partner at will — they are indispensable, in the “dealer’s choice” category.
On the other end of the spectrum, an organization with weak market position and financial performance would fall in what Mr. Sachs called the “fire sale” category — they most likely need to find a willing partner, and fast.
The other two categories were “choose wisely” — for organizations with weak financial performance but good market position — and “time bomb” — organizations with strong financial performance but a low position in the market.
Performing an indispensability assessment can help hospitals and health systems determine how well-positioned they are for their desired strategy, and how feasible it is to stay independent in a quickly consolidating market.
