The C-Suite’s Guide to Reorganizing the Health Care Value Chain

Forced innovation reshapes value chain

The health industry’s response to Coronavirus 2019 (COVID-19) and related economics have demonstrated both innovation and collapse across the value chain. The crisis stimulated new ways of working and collaborating as everyone scrambled to operate in a drastically altered environment. It also exposed supply chain, staffing and fiscal vulnerabilities, with an estimated 800,000 health care workers still unemployed in June 2020.1

Through extraordinary effort from organizations across the country, we have experienced new, more innovative ways to work together. We are learning what adjustments are needed to weather ongoing disruption and create a more resilient, pandemic-proof landscape. Most significantly, these adjustments can help us permanently lower costs and improve performance.

Navigating economic uncertainty

Five key learnings have emerged from organizations that have navigated the crisis well:

  1. A predictive outlook is required to manage the speed of change and mitigate risk.
  2. Only an agile business model can respond in time and at the right cost.
  3. Digital innovation and connected ecosystems are mandates for accurate, flexible action.
  4. All redesign should prioritize new ways of meeting consumer needs.
  5. Partnerships are needed to scale resilience and relevance.

The challenge now is navigating the longer-term economic backdrop. State and federal budgets are stressed, and the ongoing role of government is uncertain. Employers are pulling back on spending and the roles of commercial payers are shrinking. Providers face revenue shortfalls that challenge their solvency, with up to 25% of hospitals at risk of financial failure.2 And a growing number of consumers are now forced to withdraw from both their coverage and their care.

The financial limitations are clear, but the solutions are still emerging. Value-based arrangements have proven most resilient to the crisis and have a growing opportunity to more radically bend the cost curve. Merger and acquisition (M&A) activity is on the rise. But bigger may not prove to be more sustainable, and being purchased may not ensure safe harbor. The market is demanding price-based costing, yet we still seek equilibrium in defining cost and price for virtual health alternatives. What is certain is that all players need to take a hard, honest assessment of their capabilities to define the true value they provide to their consumers. Then they can discover the best ways to build connected services around the consumer, wherever they are willing and able to receive it.

Innovating cost-effective options

Implementing cost-effective options starts with efficient staffing and supply chain costs. Right-sizing is hard enough, made all the more challenging when demand fluctuates or supply chains fail. Nimble organizations can anticipate any imbalance. Predictive tools provide leaders the time and insights they need to redeploy staff and redirect procurement. Artificial intelligence and machine learning extend the capacity of clinicians. And managed services allow for expansion, contraction and other alternative action.

Virtual health adoption has gained extraordinary interest from investors, with telehealth positioned to grow into a $250 billion revenue opportunity.3 More than a substitute for in-person visits, virtual health is able to meet consumers where they are — easily, conveniently, effectively and at a lower overall cost while still providing high quality care. As health care technologies expand, leaders need to understand how to choose, adopt, price and scale these innovations across their populations. These capabilities will alter care strategies, redefine pricing and help define market leaders.

Most importantly, costs need to be removed. Organizations that come out on top will prove proficient in radically reducing their cost structure while removing barriers to care. This will both appeal to consumers and be more attractive to potential partners.

Innovation is a leader’s response to change. Externally, health care leaders can track disease impact and strive toward a pandemic-proof ecosystem. But they can also take a hard look at the economic hardship in their community and the many barriers to health care that consumers are facing. Business opportunities and new strategic partnerships may lie within these challenges.

Building interconnected, strategic relationships

In a high-performing value chain, each member organization has intrinsic value. And all are able to navigate interdependencies and effectively exchange information, services, supplies and dollars to benefit the patient or member. To manage the pressure of today’s disease prevalence and economic downturn, leaders will strive to remove every roadblock to a consumer’s health and well-being. But they must be cost-effective in the process. To secure a sustainable role in the new value chain, these leaders need to honestly assess their organization’s unique qualities and identify the partnerships that can best strengthen their relationship with the consumer.

Each member of the C-Suite has a unique role in value chain reorganization. Explore, and for our insight series Navigating Forward and a deeper look at the unique challenges facing health care leaders.

1 Bhagwan S, Zigrang TA, Bailey-Wheaton, JL. COVID-19 financial resources for physicians. Elsevier Public Health Emergency Collection page. US National Library of Medicine, National Institutes of Health website. Accessed August 21, 2020.

2 Toney ME, Becker RB. Rural And Community Hospitals – Disappearing Before Our Eyes. Rural Health Voices Blog page. National Rural Health Association website. Accessed August 21, 2020.

3 American Medical Association (AMA). After COVID-19, $250 billion in care could shift to telehealth. Digital page. AMA website.,who%20used%20telehealth%20in%202019. Accessed August 21, 2020.

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