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In case studies of seven health care providers of various sizes and services, KaufmanHall Financial Strategies for Healthcare found five common themes among strategies that executives use to achieve growth, said Mark Grube, partner of the Skokie, Illinois–based consulting firm.
“The first is that the organizations have a clear and distinct sense of their strategy,” Grube told the student-led Healthcare Group at Harper Center on April 11. “They know what they’re going to do and, probably as importantly, what they’re not going to do – which markets they’re not going to focus on, which types of businesses they’re not going to drive resources into.”
The second theme is a structured and rigorous growth planning and implementation process, Grube said. “Just as GE and Procter & Gamble do, these organizations take strategy very seriously,” he said. “They spend a lot of time developing their strategic and financial plans going forward. It’s very quantitative, very data driven, and a rigorous process that is updated on a regular basis, usually annually.”
Thirdly, these health care organizations methodically and purposefully leverage size to achieve benefits of scale, Grube said. Larger organizations spend billions of dollars on IT across their systems in an effort to better manage care and the cost of care and to deliver higher quality outcomes, he said. “If you’re a stand-alone with a $150 million revenue base, it’s difficult to put in the kind of sophisticated systems large-scale organizations can offer and drive from a centralized location,” Grube said.
Achieving scale improves the cost of capital and an organization’s ability to access capital markets on an ongoing basis, he said. “When ratings agencies talk about scale, one of the things they focus on is risk diversification,” Grube said. “Optimal organizations that spread across multiple markets and have a broader diversification of programs and services; business units, the agencies believe, inherently have a more diverse risk base than those that are concentrating on a single market or rely on a single type of service to drive most of their business.”
The fourth theme of the organizations’ strategy and growth is recognizing the importance of physicians, ambulatory care, and primary care, he said. “Increasingly we heard from CEOs and other leaders that hospital business is really just a portion of what they’re all about,” Grube said. “They’re really focused on position strategies and ambulatory strategies as the business continues to shift to the outpatient side.”
Finally, the organizations establish and maintain accountability and cultural alignment, he said. “The Catholic systems said in particular that their mission really isn’t driven by growth for growth’s sake. It’s basically to provide better care and be able to serve their communities more effectively in the future, so they’re very careful about the process of evaluating potential partners and potential acquisitions. They make sure there is a good fit culturally and strategically for the organization.”
KaufmanHall’s innovative approach is appealing because the firm applies specific business concepts to hospitals and health care providers, said second-year student Gretchen Speakman, a co-chair of the Healthcare Group. “Hospitals have always kind of operated outside of those ideas,” Speakman said. “They’ve always said they’re so different that those things can’t be applied to them. KaufmanHall is showing that applying these principles is a very good way to improve their operations and returns. Getting more business people into the health care sphere is really important with the challenges the industry faces.”
--Phil Rockrohr