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Counterintuitive Thinking During Difficult Times: Bold Growth Strategies

Mark Dubow, for HealthLeaders Media, December 10, 2009

For decades, periods of severe financial pressure and uncertainty have been fertile ground for the explosion of highly successful products, services, and companies. Apple, Fortune magazine, General Electric, Gillette, Hewlett-Packard, Kellogg's, Microsoft, Motorola, MTV, Revlon, Trader Joe's, and Disney are among the firms that began their road to competitive and financial success and brought innovative new services and products to the market in periods of extreme duress. Baystate Health, Geisinger Health System, Mayo Clinic, Advocate Health Care, Ohio Health, Henry Ford Health System, Celebration Health, Baptist Health Care, Baylor Health System, Kaiser Permanente, and Scripps Health are among a number of healthcare organizations currently achieving similar distinction under adverse market conditions. Designing revenue growth strategies that are bold in nature and accelerating the implementation of those strategies are fundamental to the success of healthcare organizations.

In recent years, many healthcare executives have pursued growth with an emphasis on building inpatient volume in existing high-margin services. Looking forward, given current and pending reductions in reimbursement and the expected impact of healthcare reform, revenue rather than volume will be the appropriate focus of growth initiatives. Further, achieving revenue growth in cardiovascular, orthopedic, neuroscience and other traditional surgical services by driving volume through existing models of care delivery will become increasingly difficult. Instead, more effective avenues will involve clinical innovation, resulting in new services and products (e.g., wireless medicine), lower cost locations, and models of care delivery. Similar to the companies and healthcare providers referenced above, an organization's future success will depend on setting bold strategies and accelerating implementation. Organizations simply cannot afford to "hunker down" and watch competitors leap past them.

At first glance it appears that "bold" is a relative concept and can be situational. Interviews with a sample of hospital executives across the nation in early 2009 revealed widely differing perceptions of what made their successful strategies bold. Several pointed to specific changes made to the features of services or products, while others focused on the degree of impact achieved once implemented. Some focused on collaboration with powerful strategic partners, while others noted the degree of risk taken.

After more careful scrutiny, it becomes evident that for a strategy to be bold it must simultaneously push boundaries on two dimensions: nature of change (innovation) and degree of change (impact). The extent of innovation takes into account the way in which the product or service provides new ways to meet customers' needs specific to access, information exchange, ease of use, clinical outcomes, and pricing, among other factors. The degree of impact takes into consideration the extent of change the product/service affects in terms of quality, efficiency, satisfaction, awareness, preference, market share, and profit. Each of these two dimensions can be viewed as a continuum extending from a "low" to a "high" level. Strategies on the high end of both dimensions would be bold "game changers" with a higher return on investment. Frequently, a degree of risk is inherent to bold strategies. Risk takes into account the extent to which a product or service is ahead of its time; the amount of investment and length of time to ROI; its divergence from established patterns and partners; the amount of collaboration with competitors; and the probability and cost of failure. A strategy does not need to have a high level of risk to be bold. Rather, for a bold strategy to be successful, it is critical that the risk be accurately characterized and managed. Figure 1 illustrates how a bold strategy fits within a three-dimensional landscape composed of these three characteristics (innovation, impact, and risk).

Figure 1. Three Dimensions of a Bold Strategy

While many types of bold growth initiatives exist in healthcare, they can be grouped into four categories of strategies: 1) acquisitions/mergers; 2) physician-oriented; 3) patient and employer-oriented; and 4) technology-oriented. An example of an organization pursuing a bold acquisition/merger strategy is El Camino Hospital, a 300-bed community hospital in northern California. El Camino accelerated its entry into a target market by acquiring, closing, re-structuring, and re-opening Los Gatos Community Hospital, a competitor. Innovation was incorporated through changing the dynamics of patient access and physician integration. The hospitals are in the process of achieving significant impact in increasing residents' awareness of the organization and increasing patient volume and income. The initiative was managed within an environment that had a high degree of risk associated with four factors: the management team had no prior experience operating a multi-hospital system; the closure and reopening of the acquired entity had to be expedited to avoid significant loss of physicians, clinical staff, and patients; the market entered was highly competitive; and a large investment was required during a recession.

"We intentionally built a bold strategies category into our recent strategic plan," said Ann Fyfe, vice president of business development at El Camino Hospital. "The acquisition of a competitor in a target market is expected to dramatically enhance our collaboration and alignment with physicians in that area and significantly increase patient revenue at both the new and our main campuses. Similarly, we saw an opportunity to link clinical innovation in genomics to enhancement and growth of our existing oncology and cardiovascular services while substantially differentiating our organization."

El Camino Hospital's initiation of the nation's first community hospital-based genomic medicine institute is illustrative of the physician-oriented bold strategy category. Innovative elements of the strategy included the design of personalized patient therapies based on the genomic analysis and the formation of a strategic partnership with DNA Direct, a firm providing 20 board-certified genetic counselors with different specializations. Significant impact is being realized in three ways: resolving barriers to the use of genetic testing and thereby delivering significant new value to patients via personalized medicine; positioning the organization as a destination for "leading edge" care; and considerably shifting market share and patient volume. The strategy was managed in an environment that had a moderate to high degree of risk related to implementing a clinical service ahead of its time and leaping beyond the hospital's historical capabilities.

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