A New Kind of Growth Strategy

Carrie Vaughan, for HealthLeaders Media, February 13, 2009

Seventy percent of CEOs are concerned that reimbursement cuts will have a strongly negative impact on their organizations, according to the HealthLeaders Media Industry Survey 2009. So it's not surprising that finding a reimbursement solution was the top wish among CEOs to fix the healthcare system (18%).

But CEOs can't sit idly by hoping their wish will come true and the government will bail them out. Odds are it won't happen. Healthcare organizations have two options in today's environment, says Bill Ott, senior consultant with Numerof & Associates, Inc. in St. Louis, MO. "You accept your top revenue line and look at cutting costs, or you say, 'How do I grow that top revenue line?'"

According to the survey, 78% of CEOs plan to fuel financial growth over the next five years by expanding outpatient services, 61% plan to start or increase promising business lines or facilities, and 42% plan to launch a strategic marketing campaign to grow market share. Sounds good. These strategies are consistent with the notion that the days of big box healthcare are numbered. Consumers want to have care that is closer to home and more convenient. Who doesn't want to avoid going to the hospital if at all possible? I do. I've even been known to put off going to a primary care doc.

But what exactly do CEOs mean by promising new business lines and strategic market share? Is it investing more in their most profitable services like cardiac and orthopedics, or ensuring that advertising reflects their strategic priorities better? Cardiology and orthopedics were viewed as the service lines with the most revenue growth potential in the next three years by 23% and 16% of CEOs, respectively. This is in line with what senior leaders across the industry sectors—finance, technology, quality, physicians, marketing, and health plans—said, as well.

Focusing on the business lines that bring in the most revenue isn't exactly what Ott thinks about when he considers strategic marketing and growth strategies, however. He says CEOs should take a step back and redefine the healthcare business they are in—fixing people when they are sick. "There is a lot more competition than just hospitals out there," he says. "What hospitals are experiencing is this leeching of business that traditionally used to be theirs that goes out to alternative care providers now. If they are really serious about growth strategies, they are going to have to embark on strategic marketing like they have never done before."

For example, some businesses cater to people who are trying to manage their diet for health reasons and sell them a week’s worth of diet-specific meals, week after week. Hospitals have dieticians on staff and provide this service for inpatients, so why should someone else have that business? asks Ott. "No one says you can't do business unless people come to the hospital," he says. "They have to break out of this mindset that a hospital is defined as this big building with a lot of rooms that people come and have surgeries performed in."

Granted, some hospitals have jumped into the retail game, and I can even purchase Tylenol or a knee brace at my pediatrician's office for a lower price than the local Walgreens. But are healthcare providers—hospitals in particular—really focused on taking back some of this business? Think how much money—not reimbursed by insurance companies—goes to treating back pain or obesity. Shouldn't hospitals be more focused on carving out business lines where it doesn't matter what the reimbursement rate is?

As it stands, CEOs may not view retail clinics as a positive trend, but many don't view them as a real threat, either. Sixty-nine percent viewed their impact on their organization as neutral in the next three years, with 18% viewing them as having a slightly negative impact and 5% viewing them as having a strongly negative impact. So do CEOs just have their heads stuck in the sand?

Carrie Vaughan is leadership editor with HealthLeaders magazine. She can be reached at cvaughan@healthleadersmedia.com.
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