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Analysis

Health System CEOs More Concerned With Growth Than Costs

By Jack O'Brien  
   June 12, 2019

Hospitals and health system executives are shifting their top strategic focus from cost control to revenue growth, according to Advisory Board’s Annual Health Care CEO Survey.

Health system CEOs are increasingly more concerned with driving revenue growth rather than containing costs, according to Advisory Board’s Annual Health Care CEO Survey released Wednesday morning.

Improving ambulatory access remains the top overall category of concern among surveyed CEOs, leading the way with 57%, as hospital executives angle for ways to bolster patient volumes and increase revenues for their respective organizations.

The top single priority among all categories was revenue growth, garnering 21% of responses, just ahead of population health and accountable care organization strategy at 20%.

Cost containment appeared in third place, tied with physician network alignment and systemness at 13%, only one year after it led the way with nearly a quarter of the votes.

For the broader categories of interest, the top five topics consisted of minimizing unwarranted clinical variation, 53%; strengthening primary care alignment, 53%; redesigning health system services for population health, 52%; and innovative approaches to expense reduction, 51%.

This was a significant shift compared to the 2018 survey, as innovative approaches to expense was the only topic that reappeared in the top five. Meanwhile, the top category in 2018, sustainable cost control, fell out of the top 10 this year.

Related: 4 Topics Revenue Cycle Leaders Are Discussing Now

Rob Lazerow, managing director with the Health Care Advisory Board research program, told HealthLeaders that the study's findings highlight two major elements: margin management still remains the primary focus for executives and achieving that has shifted from cost containment to revenue growth.

"I think [the results] are trending in line with where we see hospitals' and health systems' financial performance," Lazerow said. "As data from Moody's has illustrated, margins have been plummeting for years, primarily from 2015 to 2017. They were in free fall because expense growth was outpacing revenue growth. Even as hospitals and health systems were doing important and successful work in bringing down their expense growth year-over-year, it wasn't enough to keep up with the even faster descent of their top line revenue." 

Health systems have recognized the need to couple efficient cost control methods with accelerated revenue growth, according to Lazerow, in order to escape the "vicious cycle of cost cutting."

Related: Find the Hidden Dollars in Your Hospital (Without Reducing Labor)

Lazerow added that hospital executives can maximize revenue growth strategies by focusing on increasing patient care revenue.

Such approaches include an emphasis on revenue cycle performance improvement to reduce leakage and growing market share, specifically in outpatient settings.

Beyond patient care revenue opportunities, Lazerow said health systems should look to "better development."

He suggested hospitals embrace business operations outside of provider care, such as operating a pharmacy or health plan, as well as venture capital investments and commercializing intellectual property.  

Related: Nearly 4 in 5 CFOs Plan to Invest More in Digital Transformation

Lazerow said the survey's findings confirm that hospital executives remain committed to fostering a culture that promotes innovation and explores alternative methods for both cost control and revenue growth.

"To me, that screams that leaders are more holistically looking for new ways about both growing revenue and controlling costs," Lazerow said. "[They're saying] that 'we can't just rely on the traditional playbook, we need to embrace innovation along the way.'"

Jack O'Brien is the finance editor at HealthLeaders, a Simplify Compliance brand.


KEY TAKEAWAYS

The top single priority was revenue growth, garnering 21% of responses.

Cost containment appeared in third place, only one year after it led the way with nearly a quarter of the votes.

Rob Lazerow, managing director with the Health Care Advisory Board research program, said CEOs realize they "can't can't just rely on the traditional playbook."


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