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Analysis

Market Share Still Matters: 3 Ways to Win

By Philip Betbeze  
   August 02, 2018

For CEOs, market share is critical. But measurement of it, and tactics to grow it, are getting more complicated as patients connect with providers in more sophisticated ways.

This article appears in the July/August 2018 edition of HealthLeaders magazine.

Health system CEOs have always worked to meet their mission of caring for the poor and underserved and improving the health of their community. They often cite that mission as their top priority. But in truth, they are evaluated by how well they grow revenue and margin, both of which come through expanding market share.

Market share used to be easy to define. CEOs counted on a reliably increasing reimbursement model that exceeded inflation and an aging population that meant more hospital days every year. No longer. But even though market share growth is much more complex now, failing to achieve that growth could mean termination.

To win the market share battle, healthcare organizations must first redefine what it is (see the sidebar on new market share proxies) and then build strategies that take advantage of the shifts in healthcare delivery. Here's how three healthcare leaders are doing it.

Northwell: 'The consumer is the determinant of success'
 

Michael Dowling, president and CEO of Northwell Health in Great Neck, New York, acknowledges the need to provide access, value, and convenience for consumers who are increasingly looking for a wide-ranging array of services offered by a single health system. The key to this strategy is the consumer as the focal point of healthcare decision-making.

Northwell is currently investing heavily in home health and digital care access, including a major initiative in telemedicine, but tying it all together into a seamless consumer experience is critical.

"You need hospitals as anchors, but the strategy is very consumer-focused in providing access and convenience," Dowling says. "We've been doing this for 10 years, and it's one of the reasons we've grown to being one of the biggest players in the New York City market. It's the interconnection of all these pieces that makes all the difference."

Although it's not a perfect analogy, Dowling says Northwell wants to emulate Starbucks' approach to market coverage. It's not a location on every street corner, but it's close.


"The traditional way of looking at market share isn't valid anymore."

—Chris Van Gorder
 

Also, getting critical market share mass in a variety of modalities is necessary to becoming the viable narrow network that employers and insurers are looking for. Smart health systems are spending more on smaller facilities, like micro-hospitals, or on freestanding ERs, homecare, urgent care centers, and telehealth capabilities. Such investment aims to meet the everyday health needs of consumers, not just provide for their increasingly rare inpatient stays.

This means focusing on organic growth that complements or even stands alone from the inpatient realm rather than buying hospitals, for example. Specialized areas of investment in both inpatient and outpatient care are the usual profitable service lines, such as orthopedics, neurology, and cardiac care, says Dowling.

He says he seeks two kinds of market share when it comes to reimbursement: Medicare and Medicaid, and commercial. Both kinds are needed to serve the community comprehensively, he says, but only one of the two makes a margin. Patients don't see that distinction, though, and Northwell must serve them all.

"[Commercial] is what everyone's going after," he says. "So, you try to be the preferred provider. You take market share from competitors by developing the physician relationship and by the expansion of ambulatory. We've built a massive ambulatory network with over 650 locations. It's a marketing and consumer experience strategy. If patients are not happy with experience, they will go somewhere else, so it's multifaceted."

Sidebar: Healthcare CEOs Using New Proxies for Market Share

Sidebar: Geography Should Inform Your Market Share Strategy

Hospital-centric organizations used to measure market share in terms of inpatient volume or discharges, but as more services have moved outside the hospital environment, those have become less reliable measures of success.

"We're all moving toward understanding that the consumer is the determinant of success, rather than just the patient care business," says Dowling. "The consumer is going to be determining how they want care and where, and since more of it is not needed in the hospital, you have to create locations for cancer care and imaging and surgery where it can be done on an ambulatory basis."

Scripps: Accentuate your strengths
 

Chris Van Gorder, the longtime president and CEO of Scripps Health in San Diego, is content with a level of uncertainty around market share, and says that growing it depends partially on instinct in a time of upheaval.

"Market share's an odd thing. Everyone still wants to gain commercial market share, of course," he says. "But today we're not so focused on the inpatient side. We're doing total hips on the ambulatory side. So, the traditional way of looking at market share isn't valid anymore."

Even though the discharge-based methodology isn't as relevant as it used to be, it's still important. Rating agencies still use discharges as an important tool to measure financial health, and with the relative lack of precise alternatives, discharges can be an important factor in how they determine borrowing capacity and interest rate terms for healthcare organizations.

"As an industry, we have to figure that out," Van Gorder says. "Rating agencies use discharges, but you could be reducing that number and getting stronger as an organization."

Chris Van Gorder (Sandy Huffaker/Getty Images)

Scripps went through its rating agency sessions about three months ago and has seen a small decline in those traditional market share measures, but Van Gorder says those measures don't tell the full story anymore. Scripps' market is dominated by three major players: itself, Kaiser Permanente, and Sharp HealthCare, so fluctuations in discharges are often small and at the edges.

Rating agencies are smart enough to recognize that healthcare is changing, Van Gorder says. For example, they know it's the right strategy to move to ambulatory, and Scripps experienced growth in covered lives in its health plan, which is part of Scripps' strategy to build its own narrow network. But even rating agencies are frustrated that there's no metric to enable consistent comparisons, he says.

"We still talk about market share because I still need to make sure the hospitals are occupied enough. Half-full hospitals are the fastest way to go bankrupt," he says.

Scripps is strong in cardiovascular services, particularly interventional cardiology. "So, we focus on maintaining our strength in that area and in ortho, which is becoming much more ambulatory than it used to be," says Van Gorder.

One area where it's not as strong is cancer, he says, even though Scripps is a major oncology provider in San Diego. To maintain and even buttress that market share, the health system has partnered with Houston's MD Anderson Cancer Center to build a new comprehensive cancer program that started treating patients this summer.

"[MD Anderson] is building a network strategy, and they have 23,000 people just working on cancer, so we are taking advantage of their knowledge to make us stronger," he says. "It was a market share play, but it's much more than just that, with increased access to research and clinical trials." (See related sidebar on seeking out partnerships.)

John Haupert (Dustin Chambers/Getty Images)

Facing fierce competition in ambulatory, Van Gorder says the health system is focusing on areas where it's strongest and trying to grow there.

In all areas, he says Scripps must aggressively focus on cutting costs, because he sees cost as a proxy for quality. In fact, he notes, cost may be the major limitation for most health systems in growing market share for the foreseeable future.

"People are paying more out of pocket to come in, and insurance companies have gotten so good at narrow networks," he says. "People tell me you can't lead with cost, and I say no. Cost is a quality indicator."

Grady: Investing in specialty services
 

Safety-net hospitals, such as Grady Health System in Atlanta, have historically been overrun by mission patients—that is, patients who do not bring margin, such as Medicaid patients. But its leadership has recognized that the health system needs to be more competitive in commercial patients.

For Grady, that hasn't meant investment in traditional service lines, but instead investment in highly complex tertiary and quaternary services that can't easily be found elsewhere in its market, says John Haupert, its president and CEO. With seed funding from philanthropic sources, Grady has made multimillion-dollar investments in stroke and neurological surgery, interventional cardiology, and surgical subspecialties.

"In our case, it was a matter of survival. If all your patients are Medicaid or unfunded, you're not going to be in business. Part of Grady coming back to life 10 years ago involved developing strategies to grow in funding the mission," says Haupert.

The complex cases that have come from Grady's recent investments weren't previously present in the market. Unlike many organizations, Grady needed to create additional inpatient capacity to maximize those investments in capital and talent. It will soon be operating around 700 occupied beds; 10 years ago, it was barely operating 400. It's building new outpatient facilities as well, expanding ambulatory surgical and oncology capacity across the street to free up space in the main facility where its cancer center is now.

"In the next three years, we'll have 750 beds in operation," Haupert says. "We've gone from 9% to 20% commercial. That helps with sustainability."

Philip Betbeze is the senior leadership editor at HealthLeaders.

Photo credit: (at top) Michael Dowling, president and CEO of Northwell Health in Great Neck, New York (Adam Lerner/Getty Images)


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