Health systems are experiencing significant margin pressure as a result of declining reimbursement increases from commercial payers, increasing expense inflation, slowing inpatient demand and increasing percent of government payments. Moody’s notes that recent merger and acquisition activity has done little to mitigate this problem. The nation has little to show for almost a decade of investment in "innovative concepts" such as value-based care, population health, pay-for-performance, direct contracting, narrow networks, and provider-based health plans other than record profits in the insurance industry and record low margins for their health systems. Signals are strategies that lead to organizational growth. Noises are strategies that lead to nowhere. Health systems must invest in the development of new innovative competencies; however, those who are unable to differentiate between signals and noise can lose focus resulting in significant degradation in financial performance, which in some cases may be irreparable.
Moody’s predicts that “significantly higher healthcare spending in the United States will continue a damaging ripple effect across the economy, crunching public sector budgets and those of businesses and households as well.” Clearly, the nation’s health system is on an unsustainable economic course and disruption is inevitable. There will be winners and losers in the post-disruption healthcare world much like there was after the housing bubble. Those health systems that focus on signals will position themselves to be one of the winners.
Most health systems have invested hundreds of millions (if not billions) of dollars in facilities, equipment, and highly specialized manpower, and must ensure that their strategic focus optimizes the financial performance of their capital-intensive inpatient and outpatient services. Health systems cannot just abandon their capital structure and emulate Google as many industry pundits suggest. Mr. Kaufman’s consulting practice is about partnering with his clients to produce results (vs. sitting on the sidelines and sharing theories.) In recent years, he successfully negotiated managed care contracts, lead negotiations on multiple ambulatory joint ventures, structured state-of-the-art orthopedic co-management relationships and participated in physician group acquisitions, all of which increased market share and improved financial performance and positioned his clients for success. This presentation provides practical recommendations to ensure an organization's short and long-term success during these turbulent, noisy times.