Unprecedented margin pressure: if they aren’t already, they should be the three most motivating words in healthcare strategic marketing. Every week brings new reports of hospitals and health systems experiencing startling year-to-year margin declines. This week began with Edward-Elmhurst Health. Last week it was Temple University Health. And the week before, Cedars-Sinai. In September 2016, the Congressional Budget Office modeled a variety of future hospital financial scenarios, ultimately projecting that anywhere from 35% to 51% of all US hospitals would face negative margins by 2025. Imagine that—half of all US hospitals losing money within 8 years (that is nearly double the 2011 baseline of 27%).
This threat is a key driver of system mergers and acquisitions, though some research suggests M&A growth has not delivered hoped-for financial stability. Building scale and the continuum of care is not a panacea.
Value-based growth—creating new value for customers by strategically aligning cost, quality and service—may be the best prescription for the threat of unprecedented margin pressure. For strategic healthcare marketers, fueling value-based growth begins with clear leadership vision—what will be our system’s organizational position in the marketplace? Full-service, financially integrated (via either an owned or partnered health plan) delivery system? Comprehensive health “ecosystem” where proactive, social and environmental outreach complements more traditional delivery components? A focused “factory” executing spectacularly on a particular area of the healthcare needs continuum – say convenient wellness, prevention and primary health services; high-end specialty destination; disease-specific center-of-excellence; or some other novel, market-appropriate approach?
Any answer can be correct—it then becomes about execution. From that decision, strategic marketing can concentrate on crafting and advancing customer-inspired brand differentiation. Without intentional focus, organizations will struggle and make only incremental progress against the unprecedented margin pressure they face.Unprecedented margin pressure: if they aren’t already, they should be the three most motivating words in healthcare strategic marketing.
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