Quick Picks: The Looming Threat of Unprecedented Margin Pressure

Quick Picks, , ,
12
Oct 2017

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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Dan Miers

Chief Strategy Officer at SPM Marketing & Communications
Dan anticipates “what’s next” in our complex industry and keeps SPM on the leading edge of healthcare policy and strategy. A valuable resource to all SPM clients, his strategic insights focus how we understand and apply industry trends to client issues. With 20 years of experience, Dan has two master’s degrees in healthcare administration and finance, worked in business development at an academic medical center, and launched a healthcare technology company. He is also a frequent speaker at industry events and an active member of the Society for Healthcare Strategy and Market Development (SHSMD).
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