Hospital and health system executives acknowledge that nearly every aspect of the new health care economy has changed. However, many organizations still struggle to achieve clinical, financial and operational efficiency with legacy models.
What’s needed is a new operating model — one designed to align with and address the significant changes reshaping health care markets.
A recent AHA Market Scan Trailblazers report, “Thriving in the New Health Care Economy — How Hospitals and Health Systems Can Pivot Their Operating Models for Sustainability,” explores the essential principles and features of this new operating model. It highlights how two health systems are successfully leveraging it to respond sustainably to the evolving market forces transforming their health care economies. Here are some key findings:
A survey by Sage Growth Partners found that C-suite executives in hospitals and health systems identify two primary challenges for 2024 and 2025: reducing the total cost of care and achieving financial sustainability. These priorities are reflected in how organizations are directing their digital and information technology investments. According to a Guidehouse survey, hospital executives ranked enhanced operational efficiency and improved patient experience as the top expected benefits from these investments in 2024.
To tackle evolving challenges — such as health care consumerism, price transparency, virtual care, digital health technologies, hospital-at-home models, diverse care sites, and new medical technologies — many organizations are adopting new operating models.
As outlined in the Trailblazer report, a successful operating model bridges two essential pillars: strategy and operations:
Main Line Health, for example, has transformed its operating model. Main Line, which operates five hospitals near Philadelphia, is dealing with the impact of other hospitals in its market having closed or reduced services. This market dynamic is creating overwhelming capacity challenges in Main Line’s hospitals and emergency departments.
To deal with this, Main Line pivoted the system’s operating model to focus on solutions to Main Line’s capacity challenges, including material market changes like staffing shortages and an aging patient population. The new operating model has resulted in:
SSM, which operates 23 hospitals and hundreds of other care sites in four states, is facing the challenge of serving a broad mix of urban, suburban and rural markets, all with issues unique to their communities. To combat this challenge, SSM implemented a new operating model that allows it to act as a system rather than a collection of disparate providers and positions the organization to more quickly adapt and respond to internal and external pressures.
“We chose to face these issues head on by becoming more innovative and agile,” said Laura Kaiser, SSM Health’s president and CEO. “Operating as a unified system on efforts that can best be tackled with size, scale, talent and expertise is helping us to respond to the increasing challenges across our industry.”
The system implemented a new operating model that produces sustainable, material and permanent responses at a faster clip. SSM Health’s customized model is based loosely on Lean management principles for continuous quality improvement.
One operational change focuses on hands-on leadership. The SSM system’s regional and local leaders routinely visit with staff to learn about their progress toward meeting the strategic objectives. SSM Health used this approach to dramatically reduce the rates of catheter-associated urinary tract infections as well as central line-associated blood stream infections, to the point of erasing them from the active list of objectives. A new objective is effectively managing patients’ blood sugar levels to help improve their clinical outcomes.
Traditional tactics employed by many hospitals and health systems are proving ineffective against disruptions in their markets. These disruptions persist because they are not temporary; they are permanent and significantly reshaping those markets.
To adapt, hospitals and health systems require innovative models and strategies that are equally lasting and impactful. They need a more efficient approach to develop and implement these solutions faster, better and at a lower cost. The key lies in adopting a new operating model that translates strategy into structure, driving improved outcomes.