The Fight for Market Relevance

Two intertwined Big Ideas—the Affordable Care Act and the shift from volume to value—have driven much of the conversation in health care over the past 5 years. To be sure, these Big Ideas have significant and still-unfolding impacts across the health care arena. Seventeen million newly insured Americans is nothing to sniff at, though a fair debate persists on how much credit the ACA deserves for this result. Regardless, significant cracks are beginning to appear in the exchange markets, with affordability concerns rising and major insurers reporting financial losses. If these cracks widen into chasms, they could undermine the exchange system.

The shift from volume to value has inspired heroic work by caregivers and health care executives—closer relationships have been forged, infrastructure has been built, learning curves have been scaled, money has been saved and, yes, patients’ lives have been improved. Heroic efforts notwithstanding, the early experience with population health and its variants is highly uneven—in many parts of the country the revolution has yet to arrive. How exactly we scale a series of scattered experiments into an economically viable new order of value is far from clear. Uncertainties on this scale require strong stomachs and stronger balance sheets. And, while the rules of the game are constantly changing, success is still contingent on having the right strategy to drive clinically appropriate, profitable growth.

In the wake of these still-unfolding Big Ideas, Sg2 sees a primal set of forces driving action in local health care markets as we enter 2016. These primal forces are all about relevance—how to define it, establish it and defend it. How is your organization maintaining relevance in your market?

  • Access: Is your primary care network relevant to your community in an age of retail clinics and virtual consults? Or is it perceived by consumers as expensive and inconvenient?
  • Consumerism: Is blanketing a local market with freestanding EDs and urgent care centers a viable way of asserting relevance? Do you understand the changing needs of health care consumers? Are you using the right segmentation and engagement strategies?
  • Pricing: In the face of diagnostic imaging steerage programs, can your hospital-based service define its value in ways that are relevant enough to consumers to defeat the steerage? How do you price your ambulatory services?
  • Payer/Employer: Is your cost of care a strength or a threat? Is a higher-cost academic medical center relevant enough to resist an insurer’s bid to exclude it from its narrow networks and/or exchange networks?
  • Partnerships: Is your hospital relevant enough in the local market for you to either stay independent or find the partner of your choosing with terms you can live with? How do you achieve scale and build the right communities of care through local, nontraditional partnerships?
  • Workforce: Is your “system” or “clinically integrated network” a relevant entity? Or is it simply an aggregation of parts, a confederation of players with more that divides it than unites it? Do you have the appropriate supply of clinicians to meet changing demand for services?

Questions like these will animate the raw geopolitics of local health care markets in 2016. They are not high-minded or inspiring but, at heart, are very much about relevance through value. Here’s a case in point: in Sg2’s hometown of Chicago, the University of Chicago, Northwestern and Rush are perhaps the most recognized and admired health care brands. But, for 2016, the local Blue Cross and Blue Shield plan has excluded all of them from its individual PPO networks; a competing plan that includes them costs hundreds of dollars more per month. Are these brands (and the value they ostensibly represent) relevant enough to consumers, shopping with their own money, to defeat the Blues’ strategy? Can the Blues sell a network without the top academic institutions? We’ll find out.

These tests of relevance are happening all over the country. What makes them important and different from the showdowns we’ve seen in the past is context. Your value is being measured by individuals and families, sitting around kitchen tables, weighing choices with their own money at stake. Following the model of science, it’s as though hundreds of little clinical trials on relevance are being conducted.

At times like these, Sg2 believes in returning to fundamentals. We don’t know how the ACA will turn out in the end. Much uncertainty attends how far, how fast and how effectively we will transition the financing of health care from a volume to value basis. Despite all this uncertainty, what do we believe is universal? 1) Defining a strategy for profitable growth; 2) Anticipating clinical demand and meeting it where it lies; 3) Responding to the access needs of consumers; 4) Creating a System of CARE footprint that is relevant and defensible locally; 5) Developing a deep understanding of patient flow; 6) Crafting a sensible pricing strategy; 7) Continually improving clinical products to produce better results, more consistently and more cheaply; 8) Building critical organizational competencies—the discipline to execute, a capacity for innovation, an enlightened approach to workforce deployment, a deft touch in managing partnerships.

These fundamentals are how any organization establishes and defends its market relevance. Whether you are a traditional hospital operator in a fee-for-service market or headed full-bore toward population health, you need to understand the demand in your market, build a credible System of CARE and master patient flow. Volume or value, the fundamentals underpinning how you prove your relevance—to partners, payers, employers, referring physicians and consumers—are largely the same.

Tough as the coming year may prove to be, Sg2 finds the focus on market relevance clarifying and refreshing. Our focus is on helping you drive relevant, profitable growth—we’ll help you get there by leveraging our System of CARE cross-continuum view through a robust suite of intelligence offerings, cutting-edge analytic tools and consulting solutions. And to help you master the fundamentals, this year we’ll home in on 5 critical areas for strategic growth: market and enterprise; care delivery; consumerism; payers and employers; and your workforce.

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As of February 11, 2016, Vizient, Inc. has completed its purchase of MedAssets Sg2 and spend and clinical resource management segments from Pamplona Capital Management, LLC. MedAssets revenue cycle business will continue to operate as a wholly-owned subsidiary of Pamplona Capital Management LLP.

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