Productivity + Risk Management = Success

“Many of the major shifts (in healthcare) over the past decade can be characterized as focusing on bulking up pieces of the healthcare puzzle and on squeezing out inefficiency, but in the coming decade we can expect the shifts to be more systemic—rearranging pieces, adding new players, and changing the very definitions of efficiency and quality,” writes Ron Adner, Ph.D., Professor of Strategy at Dartmouth College.

Efficiency, productivity and quality define success not just in healthcare, but across industries.

In fact, a recent working paper from the Congressional Budget Office found that the magnitude of the financial impact U.S. hospitals will face in the future depends on how much they can improve their productivity over time. The CBO paper concluded that if hospitals are unable to increase their productivity or otherwise reduce cost growth, the share of hospitals with negative profit margins will rise to 60% and their average profit margin will fall to -0.2%.

The focus is productivity—not simply cost reduction.

And that’s not the full equation. The other key component to success is risk management. With the ACA mandate for improved quality, healthcare organizations must ensure they are managing risk while striving for improved productivity. “A key change in the focus of negotiations across the healthcare ecosystem will be from bargaining over prices (transactional and contained) to bargaining over risks (relational and longer lived),” Dr. Adner anticipates.

This resonates with us. It is exactly what we are trying to help accomplish and we know it’s not easy.

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