As hospital operating expenses keep outpacing operating revenue growth, many are facing an impending margin crisis. Indeed, Advisory Board's modeling shows that, absent any intervention, margins could become negative for the average system before 2021.
To reverse this course, it's clear that hospitals and health systems need to make big changes now. Today, I want to talk about one part of the solution: harnessing the power of systemness.
Let's start by defining some terms. By "system," I mean any health care organization that provides services at more than one facility. Those don't have to all be acute care facilities; even so-called "standalone" hospitals often have multiple outpatient sites, ambulatory clinics, and ancillary facilities to manage. And by "systemness," I mean the capability to make decisions that are optimal for the organization as a whole, rather than for individual service lines, facilities, or stakeholder groups.
These definitions may seem simple, but I think they are important to clarify (as too often in health care we use words that sound clear enough but have multiple interpretations). In this discussion in particular, those multiple interpretations are part of the problem.
The term systemness has been around for at least two decades in health care, if not longer, though it has really come to prominence in the past decade, as industry consolidation has resulted in larger and larger organizations. But just because the concept's not new doesn't mean it's generally well-executed. I'll be direct here: Most organizations that call themselves health systems are still, in my view, Systems in Name Only. Most still act like a confederation of individual parts. This is in contrast to many other industries, like manufacturing, banking, or hospitality.