This past year saw a new administration in the White House and a push to repeal and replace the Affordable Care Act (ACA). But the forces shaping the health care industry predated these events and will continue regardless of the political climate.

As the industry prepares for yet another round of transformation and increasing margin pressure, ensuring that the physician enterprise keeps pace with change is crucial. Systems need to embrace nontraditional partnerships and identify disruptive business models to stay ahead of the market. As reform threatens already-faltering cross-subsidies, identifying new sources of growth is more important than ever before.

Below we share 12 key insights for senior executives working to drive health system success in 2018.

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1. The drive to reduce health care spending is bigger than any piece of legislation

Despite the ACA’s stated intention to reduce costs and improve efficiency, the most recent era of health care reform did little to inflect health care spending. As a result, policymakers will continue to focus on reducing health care spending through a range of levers. Keep reading on p. 2.

2. Health care reform is reducing the price of care, not the cost of care

The combination of public-sector rate cuts and market-driven pricing pressure continues to squeeze provider margins. Keep reading on p. 4.

3. A transition from privately reimbursed procedural care toward publicly reimbursed medical care is inevitable

The modern American health care system has developed mainly to serve a large, working-age population covered by employer-sponsored insurance. But as demographics shift, the Medicare and millennial segments—with vastly different care needs—are ascending. Keep reading on p. 6.

4. Health systems' relevance and influence depend on both radical cost control and radical growth

Regulatory, demographic, and market upheavals affect all health care providers. Leaders of organizations of all sizes share a common goal: retain some degree of control over the pace and direction of events. Keep reading on p. 8.

5. Market-leading delivery networks are critical to ensuring relevance and influence

In the rush to build scale, health systems often purse enterprise-level revenue targets. While absolute scale is important, it is not sufficient on its own. Keep reading on p. 10.

6. No amount of scale guarantees long-run success

As important as market-level scale is, system leaders must recognize that the bar for relevant and influential scale will continue to rise—and the boundaries of competition will continue to expand. Keep reading on p. 12.

7. Systemness is the key to unlocking—and sustaining—radical growth

For most systems, radical growth will require M&A activity in one direction or another. But the right deal can be hard to find. The key to expanding the range of win-win arrangements is system value, or “systemness.” Keep reading on p. 14.

8. Radical cost reduction is much more than operational efficiency

Health care reform, private market innovation, and shifting demographics are all demanding a different-in-kind delivery model. To deliver on that imperative, hospitals and health systems must execute on a set of three core imperatives to fundamentally transform their current models. Keep reading on p. 16.

9. Effective cost strategies engage physicians as part of the solution, not part of the problem

Many organizations are nearing the limits of cost-control strategies that involve working around physicians rather than in partnership with them. Moving forward, health systems must develop a cost management playbook that works in concert with the physician enterprise. Keep reading on p. 18.

10. Executives have a central role in accelerating and amplifying care variation reduction

Many system leaders think that care variation reduction and cost control fall entirely within the purview of physicians, but executives have a key role to play, too. Through their active and purposeful involvement, executives can accelerate the speed and amplify the impact of these efforts. Keep reading on p. 20.

11. Today’s clinical enterprise is unsustainable

Status quo networks tend to be physician-centric, specialist-heavy models that are over-reliant on legacy leadership and operational structures. The combined pressures of escalating compensation levels, low productivity, and high rates of physician burnout call into question the long-run sustainability of current approaches. Keep reading on p. 22.

12. The approach to improving productivity and reducing physician burnout is the same

As many as 60% of physicians now report being “burned out.” A closer look at the drivers of burnout and at the root causes of low productivity may surprise you. Keep reading on p. 24.

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