Emerging stronger from the crisis: What’s next for regional providers?

As the COVID-19 pandemic continues to severely strain regional health systems, new financial, operating and competitive headwinds have emerged. The past 18 months have exposed the financial vulnerability of health systems, many of which relied on government subsidies to address operating shortfalls.¹ Widespread clinician burnout threatens to exacerbate an already critical shortage of healthcare workers.² Meanwhile, non-traditional competitors are entering the market and aggressively pursuing high-growth segments of the care continuum. Collectively, these pressures pose a formidable challenge to the ability of regional health systems to deliver effectively on their missions.

Regional providers may need to do more with less in the next normal. They will need to act with greater speed, ambition and rigor than before — and take on multiple priorities at once. Foremost in their minds is prioritizing the best way to care for patients, ensuring their safety and health. Launching an intensive, organization-wide transformation can help regional healthcare providers rebuild their organizational and financial backbone for long-term sustainability.

The current environment calls for providers to embrace a transformational approach that addresses six imperatives going forward:

Expansion into new geographies and business segments enables providers to diversify their revenue and realize the benefits of scale (for example, sharing clinical best practices and augmenting shared services).

As the lines between provider and payer continue to blur, regional provider systems should focus on launching provider–payer partnerships, joint ventures and joint products to achieve a greater share of the premium dollar.

Tech-driven innovation and redesigned care models have the potential to increase productivity and alleviate some of the pressure on caregivers. To attract, retain and inspire frontline staff, regional providers should support efforts to address mental health and burnout, create flexible and attractive career ladders, provide competitive compensation and training, and accelerate diversity, equity and inclusion programs.

Ensuring financial sustainability may require bold action across a comprehensive set of cost and revenue levers – such as launching broad margin-improvement programs, evaluating scale and inorganic growth opportunities, evaluating managed-care contracts and shifting to value-based care models.

Building on their growing societal role, regional providers can promote community health equity by expanding access to care and health coverage, addressing social determinants of health, scaling screening and prevention programs, and promoting health literacy and medical education.

Greater data liquidity and advanced analytics are powering major improvements in consumer experience, quality and access, and in managing total cost of care. Digital and automation capabilities can deliver substantial performance benefits across the entire hospital and provider value chain.

The scale and urgency of these six imperatives should be met by an equally rigorous and comprehensive transformation program. The most successful transformations start with a clear analysis of the organization’s full value-creation potential, often setting gross performance targets at 75 percent or higher of trailing earnings. They also go well beyond cost-cutting measures: on average, 40 percent or more of overall transformation-program value comes from growth and revenue expansion.

In our experience, a successful transformation requires a few critical elements:

• A mission-driven case for change. The rationale for undergoing a transformation should be framed as part of the provider’s mission, grounded in clear conviction, and cascaded throughout the organization to emphasize the transformation’s impact and benefit for teams, patients and other stakeholders. 

• A strong link between bold targets and individual accountability. Big goals should be broken down into hundreds of smaller initiatives that can be owned “by the line”— not just the top team. These smaller initiatives, which may engage 20 percent or more of the workforce, create greater ownership and empower more employees to personally drive the transformation program.

• A new execution engine. Going well beyond a typical project management office, the transformation hub should be fully empowered to set new rules of engagement that increase the metabolic rate of the organization while helping teams build the execution muscle to achieve sustainable results.
   

While regional provider systems are under immense stress and face profound challenges, leaders have a unique opportunity to rethink the care-delivery model to radically improve cost, quality and patient outcomes. Achieving this goal will likely require a comprehensive and bold approach that challenges conventions, adopts learnings from other industries and embraces new ways of working.

This article is a collaborative effort by Kevin Carmody, Karl Kellner, Edward Levine, Rupal Malani and Joseph Mitchell, representing views from McKinsey’s Healthcare Systems & Services and Transformation practices.

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