January 11, 2019 / Written by Dan Michelson, CEO, Strata Decision Technology
If you want to understand the shifting sands of healthcare, you’ll find no better place than the nonprofit provider track during the infamous JP Morgan Healthcare Conference that took place this week in San Francisco.
Over 40,000 players were in town from every corner of the healthcare ecosystem. However, if you want to hear the heartbeat of what’s happening at ground level, you needed to literally squeeze into the standing room only nonprofit provider track where the CEOs and CFOs of 25 of the most prominent hospitals and healthcare delivery systems in the country shared their perspectives in rapid-fire 25 minute presentations.
This year those presenters represented over $300 billion, or close to 10 percent of the annual healthcare spend in U.S. healthcare. These organizations play a truly unique role in this country as they are integrated into the very fabric of the communities that they serve and are often the single largest employer in their respective regions. In other words, if you work in or care about healthcare, understanding their perspective is a must.
Every year I take a shot at condensing all of these presentations into a set of takeaways so healthcare providers who aren’t in the room can share something with their teams to help inform their strategy. So what do you need to know? Glad you asked, here you go.
Shift Happens — Moving from Being a Healthcare Provider to Creating a Platform for Health and Healthcare in Your Community
Trying to synthesize 25 presentations into a single punch line is pretty stressful. I listened to every presentation, debriefed with other healthcare providers in the audience afterwards and then spent the next 48 hours trying to process what I heard. I was stumped.
But then, finally, it hit me. To take a new spin on an old phrase, “It’s the platform, stupid.” To be clear, even though I’ve been in healthcare for close to 30 years, “stupid” in that sentence is absolutely referring to me.
So the No. 1 takeaway from the 2019 JP Healthcare Conference is this — for healthcare providers, there is a major shift taking place. They are moving from a traditional strategy of buying and building hospitals and simply providing care into a new and more dynamic strategy that focuses on leveraging the platform they have in place to create more value and growth via new and often more profitable streams of revenue. Simply stated, the healthcare delivery systems of today will increasingly leverage the platform and resources that they have in place to become a hub for both health and healthcare in the future. There is a level of urgency to move quickly. Many feel that if they don’t expand the role that they play in both health and healthcare in their community, someone else will step in.
Folks in tech would think of this as the difference between a “product” strategy (old school) and a “platform” strategy (new school). Think of this as the difference from cell phones (Blackberry) to smartphones (iPhone and Android devices). One was a product, the other was a platform. Common platforms that we’re all familiar with such as Facebook, Amazon, Google, Apple and even Starbucks have always 1) started with a very small niche, 2) built an audience, 3) built trust and 4) then added other offerings on top of that platform. By now there is no need for a “spoiler alert.” We all know that this strategy works and these companies have created a breathtaking amount of value. The comforting news for hospitals and healthcare delivery systems is that many have already completed the first three steps and have many of the building blocks they need to leverage a “platform” as a business strategy. The presentations at the JP Morgan Healthcare Conference made it clear that most are now actually taking that fourth step to separate themselves from the pack.
There is enormous upside to those who understand this pivot and take advantage of this change in the market. Dennis Dahlen, CFO of Mayo Clinic, shared his perspective on this: “Thinking differently in the future is essential. In many ways, at Mayo, we are already operating as a platform today, but we have to continue to leverage this approach to uncover additional ways that we can be a hub for both health and healthcare in our community.” Mayo’s platform includes leveraging research, big data, expert clinic insights and artificial intelligence to create new value for Mayo’s clinical practice as well as new opportunities for Mayo’s partners.
To be clear, the mental shift here is massive. It’s the difference of being on defense (where most healthcare providers are) to be being on offense (which is where they know they need to be). Executive teams have focused their time, energy and resources on driving and supporting inpatient admissions via a traditional bricks and mortar presence coupled with the acquisition of physician practices. The difficulty of thinking through what it means to truly be “asset light” and taking a different approach shouldn’t be underestimated. The good news is that the recent financial results of many health systems have improved, providing a little breathing room for investments to enable this shift in strategy. Those who don’t may fall way behind.