The pandemic has had an undeniably powerful impact on the healthcare industry—from boosting innovation to shifting profit pools to fueling a burnout crisis. For providers to thrive in healthcare’s new environment, they must prioritize agility and new business building, according to the report. Research Posted Tuesday McKinsey & Company.
Healthcare EBITDA grew 5% between 2017 and 2019 and remained flat in 2020 and 2021. The report estimates that the healthcare industry’s EBITDA will grow by 6% by 2025. If the industry hits this growth rate, it could add about $31 billion in profit time over the period.
The estimates do not take into account the possible impact of macroeconomic forces, such as rising consumer inflation, the report noted. It said the industry’s profits could fall by more than $70 billion over the next four years if inflation remains unchecked.
Drew Ungerman, a senior partner at McKinsey & Company, said there are four things health systems should do to succeed given the uncertainty in the national economy.
more decisive
The first thing a health system must do is to ensure that its organizational decision-making maintains the same level of speed and intent that it has been forced to adopt during the pandemic. Ungerman points out that times of uncertainty require agility. That means health systems should avoid excessive bureaucracy and “massive phased restrictions” when rolling out new initiatives, he said.
Efficiency first
Ungerman also said the health system also needed to “be more efficient”. This means investing in new technologies to automate administrative tasks, as well as optimize scheduling and reduce wasteful analytics. Ungerman suggested that the deployment of efficiency-enhancing technologies should not be incremental — hospitals must come up with specific goals and metrics to measure the short-, medium- and long-term success of these tools.
Don’t be afraid to re-strategize
Furthermore, it is important that health systems consider capital allocation differently.In fact, large state systems like promote and Providence Ungerman said millions of dollars in losses have already been reported this year, which means it’s time for the health system to seriously rethink its strategy for capital efficiency. This means divesting from projects that fail to demonstrate a clear or substantial ROI.
Pursue strategic growth
The last thing a successful health system must do is take strategic growth seriously and be more open to transformative business opportunities. When planning for long-term growth efforts, health systems can’t just focus on costs, Ungerman asserts.
These strategic growth initiatives will vary by health system.some suppliers such as Mayo Clinic and UPMC, has launched a venture fund to diversify its core business into attractive revenue pools such as data and artificial intelligence.Some health systems such as OSF Healthcare Launched a startup incubator to develop new digital health products and services.others, such as Boston Children’s Hospitalis forming and expanding specialty pharmacies.
In addition to these long-term growth plans that may be pursued, Ungerman said hospitals should not shy away from mergers and acquisitions.He believes fragmentation among suppliers will consolidate, saying that the recent large merger between Advocate Aurora Health and Atrium Health “Will be one of many.”
This doesn’t just mean that acute hospitals will be merged with other acute hospitals. The health system will also begin acquiring different businesses, such as senior care providers and ambulatory care sites, Ungerman said.
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