Strategic Imperatives - The Chartis Group · 7/30/2018 · Strategic Partnerships Embrace Your Clinical Workforce as a Strategic Asset Focus Efforts to Make a Material Impact on

Strategic Imperativesfor Children’s Hospitals

Positioning to Thrive in an Era of Unremitting Change

Authors: Brian Thygesen, Mackenzie K. Horne & Melissa Anderson

JULY 2018

STRATEGIC IMPERATIVES FOR CHILDREN’S HOSPITALS: Positioning to Thrive in an Era of Unremitting Change

02

As pediatric leadership teams construct their strategic

roadmap to guide their organizations into this future,

a set of six key imperatives should form the central

core of any strategy formulation.

SummaryOver the last decade, children’s hospitals have experienced some of the greatest success in their storied histories - clinically, operationally and financially. Yet several trends, including increasing volatility in demand for pediatric services, competition from old and emerging competitors, and accelerating operating and financial pressures, will not be solved with the historical strategies used by leading children’s hospitals. Historical focus primarily on inpatient volume growth, reliance on premium pricing, and unit cost management to generate sustainable margins will be inadequate in an era of shifting markets, emboldened payors’ demands for value, and rapidly accelerating costs. As pediatric leadership teams construct their strategic roadmap to guide their organizations into this future, a set of six key imperatives should form the central core of any strategy formulation.


03

The past decade has been a time of remarkable success for most children’s hospitals. Growth, in the form of increased patient volumes and revenue, as well as significant philanthropic donations, have bolstered balance sheets and allowed many to make significant investments in both existing and new facilities, programs, and services across the care continuum. In part due to the strong US economy, and despite the continued threats to child health financing, the worst-case scenario for children’s hospitals many predicted has not come to pass. By many measures, it has been a golden era for children’s hospitals.

Yet, external forces portend a much more challenging environment in the coming years. Volatility in demand, accentuated by declining birth rates, population shifts across the country, and changing care patterns threaten to undermine the core services children’s hospitals rely on for financial strength. At the same time, competition from both traditional and new competitors is accelerating, weakening barriers to entry children’s hospitals have long enjoyed due to their unique positioning. Further, while the sector has weathered the current storm around funding for safety nets and children’s health, accelerating costs and reimbursement pressures - from both commercial and government payors - will challenge the strength of even the most well-positioned children’s hospital.

The End of an Era

The past decade has been a time of remarkable

success for most children’s hospitals...

Yet, external forces portend a much more challenging

environment for children’s hospitals in the coming years.


04

02 05

01 04

01

02

03

04

05

06

03 06

Solidify New Areas for Growth

Evolve to Become a Digitally Enabled Consumer-Focused Organization

Harness Innovation to Drive Performance Excellence and Cost Management

Actively Explore Non-Traditional Strategic Partnerships

Embrace Your Clinical Workforce as a Strategic Asset

Focus Efforts to Make a Material Impact on the Health of the Community

Resulting Strategic Imperatives for

Children’s HospitalsTo succeed amidst the emerging pressures,

six imperatives require leadership’s attention.


05

Solidify New Areas for Growth01

02

03

04

05

06

Children’s hospitals grew over the past decade through a combination of programmatic expansion along the continuum and consolidation of specialized care. The question of where growth will come from looms large as strategists contemplate future growth projections. Any strategic plan will need to discern the true opportunities for growth, whether they be through expanded geographic reach, extension across a wider array of the care continuum, or entirely new lines of business.

While demographics and demand volatility present real challenges for children’s hospitals, growth opportunities exist, with several areas warranting evaluation:

Integrated maternal-fetal-neonatal care. Children’s hospitals, long-standing leaders in supporting care for neonatal patients, should continue to move upstream by integrating maternal, pre-natal, fetal and neonatal care, including the development and incorporation of precision medicine techniques in fetal diagnostics and treatments. Though birth rates continue to decline in the US, they are increasing among women over 35 – a population typically more educated and discerning in their care preferences, and often requiring greater pre-natal care and treatment, along with additional coordination across adult and pediatric specialties.


06

Adolescent and young adult populations. Today there are more people over the age of 20 with congenital heart disease than there are under it, highlighting the sizable opportunity for children’s hospitals to continue serving this distinct population. The life-long care required for conditions diagnosed in childhood (e.g., Cystic Fibrosis, Autism Spectrum Disorders, mental health conditions) means children’s hospitals have been serving many of these patients since birth. Organizations have historically approached this population with caution, not wanting to directly compete with aligned specialists in the community or leery of the challenges in the insurance status of these patients. Nonetheless, there is a compelling argument to be made that children’s hospitals are best positioned to treat much of this population, alone or in partnership, given their complementary capabilities and missions.

International markets. American children’s hospitals and their affiliated academic partners have developed significant brand equity, providing them an opportunity to be leaders in meeting the needs for the world’s growing population. As advances continue in the realm of digital health, geographic barriers that made previous efforts ineffective will fall, and the nation’s leading digitally-advanced children’s hospitals will be uniquely positioned to serve these growing global needs. Through partnerships or new facility development, advanced, comprehensive global systems of care will begin to emerge, integrating care across local, virtual and global locations.

Ultimately any growth strategy requires focus. Few children’s hospitals have the capacity or financial resources to be all things to all families. A compelling growth strategy will link the market opportunities with the rationale for why the organization can compete in these areas and what the organization might be willing to forgo to succeed.


07

Today, millennials comprise the largest cohort of families being served by children’s hospitals. Digital natives are most comfortable with the seamless ineraction between technology and the physical world - and healthcare is no exception. The demand for a high-quality, integrated consumer experience that spans the digital and physical realm expands beyond just millennials, as Gen Y and Gen Z both demand greater connectivity and seamless access to services for their children as they grow. While parents of all generations across the country have embraced the convenience of 2-day shipping and instant access to private car service, it is not a question of if they want digital healthcare, but rather, who will provide it?

Evolve to Become a Digitally Enabled Consumer-Focused

Organization01

02

03

04

05

06

While parents of all generations across the country have embraced the convenience of 2-DAY SHIPPING AND INSTANT ACCESS TO PRIVATE CAR SERVICE,

it is not a question of if they want

DIGITAL HEALTHCARE, but rather,

WHO WILL PROVIDE IT?


08

Much of the digital revolution interfacing with patients is happening in the ambulatory arena. This includes new digital health technologies, such as virtual care, or new niche service providers organizing around a more consumer-oriented strategy to capture this growing service region. For example, the next generation network strategy for children’s hospitals must re-envision what the experience of care should look like. This requires building on a solid foundation of core service expectations – exceptional communication, family decision-making, hospitality and a welcoming environment. It must also extend beyond traditional geographic and service components to decrease wait times and increase access to services close to home (or in the home), and closely tie together a better understanding of various consumer segments and the clinical care model suited to meet evolving patient and families’ needs.

One vision of what this could look like is through a single digital experience. Patients and families will be able to access information or care in a way that matches their expectations and needs, whether it is an in-person visit, an online digital telehealth consult, or a quick phone call answered by the right person, at the right time. The industry will need to adapt to a model of “on-demand” access, employing clinical models less dependent on traditional physician-led interactions, to a hybrid leveraging diverse care providers across a mix of physical and virtual touchpoints. This will require children’s hospitals to candidly assess how they can provide this connectivity at a competitive price as the traditional ambulatory model will not survive a cost-conscious tech-savvy consumer base.


09

Children’s hospitals have historically engaged in various levels of performance improvement, but the importance of prioritizing enterprise-wide efforts to materially transform care and performance has been limited, often as a direct consequence of the reimbursement models on which children’s hospitals rely (e.g., percent of charges, daily rates, supplemental payments tied to utilization). Increasing costs, whether it be through labor, construction, or specialty pharmaceuticals, will place even greater importance on meaningful commitment to performance excellence. Further, as demand for select high margin services wavers and reimbursement models change, a renewed commitment to performance management will be required to re-affirm the indispensability children’s hospitals claim in their market space.

Fortunately, there is much children’s hospitals can do in the near-term. For example, as demand for ambulatory care grows, significant opportunity exists to improve access and pediatric medical group performance. To avert (or at least delay) major capital investments in facilities for hospital-based services, opportunities abound to significantly improve throughput of existing services (ORs, inpatient units, ED). Through data systems in place at most children’s hospitals today, significant improvements can be made in clinical care through focused quality improvement efforts.

Harness Innovation to Drive Performance Excellence

and Cost Management01

02

03

04

05

06

...a renewed commitment to performance management

will be required to re-affirm the indispensability children’s hospitals claim in their market space.


10

Over the medium term, to create truly meaningful advancements in clinical and operational performance, organizations must pursue a systematic approach to performance excellence and cost management that harnesses the power of technology. Many children’s hospitals today, through significant investments in IT, have the potential to harness the clinical, operational, and financial data now available through digital platforms, electronic health records, on-demand healthcare and other systems. To fully capitalize on big data, a more active investment in advanced analytics resources that manage health, risk and value will be required.

Through the use of EHR value realization techniques, leaders can also drive improved workflows, asset management and clinical utilization. New back office economies of scale opportunities exist for organizations looking to optimize their revenue cycle processes and further reduce costs. Whether organizations choose to invest in robotic process automation, artificial intelligence, clinical variation management systems, or real-time clinical decision-making tools, children’s hospital leaders and Boards must become well-versed in the emerging tools and actively pursue those that can make a meaningful impact on the enerprise-wide performance.

For children’s hospitals, the boundary between strategy and operations will continue to erode. To be effectively positioned as the indispensable provider of pediatrics in a market will be largely predicated on an organization’s ability to demonstrate a level of differentiated performance compared to other providers – not just clinically, but also operationally.

Harness big data

Actively invest in advanced analytics

Implement EHR value realization techniques

Achieve back office economies of scale

Optimize revenue cycle processes

Explore emerging tools (i.e. robotic process automation, artificial intelligence, and clinical variation management systems)

Systematic Approach to Performance Excellence and Cost Management


11

Actively Explore Non-Traditional

Strategic Partnerships01

02

03

04

05

06

In many ways, children’s hospitals were ahead of their adult counterparts in forging collaborative strategic partnerships, whether through programmatic joint ventures or clinical coverage agreements. Children’s hospitals have benefited immensely from these partnerships, ultimately through greater influence over the quality of care and the location this care occurred. While there will continue to be opportunities for these types of targeted clinical partnerships, children’s hospitals must expand the areas and capabilities they explore for potential affiliations.

The successful children’s hospital of the future will have shifted from a narrow set of clinical agreements to a portfolio of enterprise-level partnerships across both clinical and operational domains. For some, this may mean regional or national relationships among children’s hospitals to serve rare quaternary care or longitudinal care management for patients with congenital or chronic conditions. For others, partnerships with emerging technology providers for virtual health or consumer engagement services also will be essential to deliver on the consumer-oriented digital care platform of the future.

The challenge for children’s hospitals will be how to effectively manage these relationships. This will require pediatric leaders to effectively negotiate and manage a complex array of relationships with partners outside of the traditional not-for-profit provider realm. It will also require a change in the management of these relationships. Historically, partnerships were often managed by the chief executive officer, or a VP-level executive whose expertise was mostly steeped in clinical operations. As the number and complexity of partnerships grows within an organization, the expertise and management models will need to evolve to include a greater understanding of the myriad business lines in play.


12

Embrace Your Clinical Workforce as a

Strategic Asset01

02

03

04

05

06

If there is one area that remains a barrier for entry to competitors for children’s hospitals, it is the clinical workforce. It is a differentiator and defining element expressed to patients and families served at a children’s hospital. Given the lack of supply for much of the pediatric clinical workforce (both physician and clinical support staff), the main avenue for competitors

to grow their pediatric platforms is by recruiting away children’s hospitals’ workforce. To mitigate this threat, children’s hospitals will have to ensure the work environment remains a distinguishing feature for clinicians.

This requires understanding the emerging workforce. Millennials are not only the largest segment of families served by children’s hospitals, but they also make up the burgeoning share of the healthcare workforce of tomorrow. This emerging workforce has not only been trained differently, they entered the medical profession with different motivations and expectations for their experience. This changing workforce is likely to be driven to a greater extent by the mission of improving children’s health, but will also exacerbate long-standing pediatric subspecialty supply challenges due to differing expectations around work-life harmony.

If there is one area that remains a barrier for entry to competitors for children’s hospitals,

it is the clinical workforce.


13

Success will require investing in the clinical workforce so they want to remain with the organization. This will include connecting them more intimately to the mission of the organization or providing opportunities to have a greater social impact in the communities they serve, all while maintaining competitive compensation packages. This will also include building different career ladders and paths (e.g., working part-time), and allowing for greater leadership opportunities for the workforce, both clinically and administratively. Children’s hospitals, by leveraging scale of the clinical enterprise, can afford to lead in the development of adaptive work arrangements – such as job sharing, extended leave or alternating clinical and administrative responsibilities – while also recognizing the need for different models at various points in a clinician’s long career.

Possible Ways to Invest

in the Clinical Workforce

Build different career ladders and paths

Allow for greater leadership opportunities, both clinically

and administratively

Lead in the development of adaptive work

arrangements

Connect more intimately to the mission

Provide opportunities for social impact in

the community

Maintain competitive compensation packages

52

63

41


14

Focus Efforts to Make a Material Impact on the Health of the Community01

02

03

04

05

06

Funding for child health and social services has rarely matched the need in the US. The last few years, characterized by a sustained period of economic expansion, have not produced a commensurately strong response to aiding children in need. Even a minor recession in the next several years will expose deeper structural tensions in the country’s ability (and willingness) to fund the safety net at current levels, in particular Medicaid and other services supporting children and families.

Driven largely by their mission, and enabled by sustained periods of strong financial performance, many children’s hospitals have become a leading voice in supporting broad efforts for children. These efforts have varied and often been enabled by opportunistic philanthropic support. Going forward, a more strategic approach is required–one that evaluates opportunities in much the same way as strategic growth opportunities. This approach needs to resolve the existential question about whether to support a broad array of efforts superficially, or to target select areas to deliver a deeper and more sustained impact to the community.

For example, children’s hospitals may choose to focus on deploying robust population health capabilities to improve the overall health of communities, or focus specifically on elevating the quality of mental healthcare in their market. Successful organizations will align these community health efforts with the broader organizational objectives and view them through a different paradigm than one of the many business units competing for resources.


15

Over the years, children’s hospitals have weathered many market uncertainties and, in the last decade, most of these organizations navigated a tumultuous environment quite well. Yet, we believe the forces in play over the next several years will be of a much greater magnitude, with the potential to fundamentally reshape the market for pediatric care, but also provide an opportunity for children’s hospital to cement their position of leadership, both in their local markets, as well as on the global landscape for advancing child health. If these forces are approached strategically, astute children’s hospitals can re-envision their strategy and priorities, and proactively prepare for these evolving realities.

Conclusion


16

About the AuthorsBrian ThygesenPrincipal and Pediatrics Practice [email protected]

Brian Thygesen is a Principal at The Chartis Group and leader of the Pediatrics practice. Mr. Thygesen has more than 15 years of experience in healthcare serving as a strategic advisor to leading academic health systems, children’s hospitals and community-based delivery networks. Mr. Thygesen’s primary areas of focus are enterprise strategy formulation, digital care service expansion, physician alignment and integration, merger and affiliation assistance as well as development of accountable care organizations.

Mackenzie K. HornePediatrics and Academic Medical Centers Practice [email protected]

Mackenzie Horne is the manager of the Pediatrics and Academic Medical Centers practices with The Chartis Group. Ms. Horne has over 10 years of experience in healthcare including advising leading academic medical centers and children’s hospitals on the development and successful execution of operational strategy to support economic and mission sustainability. Her areas of expertise include enterprise strategy, research strategy, education strategy, health care reform, academic medicine and physician shortages.

Melissa AndersonPrincipal [email protected]

Melissa Anderson is a Principal at The Chartis Group and has 15 years of healthcare experience. During this time, she has worked with a wide range of healthcare providers including health systems, integrated delivery networks and children’s hospitals. She has led consulting engagements in the areas of: enterprise strategy, mergers and partnerships, network development and service line strategy. Ms. Anderson recently worked with an integrated delivery network to develop a children’s service line strategic plan prioritizing strategies for investment and preparing the organization for value-based care.

© 2018 The Chartis Group, LLC. All rights reserved. This content draws on the research and experience of Chartis consultants and other sources. It is for general information purposes only and should not be used as a substitute for consultation with professional advisors.

Atlanta | Boston | Chicago | Minneapolis | New York | San Francisco

About The Chartis Group

The Chartis Group® (Chartis) provides comprehensive advisory services and analytics to the healthcare industry. With an unparalleled depth of expertise in strategic planning, performance excellence, informatics and technology, and health analytics, Chartis helps leading academic medical centers, integrated delivery networks, children’s hospitals and healthcare service organizations achieve transformative results. Chartis has offices in Atlanta, Boston, Chicago, New York, Minneapolis and San Francisco. For more information, visit www.chartis.com.

Documents

Strategic Imperatives - The Chartis Group · 7/30/2018 · Strategic Partnerships Embrace Your Clinical Workforce as a Strategic Asset Focus Efforts to Make a Material Impact on