Scale Up to Strengthen Your Competitive Position
Business Consult | Building scale within your organization is critical to long-term success. This is true regardless of the size, scope of service, or market share of your health system or provider group. In a value-based world, cardiology practices or CV service lines that are able to achieve scale through internal growth or strategic partnerships with other organizations will be best positioned to offer accessible, high-quality, and cost-effective care—all of which are critical in today's healthcare environment. As prefaced in our two previous columns, to thrive in the value-based world, hospitals and physician groups need to work together to become optimally (1) integrated, (2) scaled, (3) rationalized, (4) informed, and (5) responsive. This column focuses on the attribute of scale. More specifically, we discuss the perceived barriers, potential benefits, and methods used to achieve scale.
Barriers to Building Scale
While the benefits of a scaled enterprise may seem clear, some provider organizations are hesitant to pursue growth strategies due to a number of perceived barriers, including:
Loss of Control — As my organization or service line grows, will my ability to influence or control decision-making be diluted?
Community Perception — Will our patients and the broader community view our pursuit of scale and service line expansion as a benefit or as an attempt to control the market and charge higher prices?
Up-Front Costs — Will finding a suitable partner and negotiating the terms of agreement come with costs we would rather not incur?
Cultural Compatibility — If the pursuit of scale involves a partnership or affiliation with another organization, will the partner be compatible enough with us to ensure a smooth transition?
Pride in Existing Organization — We have achieved some success (and a level of comfort) as an organization and within our service line. Why do we need to grow?
For cardiology groups, these barriers may be merely perceived or very real. Either way, they still need to be overcome in order for organizations to remain competitive. The reality is that regardless of the financial or clinical advantages that your organization may currently enjoy, your competitors are likely pursuing their own growth strategies, which could eventually challenge your market position.
Benefits of Scale
Achieving scale within your organization can take time and require an up-front investment; however, the benefits are significant. Large, integrated health systems are in a particularly strong position to adapt to the new value-based healthcare environment through broader economies of scale and service regionalization. Smaller systems can also realize significant gains, particularly in payer and supplier contracting relationships, as well as through community partnerships. Other benefits for providers large and small include:
Diversifying Risk — As more organizations look to engage in risk-based contracting strategies, diversifying that risk across a larger revenue base can result in significant financial gains.
Accessing Emerging Technologies — Developing affiliations or partnerships allows for access to new and innovative technologies, such as TAVR, which are often made available first to the centers with the highest volumes.
Expanding Subspecialization — With the continued evolution of cardiac subspecialties such as electrophysiology, building a full-service cardiologist network is critical to success within the CV service line.
Increasing the Scope of Services — Scale provides the ability to deliver services that small programs cannot. We have seen smaller facilities forced to move away from dedicated cardiac care nursing units, while larger programs continue to invest in them. Similarly, small programs struggle with issues such as call coverage, since they lack sufficient depth; larger programs can overcome these problems and operate more efficiently.
Enhancing Talent — Affiliated organizations are often able to tap into the talent pool of their partners, allowing them to build an even stronger and more diverse provider network.
Accessing Capital — Scaled organizations can access capital at cheaper borrowing rates, allowing them to pursue further growth.
Methods to Build Scale
There is no one-size-fits-all model for pursuing scale; organizations have many options, including mergers, acquisitions, partnerships, affiliations, joint ventures, network formation, and participation in accountable care organizations. While physician employment continues to be a dominant alignment model in cardiology, Professional Services Agreements (PSAs) and co-management agreements are being used with greater frequency. These agreements allow practices to remain independent while creating a tightly aligned structure that is essential to pursuing many of the value-based initiatives that have become prevalent today. Given the extensive array of options that exist (as well as new ones that haven't been created yet), alignment models can and should be designed to meet the unique needs of your organization or service line. Your hospital partner may already be considering some of these models, and it is important that you have a say in the approach and can determine what works best for your organization and community.
Quite simply, aligned and scaled health systems are able to support CV service lines and population health management imperatives in ways that individual organizations or cardiology groups cannot. To achieve scale, many hospitals and providers will need to align with partner organizations to increase market coverage, fill gaps in their delivery system, and successfully transition to value-centric reimbursement models. And, given the wide array of affiliation options that exist, scale can be attained without forgoing the foundation on which your organization was built.
Article written by Katy Reed, Senior Manager , ECG Management Consultants, and Will Crane, Manager, ECG Management Consultants. For more information, contact Katy Reed at firstname.lastname@example.org or Will Crane at email@example.com.
Keywords: ACC Publications, CardioSource WorldNews
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