In Brief
- New approaches to growth are necessary with traditional models under strain and margins tightening.
- Health leaders should consider the following to improve growth margins: M&As, philanthropy, payor dynamics, access to care, technology, and cost-management strategies.
- Prioritizing adaptation and proactive stakeholder engagement are essential for any growth strategy.
Children’s health systems are at a pivotal point where redefining revenue strategies has become imperative. New, innovative approaches to growth are essential with traditional models under strain and margins tightening. Swiftly taking advantage of emerging opportunities will be crucial for sustainable success in 2025 and beyond.
When revisiting strategies in the months ahead, leaders should consider the following growth opportunities to improve margins and continue delivering expert pediatric care.
Growing through M&A and partnerships
Mergers and acquisitions, particularly those driven by strategic geographic considerations, are reshaping pediatric healthcare. There is a promising shift toward increased partnerships and innovative economic models that emphasize collaboration over competition. Leveraging collective strengths through strategic alliances enables health systems to enhance service offerings and achieve high-margin growth through initiatives such as quaternary capture. Additionally, these alliances can prove economically beneficial for partners and patients by providing increased access to higher-quality care.
Leveraging philanthropy
Hospitals, health systems, and academic medical centers should not overlook the sustainable growth potential offered by philanthropy programs. By approaching philanthropy as a dedicated service line, leaders can build programs grounded in best practices, key performance indicators (KPIs), and advanced technology to maximize revenue. Grateful patient programs, the fastest-growing donor segment in healthcare, are particularly well-positioned to help address the challenges of patient-based fundraising. With thoughtful planning and effective execution, prioritizing philanthropy can provide a foundational level of support that, in many cases, rivals the revenue generated by clinical service lines.
The complexity of payor dynamics, especially concerning high-cost therapies, presents significant challenges. Reimbursement downgrading, such as the prevalent shift from inpatient (IP) to observation (OBS) status, poses threats to financial stability. Effectively addressing these challenges requires strategic negotiation and a robust understanding of the evolving reimbursement landscape to secure sustainable revenue streams. Additionally, the importance of fostering collaboration between payors and providers cannot be overstated – this is a crucial component of achieving strategic goals and improving patient experience.
Addressing access and labor challenges
A significant barrier to access is the growing scarcity of pediatric specialists, which is compounded by geographic disparities. Health systems must develop strategic recruitment and retention plans while exploring innovative workforce models to mitigate these challenges effectively. Physician compensation is increasingly the most effective, though costly, tool for addressing physician shortages. To ensure efficiency, access strategies must align available slots with physician supply.
Embracing technology
Addressing digital debt through crucial upgrades in enterprise resource planning (ERP) and electronic medical record (EMR) systems is a major opportunity for growth, especially when considering the power of artificial intelligence. Systems that have not kept pace with technical advancements are discovering that their strategic investments may be nearing obsolescence, as market consolidation increasingly favors a few dominant leaders. Lastly, responsibly embracing AI technology has the potential to streamline operations and significantly improve patient outcomes. Building AI into growth strategies is no longer optional — it's a critical tool for revolutionizing healthcare, driving efficiencies, and delivering better care.
Stabilizing costs and margins
Healthcare leadership is increasingly concerned about potential policy changes under new administration, with little optimism that reimbursement challenges will improve. Navigating these potential policy changes, on top of existing financial pressures, are roadblocks to maintaining stable costs and healthy margins. The ongoing shift from commercial insurance to Medicaid, alongside a growing uninsured population, further exacerbates revenue pressures. Health systems must adopt strategic financial adjustments, exploring innovative cost-management strategies to navigate these challenges effectively.
Successfully pave the path to future revenue
The future of revenue generation in children’s health systems relies on incorporating these emerging opportunities into your growth strategies. By growing through strategic partnerships and philanthropy, navigating complex payor dynamics, addressing access and labor challenges, embracing technology, and stabilizing costs, health systems can position themselves for sustainable success. Continuous adaptation and proactive stakeholder engagement are essential to capitalize on these opportunities and drive forward-thinking revenue strategies.