NEW YORK — The first benchmarking study of health system efforts to generate new revenue streams evaluates a range of effective strategies to sustain overall operations, fuel innovation, and advance patient care missions. The report by Partners Healthcare and Fitzroy Health finds that successful health systems have increased operating margin as much as five points through diversification strategies.
“The study shows an industry undertaking a vast number of bold experiments to diversify revenue by improving the quality, efficiency, and satisfaction of patient care delivery,” says James Stanford, co-author of the study and managing director, Fitzroy Health.
The study examined the scope, depth, and potential risks and returns of non-traditional revenue strategies. Findings revealed that health systems can create a risk-adjusted portfolio of initiatives that leverage their ecosystem and competitive advantages. In sum, health systems possess the ability to create market value through innovations that have transformed their own operating and clinical models.
Three primary levers for value creation emerged from the findings:
Lever 1: Bring care model innovations to market, like the University of Colorado Hospital’s co-development with RxRevu.
Lever 2: Transform cost centers into profit centers, like Navicent Health’s Flex Health, a workforce management company spin-out.
Lever 3: Generate royalties from drugs, devices, and diagnostics, like Children’s Hospital of Philadelphia’s $35 million investment in Spark Therapeutics.
“Diversifying revenue streams helps ensure future investment for life-saving technologies and ongoing medical discoveries,” said Christopher M. Coburn, co-author of the study and chief innovation officer, Partners HealthCare System.
Researchers conducted comprehensive interviews with C-suite executives, board members, venture executives, and others at 74 U.S. health systems and academic medical centers. All participants acknowledged the need to diversify revenue, and 90 percent indicated novel revenue streams were an urgent priority.
The researchers evaluated more than 1,400 initiatives that health systems have pursued to generate new revenue and categorized those initiatives into 10 different options. The white paper features case studies with their value proposition and success factors.
About Fitzroy Health
Fitzroy Health partners with healthcare organizations to create commercial ventures that generate new sources of revenue and enterprise value. Through its model of risk sharing, Fitzroy Health supports all areas of innovation, from sourcing and capacity building to commercialization and operation. www.fitzroyhealth.com
Martha Jones, Fitzroy Health
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